Using the 6 Jars System to Reach Financial Independence

November 24, 2021 by Jenny Smedra

Using the 6 Jars System

The 6 Jars Money Management System

T. Harv Eker first introduced the world to his theory of money management in his book “Secrets of the Millionaire Mind.” He developed his 6 Jars System after making and then losing his first million. Eker realized his failure was due to poor money management skills and a few bad investments. However, he began to consider different views of finances and wealth, and then got to work on a blueprint for financial independence. In his course, Eker claims that the greatest difference between financial success and failure is how well you manage your resources.

The concept of the 6 Jars System is relatively simple to understand. You divide your money into six different accounts, or jars. Each jar serves a specific purpose geared towards reaching financial freedom. You should set aside a percentage of your monthly income in each jar. Eker claims that it doesn’t matter how much money you begin with. Instead, the key to the method’s effectiveness is that you consistently deposit money into each jar. He provides percentages as a guideline, but you can adjust these based on your personal situation

The 6 Jars

1. Necessary Accounts 55%

The first jar is for your immediate needs and expenses. It will receive the largest monthly contribution from your paycheck. Although you may think it is too much for one jar, it is better to ensure all your living expenses are covered. The money from this account will help you manage rent or mortgage payments, utilities, bills, transportation, food, clothes, taxes, and debt repayment. Basically, this jar is to guarantee that you can pay for everything you need to live from day to day.

2. Financial Freedom Account 10%

This jar is intended to help you save towards and achieve future financial independence. These funds should be allocated for investments, establishing passive income streams, and retirement planning. Think stocks, mutual funds, real estate, and other long-term investments. Once you put money into this account, you never spend it. You may decide to redirect your returns into other jars, but you should never spend your principal amount.

3. Play Account 10%

While saving and reaching financial security is important, you cannot forget to have fun. In order to truly reach financial freedom, your soul must also be happy. That’s why you set aside a limited budget for play. You should use this jar for things that bring you joy.

There are no limits as to how you spend this money. Treat yourself to an extravagant meal, entertainment outlets, shopping, a weekend getaway, or anything else your heart desires. If you and your spouse are using the 6 Jars System, maintain separate play accounts. This way, you can each spend your play account as you please without feeling guilty.

4. Long-term Savings for Spending Account 10%

This jar is to set aside money for larger purchases. While similar to your play jar, this money should be used for more expensive things. This could include a new car, vacations, upgraded electronics, or any other luxury expenses. Keep in mind, these items usually require more time to save, but small monthly contributions can really add up quickly.

Furthermore, you can look at this jar as your rainy day fund. If you experience any unexpected expenses or emergencies, this jar will protect your other accounts from depletion. Since this money is intended for indulgences, it will not leave you in financial trouble if you need to spend it.

5. Education Account 10%

This jar is meant to help you advance your education and personal growth. Moreover, you can view this money as an investment in yourself. The money you spend on self-improvement is never wasted. Unquestionably, your knowledge and experience are your most valuable assets.

The most successful people are constantly sharpening their skills and acquiring new ones. If you are a student, this account should not be used for tuition as it is a necessary expense. However, education does not end at graduation. You can use this jar to pay for specialized courses, seminars, books, or other learning apps. Be careful to limit your spending to things with educational value though.

6. Giving Account 5%

The last jar should be used for charity. As you gain financial independence, it is your responsibility to help others on their journey. You can use this money to do some good in the world. Send a check to a charitable organization that is important to you, or non-profits in your own community. You can even use this account to help build up people in your own life who are struggling. There is no set definition as to what qualifies as charity. When you share your wealth with the less fortunate, the universe will reward you in kind.

Creating Healthy Money Management Habits

The core concept behind the 6 Jars System is learning how to manage the money you have. The monthly contributions establish good money management habits as your wealth grows. It helps eliminate wasted resources and keeps you focused on your goals. It doesn’t matter whether you begin with pennies or pensions, because the system can work for anyone.

Here are three easy steps to get you on track.

1. Know the percentages.

Firstly, you first need to know exactly how much you earn and spend each month. Calculate and track your monthly budget. Make sure you are putting aside the correct percentages in each jar.

2. Change your perspective.

Money management isn’t about restricting your spending or freedom. It’s just the opposite. The system is in place to help you reach financial independence. View it as your vehicle to reach your goals.

3. Don’t make excuses.

This last step is crucial to your success. If you are serious about achieving your goals, then you can’t make excuses. Make a plan and follow it through to the end.

If you are struggling to get started, it may be time to re-evaluate how you view things. If you begin in a place a doubt, then you will likely fail. You don’t want to shoot yourself in the foot before you even begin. However, if you are fully committed to taking control of your finances, then anything is possible.

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