Having Trouble Saving Money? (This System Works for Any Income Level!) By: Paul Barton & Barry Spilchuk

Thinking of her youth, Donna can recall many fond memories of time spent at her Grandparents farm. Donna would help her Grandmother with the annual fall ritual of making things like relishes and jams, and preserving them in jars for the winter months.

It took a lot of time and effort to preserve the various fruit, vegetables, relish, jams, and pickles. Many jars were needed to preserve the harvest from the growing season. Each jar was carefully labeled with the contents inside, and of course, the secret recipe for each preserve was kept safely hidden!

In a way, saving, managing, and preserving money is somewhat similar to how Grandma would preserve the many items from her garden. Putting money aside in various jars, or cans, or envelopes, or whatever is available to hold money, is a great way for anyone, at any income level, to establish saving habits.

Using visual aids, such as a money jar, may be especially helpful for parents looking for an effective way to demonstrate to their children how to set aside money for various goals. In one case, David was planning a trip to Boston with his family. The kids were involved with the planning of the trip and a “Boston Jar” was placed in plain view for the family to see. Each day, mom or dad, and sometimes even the kids, would place spare change into the jar. Within a few months, enough money was saved to pay for return airfare tickets for the whole family.

To some, the use of money jars may seem unnecessary; after all, with automation today, wouldn't it be easier to simply establish monthly transfers to various accounts using an automated pre-authorized method of saving? The short answer to this question is yes! Those that already use an automated method of saving often don't miss the money coming directly out of their bank account. However, for those that don't use preauthorized savings, then a money jar system may be the answer to help develop effective saving habits.

Part of establishing new habits is through repetition. If saving money has been a struggle for you, seeing your goals labeled on several jars sitting where you can see them daily is a great way to be reminded to set money aside in each jar. Even a few cents a day can add up over time.

T. Harv Eker, founder and master trainer of Peak Potentials based in Vancouver, teaches a form of money management using a simple jar system. Mr. Eker's explanation of his jar system is highly entertaining, and most memorable. Many people have written to Mr. Eker with testimonials describing how easy saving and managing money became once adopting his money jar system.

Even though you can probably imagine what we mean by using a money jar system, we have outlined below how you could label several jars for specific purposes. The labels shown are for illustration only. Label your money jars with whatever is appropriate for your situation.

Jar #1 Long-Term Goals Money in this jar could be for any number of reasons, such as; travel, saving towards a new vehicle, or accumulating money to pay down debt.

Jar #2 Education This could be for your children preparing for post secondary education, or it could be for you upgrading your skills. Some people dread going to work at a job they don't enjoy. Perhaps they have limited skills to work in a job they would truly love. Setting aside money to upgrade skills may help land that desired job!

Jar #3 Personal Use When was the last time you treated or pampered yourself…without feeling guilty? Setting funds aside for you to use any way you choose is a very good way to achieve balance in your life. Saving without ever spending is no recipe for happiness; however, spending without ever saving is a recipe for disaster.

Jar #4 Giving/Donating Some people donate anywhere from five to 10 percent of their monthly income to a worthy cause, and/or to their place of worship. How much should be placed in these jars each month? Many thoughts exist on how much money should be allocated. Some will be able to put larger sums into each jar, and others may only be able to put a few cents in each jar.

Every person's financial situation is unique, therefore, it may be hard to place set rules on how much money should go to various spots. If in doubt, remember to seek the guidance of a licensed financial advisor to help get you on track. Anyone could easily adopt a money jar system of saving…all it takes is action!

“Action may not always bring happiness; but there is no happiness without action!”- Benjamin Disraeli

Living on a fixed income

Living on a fixed income can be a challenge. Each person’s financial situation is different. Spending without a financial plan can lead to financial ruin. Financial plans work best when individuals make choices they are willing to put into action. By making informed choices you can create a financial plan that works for you.

Wants, Wishes, and Needs

Knowing what we want is not always easy. It may be helpful to know that others have found it takes some thought to answer this question in a meaningful way. A major factor in getting what you want is knowing the difference between needs and wants.

Have you ever thought, “If I just had more money …”? More money is not an instant cure. Wishing for money does not make it exist. When we allow money to control us, conflict and uncertainty increase. We need to be realistic in our expectations.

It is very important to learn to recognize the difference between needs and wants. A need is something you cannot live without, such as food, clothing, and shelter. A want is something you would really like to have, but you could substitute something else for it.

Thoughtful planning is the key. Planning what you want and how to get there helps you to be in charge of your own financial situation. Knowing what you want can reduce some of life’s stress and provide you with a sense of security.

Know What You Have

Be aware of what you have. Having more things is not necessarily better. Do you need the things you have? Does having these things cause you to spend more money for upkeep? Take an honest look at current income/ pensions, investments, and savings. Do you have an emergency fund? Know how much money you have and where your money goes.

Know Where Your Money Goes

Write down every item purchased and the amount spent. Keeping a record of exactly what is spent can help you to know exactly where your money goes. Then you can consider possible options. Be sure to track your spending for a few weeks before creating a plan. Be sure to track fixed, flexible, and occasional expenses. Fixed expenses are costs that are the same each month. Flexible expenses are costs that vary. Occasional expenses are quarterly, yearly, seasonal, planned, and unplanned costs.

Remember to include charge accounts and loans as expenses, too. In 1996, 1.1 million Americans filed bankruptcy. Many of these cases of bankruptcy were due to personal overspending. Credit can be easy to get. Credit overuse may make it harder to carry out your plan. Having credit does not mean you have to use it.

Choose Your Action Plan

Compare dollars available and dollars spent. Set priorities for spending. Know your limits and adjust your spending. Seek creative solutions. Then put your plan in writing. Setting short-term and long-term goals gives your plan purpose. Rethink your current buying habits. Do you buy because you have a need? Do you shop because you might find something to buy?

Remember it is okay to say no. If you are barely able to pay for minimum necessities, saying no to things you would like, but do not need, can be helpful. You may be able to think of other choices. Having a financial plan may help you say no when it is necessary.

Each person’s financial situation is unique. Do what works for you. Think positively. Avoid comparing yourself to what others are doing. Be realistic in your choices. Plan ahead. Consider substitute activities—things that you could do for little or no cost. Perhaps a part-time job or a hobby could bring in some extra income.

Once you choose your action plan, try it for a month or two. Rethink and adjust your financial plan to make it work for YOU. Keep the part that is working. Decide what needs to be adjusted to make your plan work. Your action plan will need to be fine-tuned periodically as changes occur in your life.

A major factor in getting what you want is knowing the difference between needs and wants.

Summary

Financial planning should begin 10 to 15 years before retirement or earlier. The earlier financial plans are made the better. Financial planning will not always prevent all problems, but it can prevent some and make others easier to deal with.

Ask Yourself These Questions

■ Can I find a way to spend less than my income?

■ What do I need to change?

■ What am I willing to change?

■ Did I plan to save for emergencies?

■ Are my wants and wishes realistic?

 

By making informed choices, you can create a financial plan that works for you.