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Money Problems
The StepHero™ Community Newsletter
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THE JARS – A Simple Route to Financial Peace
Using this method will give you what you need to save, spend, give, and invest in your future.
When my husband and I got together we formed the highly unhealthy match of a spender and an avoider*. As a result, we quickly went into debt together and had a terrible time paying our bills on time. Our money problems were awful and caused the greatest amount of tension, stress, and frustration in our relationship (more so than any other blended family issue).
After we discovered the Jars budgeting system, everything changed – overnight. I’m not exaggerating. We suddenly had a way for both of us to take responsibility financially, and we completely supported each other in using the system. Now, when we have a purchase we want to make, we simply go to our jars and see if there’s enough money IN THE RIGHT JAR to pay for it. And when bills come in, we pay them automatically with the RIGHT JAR and always know how much money we have to cover our expenses. This system has been an amazing blessing in our life, and I believe it will have as significant an impact on your overall happiness and financial well being as it has for the thousands of people who have incorporated it as a way of life.
The Jars Budgeting System
The overall concept of this system is that you take your income and split it up among 6 jars:
Jar 1: Financial Freedom – Ideally you want to put 10% of your earnings into this jar with every paycheck. AND, if possible, get in the habit of putting some money into this jar every day. This money is never spent on things or services. It is money that will be put to work to earn you money in the form of passive income – investments, interest-baring accounts, etc.
Jar 2: Long Term Savings for Spending – 10% of your income goes into this jar. This is for bigger items you are saving for (a car, a home, a trip, . . .). You can also split this into two or more jars, where you save for “contingencies” (unexpected expenses) and/or put money aside to pay off your debt. So, you could have 2 jars and put 5% in each, or 3 jars and put 3% in two and 4% in one.
Jar 3: Necessities – 55% of your income goes into this jar. This covers all your living expenses – rent, bills (not outstanding ones), food, gas, hair, nails, etc.
Jar 4: Education – 10% of your income goes into this jar. As someone with a tendency towards avoiding money, it is essential that you take some time every day to learn about money and how to have it work for you. Knowledge is power. The more you know, the more comfortable you’ll feel around money. You can use this money to buy books, take courses, get tapes, attend lectures, etc – all related to money management. Even without a lot of money, you can get great books at the library, as well as terrific information on-line.
Jar 5: PLAY – 10% goes into this jar. AND, it is essential that you blow the entire amount by the end of each month. This is money to be spent on fun extras – not on necessities.
Jar 6: Give – 5% goes into this jar. Part of being able to receive money is to practice the art of giving and sharing what you have with those who have even less.
For couples with different incomes: Start by looking at your budget and what needs to be in the Necessities jar first. Then, determine what amount each of you can take off the top that goes into each of your personal, separate accounts or jars. This money is the same amount, regardless of the difference in income (eg. You agree that each of you gets $100/month for your own personal use and you pool the rest). This personal money is to be used by each of you individually – you don’t need to ask each other for permission; you don’t need to tell each other how you’re spending it.
Now, for the rest – look at your incomes in terms of percentages. If the woman brings in, say, $1000/month and the man brings in $2000/month, then he puts in twice as much as she does. Another way to look at this is that you each follow the percentages above from the standpoint of your income. She puts 55% of her income into Necessities, he puts 55% of his income into Necessities, and so on.
For people who cannot meet their living expenses with 55% of their income: – you don’t have to start with these percentages. I met a woman who was going bankrupt due to a huge, insurmountable debt. She started using the jars with only $1.00 a month (so, 10 cents went into the 10% jars; 55 cents went into her necessities, and 5 cents went into the give jar! She even took the 10 cents out of the Play jar and bought herself a “double bubble” to have some fun and “blow” her play money for that month). Over time she was able to double the amount she could put towards the jars each month (so she went from $1.00 to $2.00 to $4.00 to $8.00 . . .). Three years later she has a number of investments and only needs to live on 30% of her income now, because she has passive income paying for the majority of her expenses!
What this will do is get you in the habit of knowing where your money is going and having it work more effectively for you. It’s a great way to take back control of money, instead of having it control you. I empty out my change into my Financial Freedom Jar each night and love seeing that pile grow! Every little bit helps.
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Action Step
Go to your kitchen and find 6 jars, of any size and shape. Label them according to this system and put them in a place where you can see them and access them easily. Share this system with your spouse or partner and with the children too.
Create a wish list of things you’d all like to save for and put those wishes in the Long Term Savings for Spending Jar. Create another wish list for ways you all would like to Play as a family. Put those wishes in your Play jar. Then, at the end of each month, see how much money you’ve all contributed to each of the jars, towards your family goals.
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Resources
If you’d like to order the Special Report and learn about: - Your money personality,
- Your beliefs around money, and
- Effective ways to talk about money with each other,
please get the Unravel Your Money Problems Special Report.
If you find yourself challenged by the above Action Step, contact me at
to schedule a coaching session to get you unstuck.
Wishing you and your blended family a
ll the best
this year,
Emily Bouchard, founder,
www.Blended-Families.com
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