Since I’ve been implementing this nifty little system, I’ve noticed a BIG change in my finances.
I started with small changes first and found that even *those* made a big difference.
So that’s why I’m putting this in a blog post here today.
I think more people need to know about this system and find a way to modify it to fit their needs.
Before I explain this system, first let me share what I used to do.
I had a Spending Account (and of course, I would spend most if not all of the money in that).
I also had a Savings Account and a Business Account, which I would contribute to occasionally.
And I usually felt that I didn’t have enough money to contribute to either on a regular basis.
So most of the time, I ended up feeling depleted.
And I’d already heard variations of this system before.
I remember hearing once on a TV show about a family that divided up their cash into different envelopes. They had an envelope for groceries, one for paying bills, one for eating out, one for going to the movies, etc.
I thought it sounded like a good idea in theory, but I didn’t think that would ever work for me. The idea of withdrawing all that cash, putting it into so many specific envelopes, and then sticking to that rigid of a system sounded exhausting and forced.
So not my thing.
But then my Mom lent me this book recently: 5 Wealth Secrets 96% of Us Don’t Know by Craig Hill. It’s written from a Christian perspective based on Biblical teachings (the teachings are actually an ancient Judaic practice).
If you decide to read the book and have different spiritual beliefs, please don’t let that get in the way. I think the advice is really solid, regardless of spiritual perspective.
So the ancient Judaic tradition I read about is to divide your cash into 5 Jars.
The 5 Jars are: Spending, Saving, Investing, Charity, and Tithing
The idea is that most of your money goes into the Spending jar, but a predetermined amount (usually 10%) goes into each of the other 4 jars for every chunk of money you get–no matter the size.
The best thing about this is that you end up creating a feeling of abundance rather than depletion no matter how much money you are working with.
In his book, Craig Hill uses the example of a child receiving $10 as an allowance. Instead of spending it, the savvy child would put 10% ($1) into each of the 4 categories and then spend the rest to treat herself.
(FYI, since math can be frustrating: find 10% of any number by multiplying it by .10)
The beauty of this version of the system is that the categories are broad enough to give you freedom of use (as opposed to those envelopes for every possible thing you can think of to spend money on) and that you can use multiple bank accounts and view them on line (rather than withdrawing cash if you don’t want to).
So here’s my take on the 5 Jars:
1) Spending: A jar/account that is just for spending–pretty self-explanatory, right?
That’s the one we’re all most familiar with, and most people only have this one type of jar/account.
2) Saving: I recommend putting 10% of any amount of money you receive in a savings account.
The first move I made to implement this system was to start adding 10% to my Savings and Business accounts. I was surprised to see how much of a difference that made even after only doing it once!
I had some story in my mind about how I couldn’t afford to do this regularly, because I needed that money for my expenses. It turns out that we’ll find ways to spend whatever is available in “Spending.”
In addition to implementing this system, I also realized that I could maximize interest by turning the account into a Money Market account rather than just a regular old savings account–so I did that too.
3) Investing: My investing account is my business account, which I already had set up. Contributing 10% to it regularly is giving me a sense of empowerment–knowing that I have funds building towards my next live event for instance, is an awesome feeling!
Of course, if you don’t have a business, you can still benefit from contributing to an Investing jar/account. You could start putting money aside for education, buying a property, buying stock, or starting a business–whatever is likely to give you a return on your investment in the long term.
4) Charity: I really love this one! I love doing collections for local animal shelters, participating in the AIDS walk, supporting local museums, supporting friends making films and starting their own businesses, giving money to mental health organizations and cancer research–I could go on and on.
But all too often, I would feel that I couldn’t afford to give. The idea of putting aside money for a Charity jar/account is such a good feeling! It feels abundant and empowering to know that you have money to give. And it makes your work more meaningful, knowing that a portion of your money is going to a greater good.
5) Tithing: Tithing means giving a portion of your money to a spiritual community–it could be a Church, Synagogue, or a donation to a meditation group or shamanic journey.
In my opinion, this jar/account only makes sense if you’re part of a spiritual community that you are regularly involved with. Otherwise, the money for an occasional contribution can reasonably come from the Charity jar/account.
Okay this clearly doesn’t work if you routinely move money around to fund your spending account.
And be warned, I’ve also noticed it’s tempting to justify things like “Well this dress is an investment…”
And maybe it is…but these jars/accounts are only as real as we make them. We need to make solid distinctions between them and take them seriously for the system to truly work.
It’s helpful to make it as difficult as possible to move money around. The last time I went to the bank, I was pitched a “virtual wallet” scenario where I could combine all of my accounts into one, so I could withdraw from any of them anytime–bad idea!
Multiple cards for withdrawing from multiple accounts are not so helpful either. I actually love the fact that it’s hard to access my on line banking on my smart phone–I only use my desk top computer to manage my money, and I have more self-control there.
Final Tip: Even though I never want to get as specific as that family that used all those envelopes, it did seem like a good time to start loading up a Starbucks card.
I’ve made shameless peace with the fact that I enjoy my daily trip to Starbucks most days, so why not have a specific account for it?
The card gives you freebies after buying so many drinks and you get a free drink on your birthday (which is more than I would get if I kept paying with my checking card). Plus the money is separated out from my Spending account, so I can see how much I have available not including my tea expenses. It also makes me feel more justified in spending from a pre-loaded amount.
I only mention this so that maybe you can think of a way you can separate out some expenses in order to save more money and create more peace of mind.
Leave a comment below and share any money management tips you have!
If you’d like to give this nifty system a try, remember that I saw a significant difference after just contributing 10% to Savings and Investing one time. So experiment by starting small–it’s still a big move!
My biggest takeaway: It’s crazy to think that the money is already there for the important things–it’s just a matter of managing what you have.