Effective Money Handling: A Guide to Efficient Money Management
Money management is all about financial discipline. It’s not acquired or inherited but developed over time with experience. Having good money management skills can help you sail through difficult situations without much difficulty. Effective management can help you live a financially stress-free life
Why is Money Management Important?
Here are some of the reasons why money management is critical for everyone:
Develop Self Discipline.
Understanding how to manage your money isn’t just about numbers—it’s about cultivating self-discipline. By gaining insights into proper financial handling, you can steer clear of impulsive decisions that may harm your financial well-being.
Consider this: if you tend to use credit cards for unnecessary purchases, you might find yourself sinking into debt. On the flip side, if you embrace budgeting and prioritize spending on essentials, you’ll reduce the likelihood of encountering financial troubles.
Build Your Goals
Effective money management is all about establishing and accomplishing your financial goals. With the right financial skills, you can effortlessly allocate funds for short-term objectives and steadily invest in long-term aspirations.
Consider this scenario: if you dream of owning a new car or a house, you can initiate early savings for a substantial down payment. For those aiming at an early retirement, strategic investments in retirement accounts and passive income sources can be the key.
A practical financial goal breakdown may include:
- Clearing outstanding debts
- Building an emergency fund equivalent to three to six months of living expenses
- Obtaining life insurance coverage
- Initiating investments for future growth
- Establishing retirement funds for a secure future
Empower Your Finances: Gain Control and Make Informed Decisions
An essential aspect of money management is empowering yourself with control over your finances. By mastering the art of financial management, you can seize command of your economic situation and make informed decisions that contribute to your overall financial well-being.
For instance, if you find yourself entangled in debt, you can craft a strategic debt repayment plan to expedite the process. If your goal is to save more money, creating a budget or exploring additional income sources, such as side hustles, can be transformative.
Many individuals are subject to the influence of spending habits and debt. Acquiring effective money management skills enables you to reverse the scenario, putting you in control of your finances rather than being controlled by them.
When you know how to manage your finances properly, you take calculated risks and minimize the chances of making financial mistakes.
Today we will know about JARS money management system which is describe in Secrets of the Millionaire Mind book., its a popular money management method— designed specifically to get you to financial freedom.
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.
So what are these jars and what percentage of your income goes into them?
Right now you may be thinking, “I’m not earning a lot of money” or “my expenses are too high.”
Am I saying you have to put Rs.1000 into your accounts every day? No, I didn’t say that.
How come I’m not suggesting a specific amount but certain percentages? It’s so that every single person, regardless if they’re earning Rs.10000 a month or 3000 rupees in a week, can follow this money management system.
Yes, if you are earning 3000 rupees in a week, you can do this system.
Jar 1: NECESSITIES A/c
55% of your income goes into the NECESSITIES jar.
Includes: Food, Mortgage, payments, bills, Gas, oil, Insurance premium etc.
Jar 2: Financial Freedom A/c
10% of your income goes into the Financial Freedom jar.
Includes: The money in this jar can only be used for investments (with returns or profits). This jar is used for building wealth for your future financial freedom. You must never spend this money.
Jar 3: Long Term Savings A/c
10% of your income goes into the Long Term Savings jar.
Includes: The objective of of this jar is to save money for future expenses (e.g. a new car, a vacation, a new couch, gifts, repaying debts….
Jar 4: Education A/c
10% of your income goes into the Education jar.
Includes: Use the money from this jar for personal or professional development (e.g. books, courses, seminars).
Rich people constantly learn and grow. Poor people think they already know”. -T. Harv Eker
Jar 5: Play A/c
10% of your income goes into the Play jar.
Includes: indulge yourself with a nice massage, some new clothes, a fancy dinner… To avoid over-spending or under-spending, make sure you use up the money from this jar at least every few months. This allows you to spend without guilt, and to also gradually improve your standard of living as your income increases.
Jar 6: Give A/c
5% of your income goes into the Give jar.
Includes: Food, Mortgage, payments, bills, Gas, oil, Insurance premium etc.
The single biggest difference between financial success and financial failure is how well you manage your money. It’s simple: to master money, you must manage money”. -T. Harv Eker
Do not fool yourself with statements like
” I would love to have this money management habit, but I cannot do it! “
” I don’t have enough money coming in to split it. “
or statements like
” My expenses are too high, there is no way I can afford to split my money into different accounts. “
