T. Harv Eker’s JARS Money Management System

Most people think that managing money is hard work. Most individuals look at how much money they have to manage and when things get tight, it’s about how much they make, not how much they manage. The truth of the matter is, how you manage your money plays a big part in how much it grows and how much you are able to save. If you think you’re ready to go on the road to financial recovery, the JARS system is a good way to get started.

The JARS money management system is a method of income management that focuses on dividing your income into specific groups for specific purposes. This system implements a balance between long term and short term financing and saving and if stuck to, can yield hugely beneficial results. According to T. Harv Eker in his money management seminar, people can use this system to begin managing their money, if they haven’t yet. He stresses that the difference between those who are financially free able is that they have great money managing skills and think in the long term. Those who find themselves short of cash or always living on tight budgets fail to put importance to proper money management and generally think of short term gratifications, hence unnecessary spending.

The JARS system divides income into six different “accounts”, each with its own percentages:

  1. Financial Freedom Account (FFA) = 10%
  2. Long Term Savings for Spending (LTSS) = 10%
  3. Education (EDUC) = 10%
  4. Necessities (NEC) = 55%
  5. Play = 10%
  6. Give = 5%


According to the system, these 6 groups are the ways one should segregate their money. Let’s look at them in detail.

Fianancial Freedom Account 

The JARS system tells you to put 10% of your income into your FFA account every time you receive it. The general rule is to let this money accumulate interest and you must never spend the money inside this account. Money from the FFA may be used to purchase or acquire passive income funds. Though you may spend the interest that grows from this fund, it recommended that you don’t until the time that you stop working and retire.

Long Term Savings for Spending 

The LTSS account will receive 10% of your income everytime you receive it. What you put in this account can be used for future expenditures such as future education for your children, home mortgage payments, or hospitalization. You can also treat this as your source of contingency funds.

Education

The EDUC account will also receive 10% of your income every time you receive it. Use the money that you accumulate from this account to pay for seminars, classes, and special events that you want to attend which can help you to grow and enrich yourself. Just because you are out of school and working doesn’t mean you should stop learning. Halting learning means depriving yourself of any other potential you may have not tapped into.

Necessities

Your necessities fund will receive 55% of your income. You will use this fund to pay for bills, buy food, pay for transportation, purchase clothing, hair services, and other necessary items and services you might need to spend for. It is where you should get your day to day living funds. Live within your means and stick to 55% for NEC. Make necessary adjustments where needed. You might think that this will be difficult, but with a little determination and practice, you will see that you can live within this budget.

Play

Put 10% of your income into your play account, which you can use to spend on anything to pamper yourself. The idea behind this is to completely spend every penny in this account and feel good about it. Whether it’s a massage, a new pair of shoes, or a trip (which might have to accumulate over a few months), spend this money, reward yourself, and feel good!

Give

Allocate 5% of your income to be given to charity or for donations, or just to help someone in need. This simple act will make you feel good and will give you a sense of social gratification. If you feel the need to give more, adjust from your NEC fund.

All in all, the JARS system is a great way to start managing your money right. It’s simple and produces results. Whether it’s because you want to start saving, or to make sure you’re giving back to society, the JARS system can surely help you to attain those goals.

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