Level: General
Reading time: 4 min
What is the 6 jars saving method?
The 6 jars saving method is a very simple and effective budgeting method that has proven very successful. One of the biggest problems with budgeting plans is that they are mostly impractical and most of the people cannot follow them. The need for budgeting is also very important and this is where our 6 jars budgeting method shines.
Using this budgeting method, you divide your income into 6 different portions, hence the name 6 jars, and then you deposit your money in each of those funds. It is an excellent budgeting method and therefore we are going to share with you the 6 components of this budgeting method that will help you take your financial game to the next level.
Carefully study each component of this method and then implement it in your life to see the changes in your financial health. So, without any further ado, let’s get started.
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Necessities– 55%
55% of your monthly income should go towards basic necessities such as rent, food, internet etc. Many people might think that this is too low but once you try to implement it, you will be surprised to learn how often you will be able to manage. So in the first jar, you are going to put 55% of your net income.
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Long-term savings—10%
10% of your income will go into a long-term savings account that you can use to make big purchases, form an emergency fund, hedge against unexpected bills etc. This is a very important component and this will protect you in the long term. 10% might not sound a lot for this type of fund but you will be surprised by the power of consistency and overtime you will have a very handsome fund at your disposal.
Fun–10%
According to the 6 jars method, 10% of your income should be spent on fun activities. This is a discretionary spending account which means you have the freedom to spend it anyway you like but remember never to go over 10% of your monthly income. Having fun is very important and therefore every budget should careful consideration to having some funds for enjoying life.
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Education–10%
This might come as a surprise to many but there is a place for growth and education in this unique budgeting method. According to the 6 jars saving method, you should spend 10% of your income on educating yourself. Education doesn’t necessarily mean going to college, you can learn on your own but the important thing is you should aim to spend 10% of your income in investing in yourself and learning new skills.
Financial freedom–10%
10% of your income should be invested in such a manner that it should help you achieve financial freedom later on. There are several options when it comes to making this type of investment and you should choose the one based on your personal preferences. Prime examples of this type of investment include real estate investments, stocks and bonds, mutual funds etc. So, you should aim to invest 10% of your monthly income into assets that will help you achieve financial freedom later on.
Charity–5%
Finally, the remaining 5% of your income should be spent on charitable endeavors. Getting the chance to use your money to help someone else can surely be one of the most rewarding things in life and therefore the 6 jars method suggests that you should spend 5% of your income on charitable ventures. Your charitable act can really help someone get out of a really tight spot and turn their life around. Therefore, it is very important to spend money on helping others.
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