Friday, July 17, 2009

The Jars

Last month I attended T. Harv Eker's Millionaire Mind Intensive Seminar. I think the most make sense and easy to do is the jars. This is the simplest money management in the world.

So, how does the jars work? First step is to prepare jars. (it can be cookie jars, tupperware, bank account, or anything that you wish to). Label it as :

1. FFA - Financial Freedom Account. 10%
2. LTSS - Long Term Savings and Spending. 10%
3. EDU - Education. 10%
4. NEC - Necessity. 55%
5. PLAY - Play or anything not necessary you buy. 10%
6. CHAR or GIVE - Charity or Give away. 5%
Note : You can always adjust the amount according to your own preferences.

Details :
By logic, the universe (or in muslim I prefer to call it as God) will only re-act to those who can manage things properly. The jars will help you on the managing the money. Imagine if there is somebody begging you for money, immediately after you give him RM10, they spend it on buying cigarette or gamble the money. Would you give him more? Absolutely No! But instead his buying some food, save some money, give RM1 to his friend who also needed etc. would you think you want to give him more money? Absolutely! The same thing goes here.

1. FFA. Why we need it? Have you ever heard the story of the golden goose? FFA is the golden goose, or at least treat it as one. Golden goose will lay eggs as long as it is alive. So, it is important not to spend any of the amount that you already put in your FFA. This FFA money only can be allowed to put in at an investment vehicle (and treat it as we already spend that money) and we can only use the dividend. In this case we don't care the economy goes up or down, cause we are not going to sell the units anyway. And the dividend is our passive income, which means when the amount of FFA grows, our passive income also will grow!

What happened if you receive the dividend? I recommend you treat it as your income, and again divide your money into 6 portion. In this way you can get 10% of your income re-invest into you FFA, so the fund will grow!

So what happens when you passed away one day? Write a will, give it to your children? No! This money cannot be given to anybody! But it shall remain inside the investment vehicle or at least put it into another investment vehicle. But the dividend payout can be enjoyed by your generation. Maybe more than seven generation!

2. LTSS. For sure everybody got something they wish to have. The good thing about LTSS is you save to spend. Maybe you like the iPhone (I like it too!), having the latest VIAO laptop or the SLR camera. Put it on your wishlist, and when the fund is ready, just spend it! Traditional way, you might bought something by withdrawing your savings or when you receive your bonus. But put aside some money, purposely to use it on whatever you wanted. Doesn't it feels cool to have the latest gadget?

3. EDU. In order to increase your financial knowledge or financial intelligence, it is important to have education. For myself, to educate, I bought a lot of books and attend some seminars. Hanging around the internet of course your can get the information, but trust me, the education from reading books or seminars is far more valuable! You can also use this fund to educate about your religion or your hobbies (like me, I am the guitar freak, attending a class also can use this fund).
Btw, this fund have close relationship to your FFA, as you might need the knowledge on the best investment vehicle, technique etc etc. So, you need to fully utilize this fund.

4. NEC. Of course you need to pay your bills, mortgage, loan etc. Also you need to eat, buy pampers (if you got kids), buy the groceries, shampoo, toothpaste and whatever necessary. That is why this fund should have the highest percentage!

5. Play. Don't just save. Sometimes you need to get some leisure. Don't you think it is good to eat at a first class restaurant. If you are music freak, go to jamming. Ride a roller coaster at the Times Square or Genting Highland (but guys, don't play the Casino please!). Enjoy yourself. Enjoy with leisure!

6. Give. Last but not least, you need to give away back at least 5%. By giving money is actually how you earn more. If you have difficulties in earning money, why not try to give money first? Like Rich Dad said, if you want a smile, smile at others people first and you'll receive more smiles. If you want a punch, go and punch other people and sooner will receive a punch. (Of course not the same people will punch you, as kids will ask their parents to punch you back!) (If you are mu

PAY YOURSELF FIRST! - It is important to pay yourself first. Why? If you pay other people first, then only yourself you are focusing on other people! Following the law of attraction, if you are focusing on other people, then you will more often pay other people. Concentrate on yourself first. But how if after paying myself, I still got unpaid bills? Just pay whatever you can. TNB wont cut your bills if you pay them 20% at least to show your commitment.