Another great teacher who our founder learned about money management was Harv Eker – Author to “Secrets of Millionaire Mind”. Harv Eker introduced six Money Jars - a systematic approach to allocate our (adult) income.

The diagram below illustrates the money management concept behind the Six Money Jars – the effective way to allocate our income.



The Six Money Jars are classified as:

• FFA - Financial Freedom Account that is a saving account, where we save our investment funds. This account cannot be used for any expenses or lent to anyone.
• PLAY - Play Account that is for us to spend on entertainment and enjoyment. This is an important account that is used to reward ourselves as we earn income. We use this account to buy toys, clothes and accessories, or message and spa, etc; or go for a holiday.
• NEC - Necessity Account for us to spend on our basic expenses that are required to maintain our current life-style. Some examples of NEC is the utility bills, grocery, toiletries, insurance, car loans, children basic education, etc. This is the account that we should target to reduce to speed up our pace towards financial freedom, which can be immediate, after we remove all our unnecessary expenses.
• EDUC - Education Account for us to spend for our own continuous learning. For family, this account is not for children's education.
• LTSS - Long Term Savings Account for us to save for future big item expenses, like house renovations, our children's education fund, etc. This account should have high cash flow, where the money can be easily retrieved when the needs arise.
• GIVE - Give Account reserved for our contribution to the society or the amount used for buying gifts to others, who are not a member of the money management plan.

The Application
(Do these steps whenever money is received, which can be monthly, weekly, etc.)

1. Create 6 physical or virtual bank accounts, one for each of the money jar.
2. When we receive income, allocate our income based on the following guideline
   • 10% to FFA (min)
   • 10% to Play (min)
   • 55% to NEC (max)
   • 5% to GIVE (min)
   • 10% to LTSS
3. Repeat step 2 whenever we recieve income, including the annual bonus.

Note:

For family account, the source of money can be the combined income of husband and wife, or it can be part of the income. it is advisable we will have to discuss with our spouse to agree on the amount. We can also have separate family and personal accounts, just like the way I have done for myself in the customized money management plan.