11 STEPS FOR PERSONAL FINANCE MANAGEMENT
(+ FREE MONEY MANAGEMENT TOOL)
The Ancient money management tool reinvented for the modern geek so you can achieve all your life goals … because you generally need money for your goals!
TIPS FOR CONSCIOUS SPENDING AND GETTING YOUR MONEY UNDER CONTROL
DISCLAIMER
This is financial education and not financial advice. For financial advice, please seek professional advice from an Independent Financial Adviser (IFA).
This method is one of many ways to manage your personal finances. If it resonates, brilliant! If it doesn’t, simply let it go, and I hope you find a method that works for you.
Although I am based in the UK, the principles of this money practice is applicable to anyone from any country.
WELL DONE FOR DECIDING TO TAKE CONTROL OF YOUR FINANCES!
LET’S GET STARTED AND NOW WATCH THE MAGIC HAPPEN…
WHO THIS IS FOR …
✅ This system works best for people who have a regular monthly income that covers your basic monthly expenses and have money left over.
✅ This system could work if your monthly income varies where some months is less than your monthly costs, but you have some months where you significantly exceed your monthly costs.
✅ You just about make ends meet.
✅ Anyone who wants do analyse their spending
❌ This system will not work if you spend more each month than your income.
COMBINING ANCIENT WISDOM AND MODERN STRATEGIES FOR MONEY MANAGEMENT
This template follows T Harv Eker's famous jar system for financial management with a few tweaks and suggestions.
And the reality is, the Jam Jar system is probably thousands of years old and has been used by people all over the world to help manage money. As a child I used envelops for organising my coins for the things that I wanted to buy - mainly sweets, stationery and a few electrical bits (I used to make traffic lights for my Lego).
BE INTENTIONAL AND STRATEGIC WITH YOUR MONEY
The simple premise is being intentional and strategic with your money and pre-allocating your monthly income into separate bank accounts or ‘Jam Jars’.
Plan your Jam Jars in advance before adjusting your direct debits and standing orders.
INTENTIONAL AND STRATEGIC MEANS
✅ You know where your money is going every month. This increases wellbeing as you know you know you financial situation.
✅ You are being proactive and not reactive with your finances
✅ You are strategic as you are setting up Jars for what is necessary and important in your life
✅ You are being kind to yourself with having a fun pot of money and it doesn't matter how you spend this
✅ The information from your Jam Jar Money Management tool will allow to make quick and easy decisions regarding your money
POOR MONEY ORGANISATION MEANS
❌ You might feel guilty if you dip into savings that is for something specific
❌ You do not know your money situation and you are ill-prepared for a larger expense such as a boiler repair, a leak or something breaking down.
❌ You may feel stressed if you want to go on holiday, but don’t have savings and only have a few months to pay for the holiday.
❌ You may feel that you do not have enough to treat yourself, but this not be the case
❌ You are avoiding responsibility - you know your are over spending, but you don’t know to what extent
WHY I LOVE THE JAM JAR METHODOLOGY
This is about being strategic and intentional with your finances and allocating a set amount of money into a Jar that serves a purpose.
✅ This is not about tracking every single daily spend such as a matcha latte here and dinner with Alex.
✅ It’s about acknowledging your financial commitments, your goals and that you want to have fun and giving yourself a monthly budget.
✅ It’s about being organised. You may not be planning a holiday right now, but you know that at some point you will go. When that time comes, the money is available meaning one less thing to stress about, which is better than putting it on an expensive credit card.
This is about knowing how much you need for each Jam Jar (aka each bank account).
IN THIS BUDGETING SYSTEM YOU ARE BEING KIND TO YOURSELF
✅ You are allocating a monthly amount of play money. This is different to other methods where you deny yourself what you desire, which could cause resentment and an unhealthy relationship with money.
STEP #01. DOWNLOAD A FREE COPY OF THE MONEY MANAGEMENT TOOL
This will make things easier for you when following the steps in this blog.
Make sure you make a copy to keep your data private. Do this by going
File > make a copy
STEP #02. ARE YOU SOLO OR A TEAM
Decide how you will complete your spreadsheet - for you only, or include your partner.
There’s no right or wrong answer, you simply need to do what’s right for you.
If you share some bills such as living costs, pets, children, and holidays, but also have your own personal finances, you may wish to set up a Jam Jar system as a couple as well as for yourself. Grab a tea and cake and discuss what works best for you both.
Maybe you’re not yet sharing expenses with your partner. When the time is right, you can discuss as a couple and use this Money Management template to discuss your options - do you combine everything together, keep everything separate or a combination of both.
REMEMBER - THERE’S NO RIGHT OR WRONG WAY, ONLY THE WAY THAT WORKS BEST FOR YOU
STEP #03. DREAM BIG AND THINK ABOUT YOUR GOALS
Go to the ‘Goals’ tab on the spreadsheet.
Most of our dreams and goals cost money. Here’s your opportunity be strategic and get organised 🤓.
1. In column C ‘Goals’, write down your goals and dreams.
These are likely to be one-off goals such as …
Sabbatical/holiday of a lifetime
New car
New home
Wedding
Kids education
Emergency Fund
Retire at 55
2. In column D, write the priority for each goal.
1 = High
2 = Medium
3 = Low
3. In column E, decide whether your goal is short, medium or long-term.
Short-term goals tend to be within 1-3 years
Medium-term goals tend to 4-10 years
Long-term goals tend to be 10 years away.
4. In column F, what is the cost or target of this goal.
For example, a new car might cost £18,000, and you might have a target of £1,200,000 for your retirement fund*.
5. In column G, write when you would like to reach your goal.
Think how strategic and organised you are by planning your finances so far in advanced!!
6. In column H, you will work out how much money you need to save each month to achieve your goal.
You will calculate this by dividing your target date in months by the target financial goal.
Target date monthly calculation: If you wish to reach your target in 5 years time, that will be 60 months (5x 12 = 60) as there are 12 months in each year.
You then need to look at your financial goal and divide your financial goal by the number of months.
Example: You would like a new kitchen in 5 years’ time costing £15,000.
5 years = 60 months
15,000 / 60 months = £250 to be saved each month
This figure might scare you, but at least you have the knowledge to adjust accordingly. Either …
Buy a cheaper kitchen
Get the kitchen at a later date
Increase your income
Or all three options!
7. Column I is for you to track the progress of your goal.
8. We will come back to column B ‘Jam Jar’ at the end.
*Retirement calculation is based on today’s numbers and does not include inflation.
Example calucluation
Desire to retire at 60 (with partner)
Assume you (and your partner) live another 30 years until 90.
Assume no mortgage/debt.
Assume annual living costs of £40,000 each year.
£40k x 30 years = £1.2m.
BUT I GO ON HOLIDAY SEVERAL TIMES DURING THE YEAR!!!
Good for you! If this is the case, set up a Jam Jar for holidays and remove it as a Goal. Make it part of your lifestyle.
We will discuss this more in STEP #08 NAME YOUR JAM JARS.
STEP #04. STAY MOTIVATED
We’re still in the ‘Goals’ tab.
Write a motivational statement for your goals and finances. Every time you check in with your goals, you will see your motivational statement.
STEP #05. THE DANGER ZONE!
We’re still in the ‘Goals’ tab.
Is there anything that is likely to throw you off achieving your dreams? This could be new shining gadgets, wild nights out, or new trainers. Whatever it is, you can write it here.
STEP #06. YOUR INCOME(S)
Now let’s go to the ‘Income’ tab and for now, let’s only focus on the ‘Now’ section.
Depending on how you decided to set up your Money Management Tool in STEP #02 - Going Solo or Working as a Team with your partner - here you write your income(s).
This section is really for regular income throughout the year.
There is a Net (after tax) and Gross (before tax) as some of your income might befrom side hustles where you will need to pay tax afterwards. Tax rules will depend on your country of residence and it’s best to speak with a qualified accountant for advice.
Additional side hustle incomes are likely to be as a Sole Trader income and not as a Limited company income unless you are paying yourself a salary.
STEP #07. STATE YOUR MONTHLY INCOME
Go to the ‘Summary’ tab and state your monthly income. The key is to ensure that this amount is guaranteed each month.
If your income varies slightly, state the minimum amount that you will definitely receive each month.
STEP #08 NAME YOUR JAM JARS
This section is where I differ from T Harv Eker. Table 1 suggested baseline from Eker. He suggests 6x pots and dividing your income with the following percentages:
Necessary
55%
Rent/mortgage
Electricity / gas
Water
Groceries
Insurances
Long-Term Savings to Spend
10%
Holiday
New laptop
New car
Freedom
10%
Retirement
Financial freedom
Play
10%
Hobbies
Fun things
Eating out
Education
10%
Courses
Coaches / mentors
Community
5%
Charity
Church
MY JAM JAR SUGGESTION
Have as many Jam Jars as you need.
As you enter your monthly costs, the percentage will change. Do not worry if your percentages do not match T Harv Eker’s suggestion. He has simply given a guideline. You must do what’s right for you.
If you go slightly over 100%, you will know if this is ok. For example, maybe you’re allocating £60 a month for a massage, but may not have one every month, or you have allocated £80 for clothes each month, but only really buy them in the sales, so there will be a surplus. This is where the money management tool is invaluable so you can plan where your money goes.
Giving 5% to charity might seem too much at the moment. Maybe start with 1% or even 0.5% and build slowly.
In this step, think about the different Jam Jars you might want and name them. Some of these Jars are the same as T Harv Eker’s ‘pots’.
Examples include
Necessary - monthly
You may pay for the majority of necessary costs monthly. If so, list them here. Try and capture everything including 79p iCloud. There may be many ‘small’ costs all adding up, and some you may no longer need.
Using 3-6 months of bank statements or credit card statements will help complete this step.
Necessary - annual
It is cheaper to pay for things annually, so you might want to think about a ‘sink’ fund where you are saving money for annual future expenses.
Take the annual cost and divide it by 12 to know how much you should allocate to this Jam Jar.
The percentage of your monthly savings does not have to add up to the monthly costs, but you do need enough money to cover the cost of each annual expense.
Freedom
After paying for necessary costs, the next important Jam Jar is your Freedom Jar, which will essentially pay for your retirement.
Think about retirement as one long holiday doing everything that you want to! Also think about when you want to stop working or if you would like to take time off when you’re younger. I’m a big fan of taking time off. I took a year off at 35 to go backpacking and do some volunteering. I also took time off in 2019 to set up my healing and coaching practice.
You may be contributing towards a great pension. If this is the case, do not capture it here, but it will need to be captured on the Income tab in Retirement income(s).
You may also have an investment account or want to think about setting one up.
We will discuss this more in STEP #11: Retirement Incomes.
Play
It’s super important to have fun and play. Make sure you are putting money aside for your enjoyment. Even if times are tough, this Jar is crucial to ensure you have a good relationship with money.
Or you may be at the other end of the scale where you are having so much fun, that there is not enough money for other areas of your life. If this is the case, give yourself a limit where you can still have fun, and not have resentment.
Long-Term Savings to Spend
This Jar makes so much sense to me! You are saving in order to spend! So many people with well paid jobs die with too much money, but could have enjoyed it earlier. Paul D. Armson describes this brilliantly in his book ‘Enough’ and on this great podcast episode with Pete Mathew.
This could be a generic ‘sink’ fund for many things such a new laptop, new experiences such as concerts, going to a sporting event, visiting Heritage sites etc.
This is not an emergency fund. Set up a separate Jar for emergencies.
Most of your Jars will be your goals that your stated in Step #03. If you’re already paying into a great company pension, it’s possible that you do not have a Freedom Jar.
Depending on your dreams and lifestyle, you may wish to set up Jars for ‘expensive’ things that you really enjoy. If this is the case, rename on of your pots for a specific intention.
Examples could include
Holiday Fund: if you (and your partner) love going away, maybe set up a Jar
Gadget Fund: if you’re prone to buying the latest tech, knowing that you have cash set aside is very comforting!
Wedding Fund: You may be at the age where you and your friends are getting married, and you are going to a wedding almost every month! Whilst this is super fun and a wonderful time, it’s also very expensive, and even more expensive if you have not financially planned for a monthly wedding and potentially a new outfit, accommodation costs and sometimes even flights.
Or if the fund is for your own wedding, this could be a temporary fund until the wedding is paid for, and then the Jam Jar could either focus on a new goal, or you could close it down and re-visit your personal Jam Jar spreadsheet and re-allocate this money to other Jars.
Christmas Fund: if you and your family love Christmas and love buying gifts, this could be a great idea. If you put aside £100 each month, that’s £1200 guilt-free for the Christmas season.
Emergency Fund
An emergency fund is essentially your peace of mind fund. It’s for emergencies and an emergency could be anything!
Examples include
Unexpected global lockdowns with the recent pandemic which financially impacted many people and businesses of all sizes
Cost of living crisis and extraordinary energy price increases
Loss of a job
Serious illness
Major home/car repairs
Financial experts recommend that 3-6 months of living expenses are set aside.
Personal Development
This is my favourite pot - putting money aside for courses, mentors, and coaches.
Children
Children are expensive!
According to the Child Poverty Action Group, the cost of raising a child in 2021 to the age of 18 was £160,692 for a couple and £193,801 for a lone parent.
Consequently, you may wish to set up 1-2 Jars for them to set aside money for daily costs and another for savings / student education / deposit on home.
Although interest rates are very low, they tend to be higher for children. In 2022, the average rate was 3%.
Here are some calculations
Assume an average of 6% interest over an 18-year period
Saving £30 a month from birth until 18 (£1 a day)
Future investment value: £11,708.70
Total interest earned: £5,198.70
This is the beauty of compound interest where interest is earned on the initial investment of £30 and on the monthly accumulated interest each month.
Giving Back
Money is a form of energy. When you give to help others, it comes back.
If giving 5% to charity might is too much at the moment, maybe start with 1% and slowly build. The important thing is that you start.
Your ‘Jar’ is likely to be a direct debit or standing order directly to the charity instead of a bank.
Debt
If you have debt, this will be an important ‘Jar’ and similarly to ‘Giving Back’, your Jar will be set up to pay back the debt. This section is where you will record what you need to pay back each month and is an opportunity to overpay to clear the debt.
STEP #09 TAKE ACTION
Now that you have planned your spreadsheet, now it’s time to make sure all the direct debits and standing orders are correctly set up and that you are sending money to the correct Jam Jar as per your Money Management tool.
STEP #10 LABEL YOUR JAM JARS
Now that you have done all the preparation and you know where all your money is going, go back to the ‘Goals’ tab and complete column A by stating which Jam Jar (bank account) is for each goal.
FAQs
Phew! How are you feeling after all of that?
Well, there’s one more step. If you’re feeling energised, you can do it now.
If not, take a look at it so you plant the seed in your mind and come back to it in a couple of weeks …
STEP #11 RETIREMENT INCOMES
Let’s go back to the ‘Income’ tab and the Retirement section.
This is a great place to start thinking about your retirement, which is basically one long holiday.
Questions to think about …
When do I want my very long holiday to start?
What will I do on my very long holiday?
How much will these activities cost?
How long do I think I’ll be on holiday?
Will my partner be on holiday with me or are they still working?
✅ Always use today’s figures. For example, if one of your incomes is the State pension, enter today’s figures. In the UK in 2022 the full basic State Pension is £141.85 per week.
❌ Avoid trying to guess what your costs/income will be after inflation.
BONUS STEP BECOMING AN EXPERT WITH YOUR FINANCES
Well done on getting this far! Here’s your bonus!
You have now downloaded your own copy of this Money Management template. The more time you spend understanding your finances and working towards your goals, you will want to evolve your spreadsheet. Keep adding tabs that will help you achieve your goals. These could include:
Knowing your net worth
Side hustle ideas / ideas for additional income
I like to track how much I’ve invested in personal development and who with
COMING SOON!
8 WEEK PROGRAMME - COMING SOON!
Feel in control of your money
Have the money to achieve your dreams
Create new income streams
Be able to retire comfortably
BE THE FIRST TO HEAR ABOUT IT!