How to Manage Money Properly?

I remember, the last time I deposited money in my bank account, the teller is looking at me as if I am from the planet mars. I collect and save a P0.10 and P0.05 that has a hole in the center of the peso coin. That was the first time I deposit money in my bank account that has “cents” amounting to P11,568.66. I was so happy because I knew I didn’t waste even a single cent from my hard earned money. Know the reason why you should manage your money well, learn great money lessons from the rich.

Know the difference how poor and rich handle their money. I learned this guide and principles to my favorite author: T Harv Eker – the author of the “secrets of the millionaire mind”. Poor people know how to make money but they mismanage their money while rich people know how to manage their money properly. I want to focus on how rich handle their finances. A conclusion, they will not became rich if they are not aware on what is going on to their finances.

Manage Money Properly Using jars

I only have to talk about how to apply this guide practically. Not every readers of InvestmentTotal.com are rich or interested in personal finance. Let me just use the word account into “jar”.

There are 6 of these jars namely financial freedom jar, play jar, necessities jar, education jar, long term savings for spending jar, give jar. Let just use “jars” instead of bank accounts. But eventually you will transfer the money from your jar into your bank account. Have you noticed about the phrase above about my “cents”. I saved a lot of peso coins, even cents because of these jars.

Put the money you have in different jars and once a month get these money and deposit in your bank account. When you receive money, either business profits, salary, bonuses, allowances or other sources, put money in the jars according to its allocation percentage.

The use of this jar is to help you save money and invest this money for your financial freedom. Example, if you receive P100 you should put P10 in this jar, if you receive coins as your “change” or “sukli” after you bought some goods, or from transportation fare, or someone give it to you. Once a month you have to get the money in this jar and deposit in your bank account.  An account use for your investment.

The use of the play jar based on my understanding is to balance my finances. A 10% of your income should be place here, and once a month treat yourself and feel rich. Go somewhere and have a massage, just feel rich. Buy what you want, treat yourself in a fine dining restaurant.

The role of this education account or jar is to help you acquire knowledge in whatever aspects you want to learn. Put 10% of your income or received money in this jar.

A jar use for your basic needs such as paying your electricity, food, transportation and other necessary things. The money you have in your necessities jar should not be spend in buying items that you don’t really need. If you want a new phone, then use the money in your play jar. Want to watch a new movie in the cinema, then, use the funds in your play jar. Never use the jars inappropriately. Buy the things you and your family really need, not just “wants”. Example, a food is a need but watching movie in the cinema is just a “want”.

Is it confusing? Will you save for a long time and just spend? Yes it is confusing, but the use of this jar is to spend this for business and create a passive income. Put 10% in this jar whenever you received money. Do you want to buy a car? Do not use the money in this jar.

Do you want to build and start you own business? Then the fund is what you need. That’s why, if you are planning to start your own business after 2 years try to fund this jar and every month deposit the money in your bank account. When you are ready to start your own business, then you have saved a business capital. That’s the beauty of having this kind of jar.

• Bank Accounts
• Investment Accounts
• Glass Jar or Plastic Jar
• Coins
• Peso Bill or any currency bill

Open a separate bank accounts and investment accounts. One is for financial freedom bank account and the other is for long term savings for spending account. These two bank accounts are “no touch zone”.

Every month or every year invest your money in your financial freedom bank account and long term savings for spending account if you want to start your own business and create another passive income.  As for my investment accounts, I have on stocks, mutual funds and UITF.

This method is for those who are disciplined enough in managing their finances. It is not good to use the funds if it is not based on their needs. Play jar is for playing and treating yourself to feel rich. Financial freedom jar is use to achieve financial freedom.

If your kids or someone want financial assistance, do not touch your funds in any jar aside from your “give account jar”. Financial Freedom Jar/Account is for financial freedom. I should emphasize this phrase all over again. It is not good to touch or use the funds even if you are tempting and if it is necessary to touch the funds in your financial freedom jar. Building emergency funds and having life insurance is very important, if that’s your case.

Answer this 5 Simple Questions
1. You need to go somewhere (Disneyland) and want to have a wonderful experience. Which of these jars/account should you use?

a. Financial Freedom Jar
b. Give Account
c. Necessities Jar
d. Play Jar

2. Your friend is asking you for a donation or a gift. Which of these jars/account should you use?
a. Play Jar
b. Necessities Account
c. Give Jar
d. Financial Freedom Jar

3. You want to invest every month in your mutual fund account? Where should you get funds to invest?
a. Education Account
b. Necessities Account
c. Give Jar
d. Financial Freedom Jar

4. You heard a popular registered financial planner is having a seminar but has a fee of P700? Which of these funds should you use?
a. Play Jar
b. Education Account
c. Give Jar
d. Financial Freedom Jar

5. You are very generous, kind and loving man. You want to treat your spouse and kids every Saturday but on Sunday morning you must do a tithing – the holy offering inside the church.
a. Play Jar
c. Financial Freedom Jar
c. Necessities Account
d. Give Account

Answers:     1. D      2. C        3. D          4. B.        5. A&D;

Money management can learn easily, as you can see even in this blog InvestmentTotal.com can learn this simple thing. Even though money management was not taught in the school or in your home, you can do it alone. No need to have an accounting subject or learn a very complicated financial terms. This is a very easy and practical guide and it is FREE. It will help you to learn how to manage small amount of money. If you can manage small amount, then there is a big chance that you can manage massive amount of money, too. Begin managing your money now, experience the beauty and wonder of money management. You can follow other money management tips if you want, some people use envelopes. The important thing is you are practicing the habit of the rich men – they manage their money well.

6 Things to Consider Before Investing

1. Have an emergency funds / cash reserve that is equivalent at least 6 months of your income. An emergency funds are important because whenever emergency arises, you will never touch your investment funds. 
2. A life insurance, this will serve as your income protection. The face amount should be at least 3 years of your annual income. A 3 year means, the time to recover. I know you know what is the importance of life insurance.
3. Know your net worth. Your assets minus your liabilities, that is how you can compute your net worth.
4. Pay your debt. You can use debt management, pay your debt every month until you became a “debt-free” individual.
5. An investment plan, or we may call it as a financial road to success. When do you want to retire? At age 60? 65? When do you want to have your first million in paper assets? This time, you need to know your retirement target earning asset.
6. Determine how much you should invest? When? After you have done the things above. Then you are ready to invest your money. Asking where to invest?