Money Management Practical Strategies: Learn About the Six-Jar Method (2022)

Money management is something we all should do but often ignore. It helps develop healthy habits and good practices later on in life. However, schools often skip teaching good practices and we often find ourselves in situations where we're having trouble understanding how our bad spending or saving habits are impacting our finances. In turn, when most people dream of getting rich, they dream of a one-off event that will get them into the millionaires club. A high-tech invention, winning a lottery or a spectacular skyrocketing of stocks - these are the sort of things that make the hearts race. Yet in reality, such events are absurdly rare.

If you consider yourself more on the pragmatic side of things, you’ll understand that taking control of your finances can be a lengthy process that requires quite a bit of stubbornness. But money management doesn’t have to be a cumbersome task, with a little bit of psychological trickery you're able to better your financial situation very quickly.

If you’ve been struggling to come up with a sound strategy to better your money management, or have ever had a problem with budgeting, I've got you covered. The following system of money management will ease the anxiety and take away the headaches that are all-too-common when it comes to saving.

Table of Contents

  • 1. Money Management: Using the 6 Jars
  • 1.1. Jar #1 – The essentials (50% of the total)
  • 1.2. Jar #2 – Entertainment (10% of the total)
  • 1.3. Jar #3 – Savings (10% of the total)
  • 1.4. Jar #4 – Education (10% of the total)
  • 1.5. Jar #5 – Bigger Purchases (10% of the total)
  • 1.6. Jar #6 – Gifts and Charity (10% of the total)
  • 2. Conclusion

Money Management: Using the 6 Jars

The idea of the method is quite simple: You separate all of your income into 6 separate jars. They each will have a distinct function and will serve a different purpose in your journey to financial independence. It's a very basic yet effective money management technique that will help you reduce spending and increase savings. Once you start budgeting and have an understanding of how much you can spend each month, you'll have an easier time tracking your spendings and savings.

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(Video) The JARS Money Management System

Jar #1 – The essentials (50% of the total)

The money in this jar is for the everyday essentials. Expenses of rent, bills, groceries, taxes, and transport should be paid from this jar.

You could, in theory, divide it into even smaller fragments and count groceries, rent + bills + tax, transport separately. But for starters, one jar for essentials is enough. This allocates 50% of your budget on essentials only, you'll know exactly how much you have to work with and if you see that you need more than 50% for this, you'll be able to start working on strategies to reduce spending.

Jar #2 – Entertainment (10% of the total)

This is the jar you take money from when you wish to buy your first-edition vintage vinyl records, a bottle of Chateau Margaux and a trip to Laucala Island in Fiji. That is if you print money for a living.

If you don’t have any connections to the drug barons either, you’ll probably use this jar for cheaper entertainment options such as eating or drinking out, going to the movies or planning a little weekend getaway. They might not be as exotic as the options above, but they won’t break your budget. If you feel that 10% isn't cutting it you can start working on reducing your jar #1 spendings and allocate the funds to other jars.

Jar #3 – Savings (10% of the total)

This jar is the cornerstone of your financial independence. The money you put in, will at first act as your safety net in times of unemployment or health emergency.But later, once you have generated a small fortune, you will use this money to generate passive income. Learn about stock options and educate yourself on the basics of investing.

One tip to get you started, only spend the money you generated from the savings, not the savings themselves. This jar is extremely important and while it won't make you a fortune overnight, you'll be surprised how quickly your savings stack up. And knowing that you have a "safety net" during harder times, will make sure you're less stressed out.

(Video) पैसे मैनेज करना सीखो | Money Management for beginners in Hindi | 6 Jar Rules Method

Jar #4 – Education (10% of the total)

This one is self-explanatory. Invest in personal development and education and reap the rewards of an enlightened mind. Whether it is a bigger salary in your current occupation or a new skillset – financial reasons for developing yourself are clear.

If you are satisfied with your current level of education – use this jar for your children’s university. You should never stop learning, with rapid advances in technology and so many new opportunities arising you have to keep up with everything. You don't have to be an expert in every field, but having an understanding of how things work will give you a substantial advantage moving forward. If you're looking to expand your skillset without breaking the bank, you can find affordable and high-quality courses on BitDegree.

Jar #5 – Bigger Purchases (10% of the total)

It can be anything. A new LCD TV or a trip to Afghanistan (not that we would recommend that).If you’re aching to get your hands on a brand new Japanese motorcycle or a pair of cool shades, this is the jar to empty. Think of this as a no-interest loan, you get to spend it and buy the thing you want, but you'll have to fill up this jar again if you want to make another significant purchase.

This method of making big purchases works like a milestone, you reward yourself. And proper rewards are key to successful money management strategies. Because as long as you feel that you're making progress, you'll continue to develop good spending and saving habits.

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(Video) How to Manage Your Money: Six Principles of Personal Finance

Jar #6 – Gifts and Charity (10% of the total)

Money might not give you happiness, but they can help you gift happiness to others.

Save this 5% of your income on gifts to friends and relatives. Give back to the society what’s left. Donate to help the destitute and disabled. Help out local animal shelters. Be virtuous. At the end of the day, you'll be happier for doing so. And if you're on an extremely tight budget you can re-allocate this to the remaining jars. And start keeping track of this one when you're more comfortable with it.

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Conclusion

The exact proportions will vary month-to-month, but if you stick to the guidelines, you will improve your current financial situation. It's all about understanding how you're spending and why you're overspending. When you're able to pinpoint your exact points of failure you can start working on solutions.Of course, you were not thinking of stuffing coins into 6 jars that once stored mayonnaise? Were you?There are far better tools available. With the rise of financial technology firms and advancement in online banking, you're able to keep track of your spendings online.One particularly bright spot in the app market is ORCA. Not only will it help you track your expenses, but it will also aggregate all your banking accounts into one sleek interface. Apps like these can help you understand your spending habits and develop money management strategies for the future. By the way, to simplify your apps management, you can use this free app.

Also, if you want to learn how to manage your finances more efficiently, it's a good thing to browse through some online blogs focused on this topic. Here is the list of the top personal finance blogs to help you get some valuable tips and insights on money management.

If you're looking to make money management to the next level, embrace the new digital Mason jar – Upgrade to digital saving methods together with ORCA

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(Video) ധനികൻ ആകണോ? ഈ മണി മാനേജ്മെന്റ് സിസ്റ്റം പിന്തുടരൂ | How to Properly Manage Your Money Like the Rich

FAQs

What is the six jars budgeting method? ›

It's called the JARS money management system. Basically, using this system, you split your money up into six different accounts, and you have percentages of your money to put into each account. You can use bank accounts or actual jars.

What is the 6 jars system? ›

Harv Eker in his book “Secrets of the Millionaire Mind.” It is a simple money management system where you take six actual jars and each jar will be designated for different purposes. Each time you get paid you will deposit certain percentages of your paycheck into each jar.

What are some money management strategies? ›

How to Manage Your Money Better
  • Make a Personal Budget. ...
  • Track Your Spending. ...
  • Save for Retirement. ...
  • Save for Emergencies. ...
  • Plan to Pay Off Debt. ...
  • Establish Good Credit Habits. ...
  • Improve Your Money Mindset.

What 5 things can you do to improve your tracking and understanding of where your money goes again be specific? ›

5 Ways to Better Keep Track of Your Money
  • Find Out What You're Spending on Little Things. Those small daily expenses aren't always factored into the budget: coffee on the road or lunch out with coworkers. ...
  • Create an Accurate Budget. ...
  • Set Savings Goals. ...
  • Keep Up-to-Date. ...
  • Let Quicken Do the Work for You.

What are the six steps for budgeting each step should be explained? ›

The following steps can help you create a budget.
  1. Step 1: Calculate your net income. The foundation of an effective budget is your net income. ...
  2. Step 2: Track your spending. ...
  3. Step 3: Set realistic goals. ...
  4. Step 4: Make a plan. ...
  5. Step 5: Adjust your spending to stay on budget. ...
  6. Step 6: Review your budget regularly.

What are the 6 steps of the budgeting process? ›

Six steps to budgeting
  • Assess your financial resources. The first step is to calculate how much money you have coming in each month. ...
  • Determine your expenses. Next you need to determine how you spend your money by reviewing your financial records. ...
  • Set goals. ...
  • Create a plan. ...
  • Pay yourself first. ...
  • Track your progress.

How do you use money jars? ›

The Jars ‍

The jar method works by splitting up your money into many different categories. At the beginning of the month, or whenever you get paid, instead of having one bank account balance, you divide up the money you received into your jars.

What are the types of jars? ›

Types of jars
  • Mason jar, a jar used to preserve serval foods (such as fruit, jam, vegetables, ...)
  • Kilner jar, another type of jar for storing foods.
  • Mayonnaise jar, a mason jar especially made for mayonnaise.
  • Canopic jar, used in ancient Egyptian burial.
  • Leyden jar, a simple capacitor.
  • Killing jar.

What is the function of jars? ›

Jars can be used to hold solids too large to be removed from, or liquids too viscous to be poured through a bottle's neck; these may be foods, cosmetics, medications, or chemicals.

What are 5 money management tips to help achieve your goals? ›

7 Money Management Tips to Improve Your Finances
  • Track your spending to improve your finances. ...
  • Create a realistic monthly budget. ...
  • Build up your savings—even if it takes time. ...
  • Pay your bills on time every month. ...
  • Cut back on recurring charges. ...
  • Save up cash to afford big purchases. ...
  • Start an investment strategy.
28 Sept 2021

How important is it to apply money management practices in our daily life? ›

With a good financial management plan, you can manage your income effectively. If you have a good financial plan then you will spend on what is necessary, save money for your future and make proper investments. Financial management helps in knowing which expense to handle first and which one later.

Why is it important to keep track of the money you spend? ›

When you track your spending, you know where your money goes and you can ensure that your money is used wisely. Tracking your expenditures also allows you to understand why you're in debt and how you got there. This will then help you design a befitting strategy of getting out of debt.

What is a 6'6 budget? ›

A '6+6' shows six months of actuals and six months of forecast. As the year progresses, the forecast for the year will become more accurate the more that it comprises actual months and fewer forecast months.

What does Dave Ramsey recommend for budgeting? ›

Dave recommends telling every dollar where it should go—before the month begins—using a zero-based budget. This means that your income minus your expenses equals zero.

What is the 50 30 20 budget method? ›

The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.

What is the budget method? ›

A budget methodology is the approach used to create a fiscal budget. There are several ways to create budgets, each one being referred to as a different method. Choosing the correct budget methodology is important as different approaches are used for different reasons.

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