T. Harv Eker emphasized that wealthy people aren’t any smarter, they just have better money management habits. The most important part of money managing is separating your income into different accounts for specific purposes. Harv recommended that you have 6 separate accounts. He calls it the 6 money jars.
- Financial Freedom Account (FFA)
- Long Term Savings For Spending (LTSS)
- Education Account (EDUC)
- Necessities Account (NEC)
- Play Account
- Give Account
- 10% FFA
- 10% LTSS
- 10% EDUC
- 55% NEC
- 10% PLAY
- 5% GIVE
You should never, ever, ever spend your FFA capital. The idea is to create a golden goose or passive income with your FFA. Only when you stop working you get to spend the egg (but never the goose).
The LTSS account is used for savings for down payment for a house, a car, education for kids, major vacation.
The Education account is used for your own education and not for your children. It is important to continuously learning and growing. Your money can only grow as much as you grow. “If you are not growing, you are dying”.
Obviously the necessity account is to pay for your daily expenses including bills, mortgage or rent, car payment, food, necessary clothing etc. If you can’t live on 55% of your income, simplify your life. Everything is a choice. You don’t have to drive a new car every 3-years. You don’t have to live in a huge house and you don’t have to have the latest new gadget to hit town. Make wise choices when it comes to your money. Wealthy people think long term and poor people think short term. Practice delayed gratification instead of instant gratification. It will be well worth it when you achieve financial freedom.
The objective of the Play Account is to nurture your inner child by having fun and being outrageous. It can be used for entertainment, holidays, toys, etc. Even if you do not have much to begin with you can still have fun with a little money. For instance you can buy a bubble gum and be a kid again or you can get one of those soap bubble fun and have a blast blowing bubbles. The only rule with your Play Account is that you must spend your Play Account monthly or at least quarterly.
Money from the Give account is to be given away to anyone or any organization that would benefit from your help. If you choose to give more than 5% take the extra from your NEC Account. For example if you would like to give 10%, take the extra 5% from the NEC Account and change NEC to 50%.
Your money can be kept in separate jars or separate bank and investment accounts. As soon as I came back from the seminar I got my 6 money jars and have started putting money daily in my FFA. It feels great!
Take note that “It’s not when I have plenty of money, I’ll begin to manage it.” It’s when I begin to manage it, I’ll have plenty of money.”The Universal Principle of Management says “Until you show you can handle what you’ve got, you won’t get any more.” The habit is more important than the amount. It does not matter if you start out with only a dollar.
It is important that you always pay yourself first.
Wealth Rule # 1:Pay yourself first (your FFA).
Broke people use the leftover strategy; they pay everyone first, then save or invest what’s leftover. If you follow this route it will be almost impossible to achieve financial freedom. The law of attraction states that Like attracts like; money attracts money. The FFA acts like a money magnet. Where attention goes, energy flows and result goes.
To accelerate the process affirm to yourself out loud daily:
“I am a money magnet. Money comes to me easily and continuously!”
You are on the way to financial freedom if you follow this easy money management system!
To your abundance and stay driven!