The Money JAR System

Recently I wrote an article about the different levels of FiRE and how I learned about the MONEY JAR SYSTEM after I attending T. Harv Eker's Millionaire Mindset seminar . To check out that article click here.

I am going to write about the Money JAR System and how I have been using it since 2010 to slowly grow my wealth. Bear in mind that this system is not easy to follow but if you are able to implement it in your daily lifestyle, it is a POWERFUL tool to save money and track your monthly expenses. Doing so will quickly help you to achieve FiRE.

What is the Money Jar System?  It is basically a way to separate your income into different categories which T Harv Eker calls them Jars. You will allocate a certain fixed percentage from your net income and place them into these Jars.  

Harv Eker also covered the MONEY JAR System in his book "Secrets of the Millionaire Mind", where he has a complete chapter on this. You can also read the book to learn more about it.  I will share a  brief overview of it and  how I have modified it.

For example, here is a brief description of the JARs and their allocation :

NECESSITY JAR (NEC) - Allocation : 50%

This can be food, insurance bills, dental fees, petrol, mortgage, etc. Basically any expenses that are necessities to continue your daily life. This jar usually eats up the most allocation.

 

LONG TERM SAVINGS JAR (LTSS) - Allocation : 10%

Planning a an expensive holiday? Or a nice big High Definition TV for your home? This JAR is meant for that purpose. I have used this to save up for my property down payment, my DLSR camera, and also to pay for my vacation to Japan. You can also break them into mini LTSS jars. Basically any savings that require 12 months or more to save up is considered Long Term here.

FINANCIAL FREEDOM ACCOUNT JAR (FFA) - Allocation : 10%

To me this is the most important JAR. Here you save at least 10% of your income and put into your FFA JAR. In the book "The Richest Man in Babylon", the secret to being wealthy and rich is to save 1/10 of your monthly income and store it somewhere safe. Remember to PAY YOURSELF FIRST and this is the first JAR you should put your money into. You will only withdraw for investment sake and nothing else.

PLAY ACCOUNT JAR (PLAY) - Allocation : 10%

Here's a saying :

"All work and no play makes Jack a dull boy"

Don't be a boring Jack. You can still go out and splurge on expensive food, clothes, spend your loved one on an expensive boat trip without feeling guilty. If you deprive yourself of the fine things in life, you may not last long with this Jar System and  decide to give up.

GIVE  JAR (GIVE) - Allocation : 10%

Most people tend to just receive and not give back. However it is good to give back and help out the less fortunate. This can be in a form of donations or charity. The more you give, the more you get back in return. 

EDUCATION JAR (EDU) - Allocation : 10%

I have used this JAR to pay for books and seminars in stock investing and other self-help courses. I have purchased udemy videos online using this jar. A person is only dead once the learning stops. 

Instead of using physical JARs, you can use different bank accounts or virtual accounts for each category. One method is after getting your monthly salary, immediately divide your salary according to the jar allocation percentage and quickly transfer them to different savings accounts (can be in the same bank or different banks).

For me, I am using a spreadsheet to keep track of how much money I have in each category.  I  used the above original allocation for the first few years before I started to make changes. It was not easy but I managed to consistently follow this JAR system for the past decade.

Over the years, I actually made a few changes to the JAR system. I created more Jars (eg: Emergency Fund Jar, Investment Jar, different jars for different properties i own, subsets of the main Jar, etc) and modified the allocation. Right now I am allocating 50% or more into FFA Jar in order to quickly achieve FiRE. Ofcourse doing I will need to allocate lesser on the other JARs such as the Necessity JAR by controlling and cutting down my monthly Necessity expenses. But try to start with 10% allocation to your FFA Jar first, and work it up. The most important thing is to build a habit of tracking your daily expenses and allocating your income into the JARs every month.