Do you find it difficult to budget your finances every month?
Do you think your income is too small for your expenses?
Do you feel challenged to manage your money?
Do you ever wish you have a simple effective strategy you could start to turn your money matters around?
Fret not. A solution (without any need of a money management software) that has made wonders for a lot of people who share the same challenge as you have (including me) is here. The only ingredient necessary is COMMITMENT as you begin until the strategy becomes a habit (Give it at least a 3 month probationary period.). Then it will become automatic over time especially with the other suggestions i will present to you.
Disclaimer: The ideas presented here will only work if you ACT consistently. If you only ponder on it, this system is not going to help you much. So, please proceed only if you are committed. Otherwise, i give you a friendly reminder to just enjoy the read for now and try this when you are ready. YOU are your best money manager. Are you ready?
Managing money has never been fun! Let me share with you an amazingly simple money management system i read from a book, reinforced in a seminar and practiced out of financial desperation. Since i started it this very simple strategy has been doing wonders for my financial life. By the way, it involves jars, yes jars similar to the jars where we put cookies or candies or some other treats in our homes or stores. But since we are adults, the treats are now the dreams we cherish or the everyday needs we have to fulfill (You need a little imagination to see them though!). So let us begin the "Managing Your Money" Basic Strategy . I simplified the process to make it easier for those who are really challenged to catch on this liberating habit (or virtue?).
You need 5 Jars for starters. Label them with the following:
- MF - Money Freedom
- GIVE - Charity/Sharing
- NEED - Expenses
- EDUC - Education
- FUN – Play!
Here is how you use them:
EVERY TIME you earn income (every time means every single time and not just during your pay day.) you divide your income accordingly
- MF - Money Freedom = 10%. (Pay Yourself First!) This fund is never to be spent. It must ONLY be invested. Investment is defined as something that gives you more money when you put money on it. You also put your loose change daily on this jar. This is the fund that will take care of you and your future.
- GIVE - Charity/Sharing = 10%. This fund is what you share with others (or give back to God). You draw from this fund when you give to your church, support a charitable institution or help ANYBODY without expecting anything return. (But you will be surprised how this gives you back more than you gave. However, for more fun don’t expect anything.)
- NEED - Expenses = 60%. This fund takes care of your basic (food, clothing, shelter, kids' education) and supplementary (other bills) expenses. (Gosh, 60% is just below the poverty line!) When you MUST do it your brain will find ways to make it happen (Creating a second income source would be a great idea!). Moreover, when you start fitting this (account) to your everyday expenses, your third eye will be opened to a lot of frightening stuff! (okay, am exaggerating). What I mean is you will discover a lot of unnecessary expenses that drain your wallet…like that “Grande” cup you crave from that fancy café everyday so that you can “work” better? Or that new gadget you must also have because your “friend” just bought one? Or that ‘beautiful’ pair of shoes you must “invest” in because your best pair is already a week old? (Did you notice ALL are “justified”? You be the real judge.)
- EDUC - Education = 10%. This fund is used to fund your OWN education. Invest this on seminars, books, mentoring and other self development programs (like reading this blog.:))
- FUN – Play = 10%. This is the source of your money splurging. You must spend (you read it correctly) this every time you allocate this from your income on things that will make you feel HAPPY (It is your reward for your commitment). It can be as simple as your favorite food or a foot massage. It could also be a vacation. (What if it’s too small?) Ok, if it’s a little small, you can save it to up to a maximum of 2 months so that it will be bigger to spend. What is important here is the FEELING of reward and not being deprived. This will help you reinforce the habit of managing your money wisely.
So, there you go! I have simplified it to a point that it can easily be implemented. I will share more advanced strategies on my future posts. (Well, if you like this and succeed on it immediately, drop me a comment and I may post it sooner than scheduled.
As an epilogue (more suggestions), this can also be done through separate bank accounts as your funds outgrow the jars. (You can still keep your passbooks inside the jar.) The mother account is the NEED account; where your paycheck is deposited. This becomes your allocation source. You transfer 40% of the income every time it comes and allocate them to the other accounts accordingly (including the Fun Jar). Just make sure you check the maintaining balance so that you will not be spending more on charges. That is why the NEED (jar) account is ideally a payroll account because there is no maintaining balance required.)
I’m getting ahead of my objective here. Enjoy doing this simple yet effective money managemet program first. Watch out for more money management tips in my future posts.
Have fun in your MONEY-gement!. This is a great start on your journey towards successful wealth management.
P.S. Want to massively change your life for the better, FAST? Anthony Robbins is coming to Asia (Singapore Expo Hall 2) on the 4th-7th of September 2009. If you are from the Philippines and committed to go at tremendous value, contact Radden at firstname.lastname@example.org not later than 29th of August 2009. Visit http://www.anthonyrobbinsasia.com/upw/ for more details.