Here’s an easy way to think about your finances. Instead of trying to picture all sorts of complicated accounts and budget lines, just imagine you have 6 jars in front of you. By putting all your money into these jars each month—in the correct proportions—you’ll easily achieve financial security!
- Necessities Jar. 55% of your money goes to cover necessities like rent, mortgage, utilities, taxes, food, clothing, etc.
- Saving Jar. 10% of your money goes to help you save for expensive things you can’t currently afford. Instead of going into debt to buy a new car, vacation, home improvements or kids’ education, save the money, then pay cash.
- Future Jar. 10% of your money goes to help you eventually become financially secure. It’s for investments, retirement savings, building a down payment for a revenue property, etc. Remember, you never spend this money, only the returns you earn on it.
- Learning Jar. 10% of your money goes to support your education and personal growth. Basically, you’re investing in yourself. This can include courses, books, webinars, etc.
- Pleasure Jar. 10% of your money goes for luxuries and treats, like dinner out, a weekend getaway, new games, a massage, etc.
- Giving Jar. 5% of your money goes for gifts. These could include birthday and holiday gifts, charitable donations, and acts of random kindness.