To live a free life, one must have proper wealth management to support the lifestyle. There are many money management systems but Six Jars Money management is one of the most simplistic systems with wider coverage of every aspect of life.
This system suggests that money earned should be divided into 6 Jars with a certain percentage.
- Financial Freedom Account (FFA) – Min 10% – As the name suggests, FFA is the seed of financial freedom in our life. And when this money is spent?? Never… Yes, you heard it right, money in FFA is never to be spent. This is invested and reinvested so that money keeps growing here
- Long Term Savings for Spending (LTSS) – Min 10% – To take care of future expenses, the LTSS account is created. One can have a common LTSS or may even have a dedicated LTSS for each and every expense. For example, LTSS for university, LTSS for buying a home, LTSS for the birthday celebration and the list is endless.
- Sustenance – Max 55% – As per this money management system, one should not spend more than 55% of their income in sustenance. As it is true for more people, before they start any money management system, their sustenance expenses are usually 90-100% of their income. But with that approach, one can not attain financial freedom. Hence one should try to restrict their sustenance expense to less than 55%.
- Real Education – Min 10% – Some people may call it Education but I specifically used Read Education so that no once confuse this with School/College Education. This is the investment in your self
- Give Back – Min 5% – We own many things to the society we live in. Hence one should keep at least 5% of their daily income for the betterment of the society. This money could be used in several manners as per the availability of social organization etc.
- Play Account – min 10% – Nourish yourself – Many people keep sacrificing their personal hobbies and interests because of the lack of money. In some other cases, even though someone has the money, they would spend it on other things but may not nourish themselves. A play account is a method to nourish yourself. While keeping the substance within 55%, money in this account should be spent on oneself to fulfill the desires of the soul.
If you observed closely, the sustenance account is having a maximum limit whereas all other accounts are having minimum limits. There are various other fine details based on case to case basis. But this is broadly six jars money management system.
