The 5 Jar Method - September 2016
Elijah J. Sanders - Guest writer.
Stress has a huge impact on our mental and physical health? It can be a degrading agent in our lives if not dealt with properly. One of the biggest sources of stress is financial stress. How are we going to pay our bills this month? How to pay for tuition? What are we going to eat? How to pay for that unexpected cost that came up yesterday? How could I even contemplate starting the business of my dreams with my current financial situation?
Well, the truth of the matter is that most people have never learned to properly manage their finances, and THIS causes a lot of stress. In fact, many people have a habit of spending everything they earn. Some treat spending as their priority, when it shouldn't be. And whether this is 100% you or not, the fact is that most of us have some very poor financial management skills and the even bigger issue is that this mentality or lack of financial prudence, is taught to us from the time we're young, we live it, and if unchanged, we will pass it on as well. If we learn better financial stewardship, it can help relieve much of the stress we are forced to deal with concerning money, and thus could have profound impacts on our health.
The Five Jar Method is not the only money management system that could work for you however if you have no money management system then why not start by trying this one. Often finding something simple and effective enough to get started is half the battle.
The essence of this process is you learn to manage your money in five distinct ways.
Jar 1: Management Of Other People's Money:
If you have debts... that's other people's money so prioritise it as the "first things to do" when you receive your income to clear this by paying back more than the premium so you can start knocking off your debt to others. You might allocate your repayment amount plus 10% each pay for this jar or account.
Jar 2: Giving and Generosity, the Anti-Scrooge:
Giving and being generous (wisely) is important, not only to our personal lives, but also to our communities, and the world at large. No matter what your situation is, I can guarantee you that there's someone much less fortunate than you are, and you could probably actually help that person out even a little. Think about setting aside some of your income, strictly for the purpose of helping someone this month. Giving also helps you detach yourself from materialism... which is itself a cause of stress and anxiety.
Jar 3: Saving For A Rainy Day:
Saving can definitely help relieve some stress and bring a smile to your face... who doesn't like to see that they have extra money set aside and growing?
Learning to save can have amazing implications on your financial situation, which in the long run can help reduce that stress. For example, here's some things that saving money (even cash) could help you do: Prevent you going into debt unnecessarily; be able to meet unexpected costs; save you relying on expensive credit cards for everyday living costs.
Jar 4: Investing and the Hope of Return:
Investing comes with its risks, but it can also come with growing rewards. Investing could start to earn you an extra stream of income, or multiple streams down the road, which... who wouldn't enjoy that? I would recommend not setting aside over 20% of your income for this Jar.
Jar 5: Spending Time! Finally:
If you've distributed your percentages as follows: Jar 1: 10%, Jar 2: 10%, Jar 3: 10%, Jar 4: 20%, then you have a whole 50% for Jar 5 - your personal spending. If you save your spending as your last financial priority, instead of first, then you'll have the relief of knowing that you've taken care of all of the above principles, and can spend with ease of mind. You'll have: taken a bite out of your debts/taken care of responsibilities, have money set aside specifically for being generous, have money saved up which can be used for a number of different purposes, and have money for investing. Enjoy.
You can read the full article here and when you scroll down you will see an infographic summary.