T. Harv Eker, author of The Millionaire Mind, has a system for managing money that offers balance. He suggests you get at least six jars–seven if you’re self employed because then you have to put money away for taxes. You put 10 % of your money into a Financial Freedom Account–that goes for retirement and will not be touched before that time. Equally important to that account is 10% in your play account. This one is for lavishing on yourself and you have to spend the whole amount each month.
Do you remember Aesop’s Fable about the Ant and the Grasshopper? In that tale, the ant was praised for its hard work and saving up for the cold winter while the grasshopper played and sang all summer and then starved int he winter. Eker is recommending we combine the best of both insects. By balancing both needs, we will be more likely to maintain the habit. If we only save, we’ll be miserable and eventually quit. If we only play and spend, we’ll eventually starve.
The other jars, he recommends, should be allocated this way: 50% for necessities, 10% for contributions, 10% for education and 10% into long term savings for spending.
One of the most interesting ideas he proposes, in my opinion, is that you start this habit of paying attention to your money right away, using as little as $1 to manage. He stresses that daily attention will reinforce the habit. He relates the story of a woman who did exactly that. She started out with dividing up just $1/month because she really had nothing extra. But she recognized that she’d never become financially free on a single dollar/month, so she also committed to doubling the amount she was managing every month. That meant the second month she managed $2, the third month $4 and so on, until by the 12th month she was managing $2048! Within two years she was doing so well she was able to put a $10,000 bonus entirely into her financial freedom account because she didn’t need it!
So even if you haven’t got much now, perhaps this is a way that will help you change your financial picture. You may think it won’t work for you, but you have to ask yourself if what you’re doing now is working? If it is, you don’t need this system. If your own method isn’t working, what do you have to lose?