When talking about investment,
we can't avoid the topic about money management.
Good money management will enable us to have money to invest for more money.
After earning money from investment,
we need to manage the money well so that we will not lose the money.
So today I will write about JAR SYSTEM,
a money management method that I started using since year 2011 until now 2017,
and will continue to use it for the rest of my life.
I first learnt about Jar System was from this book:
Author is T. Harv Eker,
the name of the book is <<Secrets Of The Millionaire Mind>>.
The book I read was chinese version,
but I lost the book after forgetting to who I lend it,
so I bought another english version to keep.
That time I read about JAR SYSTEM,
I didn't actually pay attention to it and never planned to use it at all.
Until I started joining PLC for financial education lesson,
since PLC set rules that we students need to use JAR SYSTEM to manage our income,
so I started to use it until now for almost 6 years plus....
JAR SYSTEM,
basically we prepare a few jars for different usage,
then put our money according to certain percentage at each jar.
What JAR?
What percentage?
I will list down each Jar and the corresponding percentage recommended by the book,
then talk about each Jar in more detailed ways.
JAR SYSTEM:
1) NEC - 55%
NEC stood for necessity,
basically are the living expenses, for example like loan payment for house or car,
utilities fees, food expenses and so on.
2) FFA - 10%
Financial Freedom Account,
it is used to achieve financial freedom.
3)EDUC - 10%
Education, we use these money to learn more about financial education.
4) LTSS - 10%
Long Term Saving for Spending,
This is a saving for huge expenses like down payment for house or car, traveling fees and so on...
A saving that must be spent at the end.
5) PLAY - 10%
These money is for nurturing yourself,
strongly suggested to be fully spent at the end of each month,
every month nurture yourself, so that you are able to go longer.
6) GIVE - 5%
Money to give away, can be used for charity and so on.
That's all for the JAR SYSTEM.
Of course it seems easy at first,
but it becomes harder when you start to apply it.
For example you will face a lot of questions like:
NEC is more than 55%,
FFA only 10%.....
some people do not understand why EDUC needs 10% so many.
So I will talk about each JAR based on my personal experiences for the past few years,
of course it was all based on my opinion,
just for reference.
First:
1) NEC - 55%
Most of the people facing problem of NEC exceeded 55%,
this is because their income are not high enough,
but they like to buy foreign cars, everyday eating luxurious food and so on.
So is better to review our living expenses,
to find out that are we spending too much?
So that our NEC will be less than 55%.
Not only that,
but we can try to increase our incomes at well.
Robert Kiyosaki mentioned before,
if we kept on simplifying our lives, we are actually killing our spirits.
So try to increase our incomes, then we are able to keep our NEC to be less than 55% even we maintain the same lifestyle.
Remember,
I said increasing income,
not asking everyone to find one more part time job to do.
If every time you heard about increasing income,
and what you can think of is finding another part time job to do,
then is better to review your concept about money.....
As for me,
after I graduated from university,
I didn't feel like every month earning RM2000-RM3000 is enough to make me satisfied,
so I decided to be a S (self-employed),
by having income more than RM3000 per month,
and not buying any import car, so my NEC easily below 55%.
Let me share some small tips as well.
For example like buying a car,
most people chose to have shorter car loan period,
because they dislike debt and hope to get away from it as soon as possible.
This has caused their monthly car loan installment to be higher,
monthly free cashflow became lower,
and added pressure to themselves.
Some people even worse,
once they finished the repayment for a car,
then they started to upgrade themselves and buy a new car,
so here comes another round of repaying back car loan again.
As for me,
I chose the longest installment period,
well you might think that I am an idiot for giving so much interests to the bank...
But since the repayment period is longer,
so my monthly installment became lower,
and I am able to have higher free cashflow every month,
by investing the free cashflow,
the money that I earn will be more than the interests I am paying to the bank.
Some more the longer the repayment period is,
the longer I will wait for buying a new car~
For food expenses,
since I am self-employed and always needed to travel here and there,
so most of the times I eat outside food.
I set my budget to be RM8 per meal.
Let's say one day I ate at Oldtown and spent RM15,
so RM8 of the RM15 I will deduct from NEC,
while the rest of RM7 I will deduct from PLAY,
since eating at Oldtown is kind of like nurturing myself too~
Because of inflation,
I already upgraded my budget per meal from RM8 to RM10 now~
2) FFA - 10%
What?
Only 10% for financial freedom?
Are you crazy?
Is that enough?
Many people started to get emo when they saw that FFA only 10%,
let's say if your monthly income is RM5000,
then each month you will only allocate RM500 into FFA,
what can you do with that RM500?
Can't even afford to buy 1 lot of AEONCR!
I think what the author wanted to tell us is that....
we can't just rely on that 10% FFA to achieve financial freedom.
This FFA is just to force us to put our attention on financial freedom,
because the author mentioned in the book before that:
"What you focus on, it will expand,"
Also according to the Law of Attraction,
when you start to focus on financial freedom,
only the financial freedom will be attracted and come to you.
The author also said:
"It takes no money to make money."
So.....
do we really need the 10% FFA to achieve financial freedom?
Or is it just a tool to help us focus on it?
Robert Kiyosaki also always talked about Infinite Return,
which means investment without any original cost to create infinite return.
Also Robert Kiyosaki always emphasized on SELL,
he thinks that in order to achieve financial freedom,
you should learn how to SELL.
Most of the share investors always stuck at here,
they always thinking of buying shares,
the problem is when you become a BUYER,
your money will keep flowing out from your pocket.
Only when you become a SELLER,
money from other people's pockets will flow into your pocket~
That's why Robert Kiyosaki always encourage people to build their own company,
then IPO,
sell the shares of the company they own to the public.
I not yet reach that level,
but I did SELL my shares,
however,
I didn't SELL it to other investors,
I SELL it to the bank.
(Below I will talk about advanced investment, which full of my personal opinion, and if you just copy whatever I do, you might follow me to go to hell~ )
After I SELL my shares to the bank,
not only I keep the shares,
I am able to get more capital for investment,
and this is what we called as Margin = SMF = Share Margin Financing.
Margin RM100K ,
the monthly interest is just RM400 plus,
if the income is RM4000, then 10% FFA will be RM400,
enough to pay for the Margin interest~
Every month save RM400 and buy shares?
I rather SELL my shares to the bank for Margin,
then every month use that RM400 to repay Margin interest,
so that I will have extra RM100k to invest.
That's my method.
Anyway,
I just think that the author has his own reasons to set the FFA to be 10% only.
3) EDUC - 10%
T.Harv Eker and Robert Kiyosaki always emphasized the importance of financial education,
so do I.
Before we enter university,
we went through many years of school education to build a good basic.
But when come to investment,
most of the people never bother about any basic,
they started investing without any knowledge about it,
usually the consequence is they lost all their money.
The problem is many people started to feel headache and rejective when they heard the word "LEARNING".
Congratulations!
This is because they have been brainwashed by the school education,
to have a feeling of hate about "LEARNING".
Make all the people to hate about learning,
do not chase for any knowledge,
not being able to see through the origin of things,
make them live their lives in dull.
I not sure this was caused by the failure of school education,
or is it there is hidden agenda behind school education.
(Actually there are a lot more I would like to talk about education, because it is somehow related with my self-employed works, maybe later I will open another blog about education.)
I just hope everyone can redo some thinking,
do we really hate about learning?
or did we brainwash by the school to hate about learning?
4) LTSS - 10%
I think this Jar is the most versatile jar in the JAR SYSTEM,
because not only you can set any target for saving,
you can even divide into 5% each, save for two targets at the same time.
Maybe you want to divide into 2% each for five targets~
I always use this LTSS for traveling,
recently I spent it on a new laptop.
The laptop I had been using was already 8 years old,
every time after using for 20 minutes it will become very hot,
sometimes overheat until auto shutdown.
Thanks to LTSS, I am able to replace it with a new laptop~
5) PLAY - 10%
Every month spend 10% of the income to nurture yourself~
I will not write a lot here,
since everyone should be good at spending money to reward themselves right~
Just make sure we don't save money only,
sometimes a reward is necessary to balance ourselves.
6) GIVE - 5%
Last time I always use the money to donate to orphanages or other charity organizations.
Recently I started to give away the money to some crowdfunding programs~
That's all about my money management for all this years.
If you having any problem to manage money,
maybe you can try the JAR SYSTEM.
Feel free to comment below if you have anything to say.
Thanks for reading.
I don't provide any buying/selling suggestion above,
please make your own investment decision and be responsible with it.
