2838: Learning to Budget With a Money Jar System by Steve Martile with Get Rich Slowly on Financial Freedom

[00:00:30] [SPEAKER_00]: With a Money Jar System by Steve Martile with GetRichSlowly.org and I'm your host and personal finance enthusiast, Dianomarium.

[00:00:40] [SPEAKER_00]: Without further ado, let's get right to today's post and continue optimizing your life.

[00:00:49] [SPEAKER_00]: Learning to budget with a Money Jar System by Steve Martile with GetRichSlowly.org.

[00:00:57] [SPEAKER_00]: Managing Money doesn't restrict freedom, it creates freedom.

[00:01:02] [SPEAKER_00]: While that's probably not the first time you've heard this, you've got to start managing your money if you want to create financial abundance.

[00:01:09] [SPEAKER_00]: I've started doing so in 2006 after reading T. Harve Echers Secrets of the Millionaire Mind.

[00:01:17] [SPEAKER_00]: Before then, my wife and I were pretty random with our spending habits.

[00:01:21] [SPEAKER_00]: We ran a pretty high tab every month and had nothing to show for it.

[00:01:25] [SPEAKER_00]: At the time, I was driving a brand new Nissan 350Z which cost me an $800 payment each month.

[00:01:34] [SPEAKER_00]: That didn't include insurance or gas that was just the payment on the car.

[00:01:40] [SPEAKER_00]: Jars, The Money Jar System

[00:01:42] [SPEAKER_00]: Then we started using the Jars Money Management System discussed in Secrets of the Millionaire Mind.

[00:01:49] [SPEAKER_00]: And what are the Jars? The Jars are just that, plastic jars.

[00:01:55] [SPEAKER_00]: The Jars themselves aren't actually that important.

[00:01:58] [SPEAKER_00]: What's more important is the Money Management System behind them.

[00:02:02] [SPEAKER_00]: We actually bought the Jars as a visual reminder of where to put our money when we manage it,

[00:02:07] [SPEAKER_00]: but we manage it from a set of bank accounts.

[00:02:11] [SPEAKER_00]: Managing your money reaps rewards.

[00:02:14] [SPEAKER_00]: Once we started to manage our money, I sold the 350Z.

[00:02:18] [SPEAKER_00]: After our first year without any significant change in our income,

[00:02:22] [SPEAKER_00]: and all expenses being treated equal, our net worth increased by a surprising 45%.

[00:02:29] [SPEAKER_00]: When we learned how to apply this system, we realized it was very simple and didn't require a lot of our time.

[00:02:36] [SPEAKER_00]: Here are the results we produced after using the Jars for 12 months.

[00:02:41] [SPEAKER_00]: Our net worth increased by 45%.

[00:02:44] [SPEAKER_00]: We bought our first home for $337,000.

[00:02:49] [SPEAKER_00]: We created $800 a month in passive income by renting out our one bedroom basement apartment.

[00:02:57] [SPEAKER_00]: We earned $200 in interest from our savings accounts.

[00:03:01] [SPEAKER_00]: We used ING Direct Savings Accounts, which were clocking about 3.5% interest at the time.

[00:03:08] [SPEAKER_00]: ING Direct became capital 1 360 in 2013.

[00:03:13] [SPEAKER_00]: And we created more peace in our money relationship because my wife and I have our own play money.

[00:03:21] [SPEAKER_00]: The real trick to managing your money is now what you do, it's how you do it.

[00:03:26] [SPEAKER_00]: How to use the Jars system.

[00:03:29] [SPEAKER_00]: Here are the jars and a short description of each one.

[00:03:33] [SPEAKER_00]: Number 1, necessity account.

[00:03:36] [SPEAKER_00]: Any C 55%.

[00:03:39] [SPEAKER_00]: This account is for managing your everyday expenses and bills.

[00:03:43] [SPEAKER_00]: This would include things like your rent, mortgage, utilities, bills, taxes, food, clothes, etc.

[00:03:52] [SPEAKER_00]: Basically it includes anything that you need to live the necessities.

[00:03:57] [SPEAKER_00]: Number 2, Financial Freedom Accounts, FFA 10%.

[00:04:02] [SPEAKER_00]: This is your golden goose.

[00:04:05] [SPEAKER_00]: Therefore this jar is your ticket to financial freedom.

[00:04:08] [SPEAKER_00]: The money that you put into this jar is used for investments and building your passive income streams.

[00:04:15] [SPEAKER_00]: You never spend this money.

[00:04:16] [SPEAKER_00]: The only time you would spend this money is once you become financially free.

[00:04:21] [SPEAKER_00]: Even then, you would only spend the returns on your investment.

[00:04:24] [SPEAKER_00]: Never spend the principal.

[00:04:26] [SPEAKER_00]: Number 3, Education Account.

[00:04:30] [SPEAKER_00]: EDU 10%.

[00:04:31] [SPEAKER_00]: Money in this jar is meant to further your education and personal growth.

[00:04:36] [SPEAKER_00]: Since you are your most valuable asset, an investment in yourself is a great way to use your money.

[00:04:42] [SPEAKER_00]: I've used education money to purchase books, CDs, courses, or anything else that has educational value.

[00:04:51] [SPEAKER_00]: Number 4, long-term saving for spending account.

[00:04:56] [SPEAKER_00]: LTSS 10%.

[00:04:57] [SPEAKER_00]: The money in this jar is for the bigger, nice-to-have purchases.

[00:05:02] [SPEAKER_00]: As a result, my wife and I have used the money from this account to go skiing in the Rockies in Whistler, British Columbia.

[00:05:10] [SPEAKER_00]: We also use this money last September for a trip to Italy and Switzerland.

[00:05:15] [SPEAKER_00]: The only reason we've been able to make this happen is because we've accumulated a nice sum each month in our LTSS.

[00:05:23] [SPEAKER_00]: A small monthly contribution can go a long way.

[00:05:26] [SPEAKER_00]: Number 5, Play Account.

[00:05:30] [SPEAKER_00]: Play 10%.

[00:05:32] [SPEAKER_00]: This is my favorite account.

[00:05:34] [SPEAKER_00]: Play money is spent every month on purchases you wouldn't normally make.

[00:05:39] [SPEAKER_00]: The purpose of this jar is to nurture yourself.

[00:05:42] [SPEAKER_00]: You could purchase an expensive bottle of wine at dinner.

[00:05:45] [SPEAKER_00]: Get a massage or go on a weekend get away.

[00:05:49] [SPEAKER_00]: Play can be anything your heart desires.

[00:05:52] [SPEAKER_00]: My wife and I each receive our own play money.

[00:05:54] [SPEAKER_00]: And here's the best part.

[00:05:56] [SPEAKER_00]: We're not allowed to ask what the other person spends their money on.

[00:06:00] [SPEAKER_00]: And number 6, The Give Account.

[00:06:03] [SPEAKER_00]: Give 5%.

[00:06:05] [SPEAKER_00]: Finally, the money in this account is for giving away.

[00:06:09] [SPEAKER_00]: Trisha and I give money every month to the sick kid's hospital foundation.

[00:06:14] [SPEAKER_00]: In addition, we use the money in this jar to give to family and friends on birthdays, special occasions and holidays.

[00:06:21] [SPEAKER_00]: You can also give away your time as opposed to giving away money.

[00:06:25] [SPEAKER_00]: You could house set for a neighbor, take a friend's dog for a walk or volunteer in your community.

[00:06:32] [SPEAKER_00]: How the jar's money jar system works.

[00:06:35] [SPEAKER_00]: Here's a sketch of how we use the jars.

[00:06:38] [SPEAKER_00]: Actually, we don't use jars at all.

[00:06:40] [SPEAKER_00]: All of our accounts are electronic savings accounts with our necessity and you see account being the only exception.

[00:06:48] [SPEAKER_00]: It's a checking account.

[00:06:49] [SPEAKER_00]: Trisha and I deposit all of our personal income into our necessity account.

[00:06:54] [SPEAKER_00]: The money in our necessity account pays for all of our expenses,

[00:06:58] [SPEAKER_00]: and the remaining money is distributed into five other accounts.

[00:07:02] [SPEAKER_00]: I learned very early in the process that the jar percentages are not critical.

[00:07:07] [SPEAKER_00]: To guarantee your financial success, just start using the system and build the habit.

[00:07:13] [SPEAKER_00]: This is the key.

[00:07:14] [SPEAKER_00]: It doesn't have to be perfect when you start.

[00:07:16] [SPEAKER_00]: Furthermore, you could even start by splitting $10 every month into the jars.

[00:07:22] [SPEAKER_00]: There's an inspiring story in secrets of the millionaire mind.

[00:07:26] [SPEAKER_00]: One woman started splitting $1 into the jars every month.

[00:07:30] [SPEAKER_00]: In her first month, she put 10 cents into her play, 10 cents into her FFA,

[00:07:36] [SPEAKER_00]: 10 cents into her LTSS and so on.

[00:07:40] [SPEAKER_00]: Later that month, she used her play money to buy a piece of bubble gum.

[00:07:43] [SPEAKER_00]: She received a mini comic with the bubble gum package that she bought with her play.

[00:07:49] [SPEAKER_00]: She read the comic and got a laugh.

[00:07:52] [SPEAKER_00]: Two years later, she deposited a $10,000 check into her FFA account.

[00:07:57] [SPEAKER_00]: Now who's laughing?

[00:07:59] [SPEAKER_00]: I highly recommend the jar system to anyone who wants to make the most out of their money.

[00:08:04] [SPEAKER_00]: If you're looking for a simple way to budget, then start using the jar system.

[00:08:08] [SPEAKER_00]: Remember, managing money doesn't restrict freedom.

[00:08:12] [SPEAKER_00]: It creates freedom.

[00:08:17] [SPEAKER_00]: You just listen to the post titled,

[00:08:19] [SPEAKER_00]: Learning to Budget with the Money Jar System by Steve Martial with GetRitchSlowly.org

[00:08:25] [SPEAKER_00]: And I'll be right back with my commentary.

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[00:09:30] [SPEAKER_00]: There are lots of different ways to budget.

[00:09:33] [SPEAKER_00]: You could use a tool like you need a budget, often referred to as YNAB.

[00:09:37] [SPEAKER_00]: You could use cash envelopes or a spreadsheet or a system like described today with targets for spending categories.

[00:09:46] [SPEAKER_00]: You could give every dollar a job, often referred to as zero-based budgeting.

[00:09:52] [SPEAKER_00]: Or you could just save a certain percentage of your income and not really track how you spend the rest of it.

[00:09:58] [SPEAKER_00]: If you find budgeting restrictive, it's likely because you haven't found a style that works for you.

[00:10:04] [SPEAKER_00]: You're desire to reach a financial goal, pales, in comparison to your desire for immediate gratification.

[00:10:12] [SPEAKER_00]: Or you have an income problem.

[00:10:14] [SPEAKER_00]: If your income is too low, there is no amount of budgeting that's going to fix that.

[00:10:19] [SPEAKER_00]: But if you don't have an income problem and you're focused on managing your money better,

[00:10:24] [SPEAKER_00]: budgeting is just the simple act of paying attention to where your money's going in some capacity.

[00:10:30] [SPEAKER_00]: A lot of the time, just paying attention can alter behavior.

[00:10:35] [SPEAKER_00]: Think about dieting and exercise.

[00:10:38] [SPEAKER_00]: When you track what you're eating and how you're exercising, you're able to see progress

[00:10:42] [SPEAKER_00]: and improvement over time, which can help you keep going.

[00:10:47] [SPEAKER_00]: But it also helps you make better decisions in the moment.

[00:10:51] [SPEAKER_00]: But that'll do it for today's episode, have a happy rest of your day,

[00:10:54] [SPEAKER_00]: and I'll be back with you again tomorrow, where your optimal life awaits.