During the past weeks I’ve been reading some blog posts and books about Personal Finance Management and how to improve it. And you can be wondering, is this important? And I would say: Yes, it is. Sadly, it’s not common people assist to Personal Finance classes during their education.
If you are planning to have financial freedom, you should be discipline and follow some advices to keep you in track to build and increase your net worth. This will make you create your projects, have great trips or whatever you wanna do in your present and future. So, let’s begin, one of the systems to improve your way to manage money is called: Jars System, and I’m going to explain it below.
The Jars System is a technique to build different accounts where you will fulfill every piece of your life. From the incomes you get (after taxes), you’re gonna divide the money through different places and they are:
- Necessity: This is the money you’re gonna use for your basic needs (Food, accommodation, transportation). As a recommendation, you can take between 50 – 55 % of your incomes to this account.
- Financial Freedom: You’re gonna take between 10 – 15 % of your incomes to start your business or building passive income streams. This is one of the most important accounts to arrive to your financial freedom.
- Education: We have to be learning every single day. This is the way we’re going to improve and work smarter. You should take 10 % of your incomes for education (Courses, books, training) or personal growth.
- Long Term Savings: If you want to buy something special for you or have a great trip, you should take 10 % of your incomes and save it in this account.
- Play: This is the money you’ll use for entertainment. Take a weekend trip, go to a nice restaurant or enjoy of a different activity. This account you should spend it every month and it takes 10 % of your incomes.
- Giving: This is the money you’ll give away to an NGO, hospital or any cause you want to collaborate. It takes 5 % of your incomes.
With this technique, you will be able to improve your personal finance management and start to increase your net worth. You can change the percentages collected by each account because the important fact is the consistency and not the quantity of money. What do you think? Leave a comment below or at Twitter, @rmmonagas.