Every month you will be receiving a paycheck from your active job. Have you give a thought on how you should be allocating this income to achieve financial freedom? This entry I would like to share with you an idea using 4 different jars:
1. Your Own Saving Jar – 20%
“Pay Yourself First” – I believe this quote shouldn’t be unfamiliar to you. What it actually meant is that the moment you received your pay check, immediately transfer 20% to your another saving account before you spend any. This account should be only for saving or investment and not for daily withdrawal/expenses.
20% is to allow you to accumulate enough fast enough for future investment needs. My point here is, you shouldn’t just stop here. Saving only won’t make you rich, in fact poorer due to the high inflation rate yet low interest rate environment. What you should do, is to view it as a stepping stone for future good use of this money. To employ money to work for you so to generate another stream of passive income!
2. Your Own Education – 10%
While you are saving getting ready for future ventures into investment and business. You should get yourself ready too! Meaning, having the correct education and equipped yourself with the necessary knowledge for future growth and potential!
Most of us graduate with a certification of our own profession. Be it engineering, arts and science, psychology etc. However, most often you would not be taught with the necessary financial skill set to make you rich, unless perhaps you are from business or finance sector.
ps: Although so, I have met numerous accountants during my one of my fundamental investment courses that they didn’t learn how to interpret these values that they input and consolidate everyday in their work!
Thus, I strongly urge you, my dear readers, to spend some money by investing into good books and courses that going to make you more knowledgable and more importantly, the wealth you much desire for!
3. Pleasure – 10%
I would say what’s the use of working so hard everyday yet you are so stingy with yourself? I guess being human being, we need to reward ourselves in order to motivate ourselves to go to work everyday.
If you think about it, money isn’t what we really wanted, is the value that it could bring is what we desire to have! Hence, by spending a small portion of money on yourself and family, it serves as a reminder that not to lost sight of what’s really important to you. For example, to earn enough so to provide a good living condition for your loved ones.
4. To bills, debt and everyday needs – 60%
Let’s face it, we have large amount of bills and loans to repay. Hence by allocating 60% isn’t exaggerating. But the good news is, if you follow the income allocation technique well, you should have already kept aside money for your own growth and saving!
On the other, since this exhaust large portion of your income, I would recommend that you do track your expenses closely so that you could review and implement ideas to cut down your expenditure. This amount could go into saving and you are then one step closer to attain financial freedom.
So dear readers, you should have proper money allocation system in place as your very first step to attain financial freedom. Never let your money run wild, that you lose track of everything.
Always remember that: “Once you lose control of money, money gain control over you”