6 JARS, ONE WEALTH STRATEGY: T.HARV EKER’S FINANCIAL MANAGEMENT BLUEPRINT

As we enter Q3 of 2024, it’s an opportune time to revisit and realign our goals for the year. This reflection and adjustment period can significantly impact how we finish 2024, especially when it comes to our financial goals. Aligning your financial strategy with a proven system can set you on the right path to achieving your objectives. One such effective method is T. Harv Eker’s 6 Jar Wealth Management System. This comprehensive approach to money management can help you stay on track and bring you closer to your financial aspirations. Here’s how you can leverage this system to master your finances and end the year on a strong note.

Many people try to get rich by emulating multi-billionaire Warren Buffett’s investment strategy. There’s great, though they miss (or choose to ignore) an important ingredient — one reason Buffett is so rich is because he is also infamously frugal.

There are numerous examples of Buffett’s frugality. For example, when his first child was born, Buffett converted a dresser drawer into a bassinet . For his second child, he borrowed a crib. He drove a Volkswagen until his wife upgraded him to a Cadillac (which she felt was better for his image). Buffett still lives in the Omaha, Nebraska, in the house he bought for $31,500 more than 50 years ago. You get the drift…

Buffett manages his money and wealth on the principle that small sums compound. Every penny not spent today means a lot more money to invest, or use, in the future. In the book The Millionaire Next Door , Stanley and Danko also found some interesting truths about many millionaire households that they profiled in America — most of the millionaire households that they profiled did not have extravagant lifestyles and luxury items like branded watches, suits, cars etc.). They accumulate so much wealth precisely because they live below their means

T. Harv Eker summarizes it with these wise words: “The habit of managing your money is more important than the amount.” And this is one of the 17 factors that differentiates rich people from poor people.

How can you systematically manage your money better? Well, in his book Secrets Of The Millionaire Mind, Eker shares a simple method that anyone could use.

THE 6 JARS CONCEPT FOR WEALTH MANAGEMENT

The idea of this system is simple: separate your income into 6 different accounts for specific purposes. You can also use physical jars, envelopes etc. and label them accordingly. The most important thing is to consistently deposit into these jars / accounts as follows:

1. Necessities (50%)

Half of your income goes toward real necessities ( N) like food, mortgage payments, bills, gas, oil, insurance, etc. If you can’t cover all your necessities with 50% of your income, you need to do one (or both) of these things:

• Simplify your life by spending less.
• Earn more by finding additional income sources.

2. Financial Freedom Account — FFA (10%)

10% of your income goes into your Financial Freedom (FF) jar. The money in this jar can only be used for investments (with returns or profits). This jar is used for building wealth for your future financial freedom. You must never spend this money.

3. Long Term Savings— LTS (10%)

10% of your income goes into the jar called Long Term Savings ( LTS) for Spending. The objective of of this jar is to save money for future expenses (e.g. a new car, a vacation, a new couch, gifts, repaying debts…).

4. Education — (10%)

Successful people constantly invest in and grow themselves. Hence, 10% of your income goes into the Education ( E) jar. The more knowledge and skills you acquire, the greater your earning capacity. And the more you earn, the more you need to learn (how to manage your additional wealth, how to bring your income to the next level etc.). Use the money from this jar for personal or professional development (e.g. books, courses, seminars).

5. Play— (10%)

10% of your income goes into the Play ( P) jar. It’s important to occasionally indulge yourself with a nice massage, some new clothes, a fancy dinner. To avoid over-spending or under-spending, make sure you use up the money from this jar at least every few months. This allows you to spend without guilt, and to also gradually improve your standard of living as your income increases.

6. Give— (10%)

10% of your income goes into the Give ( G) jar. However poor your circumstances may be, there will always be someone who is in an even more dire state. Besides the feel-good factor of helping others, giving away part of your income also helps you to sub-consciously develop the wealth-mentality that you have more than enough to give away.

7. Financial Freedom Jar

Finally, create a Financial Freedom Jar and deposit something into it daily, however small. The idea is to keep financial management top-of-mind, and a daily commitment made towards your financial freedom.

Once again, to summarize, here are the 6 jars concept:

PSYCHOLOGICAL & BEHAVIORAL INSIGHTS

Psychologically, dividing money into separate jars reinforces financial discipline. This visual and physical segmentation makes it easier to track spending and saving, reducing the temptation to dip into funds allocated for other purposes. Behavioral studies show that such tangible methods can significantly improve financial habits.

ADAPTING THE 6 JAR SYSTEM FOR LIFE’S CHALLENGES AND STAGES

Life’s financial needs and challenges vary at different stages, and the 6 Jar Wealth Management System by T. Harv Eker offers the flexibility to adapt accordingly. This section explores how to tailor the system for students, young professionals, families, and retirees, effectively manage debt, plan for unexpected expenses, and realize the long-term benefits of disciplined financial management. By adjusting the jars to fit your life stage, you can confidently navigate your financial journey.

1. Customizing the 6 Jar System for Different Life Stages

The 6 Jar System can be customized for different life stages to better align with varying financial needs. For students, the Education jar might take precedence, ensuring they invest in their knowledge and skills. Young professionals might focus more on the Financial Freedom and Long Term Savings jars to build a secure financial foundation. Families may prioritize the Necessities and Play jars to balance essential expenses with enjoyment. Retirees, on the other hand, might concentrate on savings and giving, reflecting their shift in financial priorities. Tailoring the system to your life stage ensures it remains relevant and effective.

2. Dealing with Debt within the 6 Jar Framework

Managing debt within the 6 Jar framework involves specifically allocating income for debt repayment. Adjusting the percentages to prioritize debt payments is crucial for achieving financial stability without compromising long-term goals. For instance, allocating 10% for Debt Repayment and adjusting the remaining jars accordingly can help manage and eventually eliminate debt, paving the way for financial freedom.

3. Incorporating Unexpected Expenses

Unexpected expenses are an inevitable part of life. To manage these effectively, create an additional jar specifically for emergencies or allocate a portion of the Long Term Savings jar for unforeseen costs. Planning for the unexpected ensures that these expenses do not derail your financial progress and allows you to handle surprises with confidence.

4. Long Term Impact and Financial Independence

The long-term benefits of the 6 Jar System are profound. By consistently applying its principles, you can achieve financial independence and security, building a solid foundation for wealth accumulation. Over time, disciplined money management fosters financial freedom, allowing you to live comfortably and confidently while achieving your financial aspirations.

GETTING STARTED

Obviously, these numbers are just guidelines. Depending on your financial circumstances, you may need to adjust the percentages slightly. Even if you are currently in debt, you can start by managing each borrowed dollar well. In fact, if you are heavily in debt, there’s all the more reason to start implementing this system.

Here are 3 simple steps to get started:

1. Know your percentages. You can’t manage your money without knowing how much you are earning and spending. You can start by calculating your current monthly income and the amount to be put into each of the 6 jars. Then, track how much money you spend daily. Just by becoming aware of your spending patterns is already a first step in the right direction.

2. Shift your mindset. Understand that money management isn’t about restricting your freedom; it is to create eventual financial freedom. Several years from now, you can be happily retired while your friends (who are enjoying the “good life” now) are still slogging away to pay for their expensive lifestyle. Constantly remind yourself out loud “I am an excellent money manager!”

3. Don’t entertain any excuses. It’s easy to say “I’ll do it tomorrow”, or “I don’t have time for it”. The big question to ask yourself is — how badly do you want to be rich and financially free? If you are serious about your financial goals, then no excuses should be permitted. Start NOW and stick to your plan.

APPLYING THE 6 JAR CONCEPT TO YOUR BUSINESS

If you’re running your own business and struggling to pay the bills each month, it’s time to start turning things around. Read up more on how you can apply a similar concept to transform your business finances and take Profit First.

* Prefer a DIY approach at this point? Read our free Secrets of the Millionaire Mind summary, or buy the full text, graphic and audio book summaries.

Click here to download Secrets of the Millionaire Mind book summary and infographic

Originally published at https://readingraphics.com on August 16, 2015.

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