The opportunities of remote working can really set you apart from the rest. You have relatively lower expenses because you work-from-home. And you’re quite happy because you have more time for the things that matter the most like your family or your passion projects.
Your online job can build work-life balance, a thriving career, and wealth at the same time. But what if you want financial freedom?
Financial Freedom: Creating Passive Income
How do you say you’re financially free? It doesn’t matter how much your income is. If you need to work for money forever, can you really say you’re free? High paying jobs are just golden handcuffs.
The ultimate goal of financial freedom is to make money work for you. A lot of people, regardless of the income level, end up working all their lives for money. If you really want true freedom, you must build passive income.
Passive income is a type of income that you don’t have to work for. Yes, it does exist. Some forms are interest, royalties, rental income, etc. With this, you are earning even though you don’t put any physical effort anymore in it.
The Need for Financial Management
Having money allows you to make more money. You need to have enough capital to let your money work for you.
You can’t build wealth if you don’t know how to manage money. It all starts with money management. Are you having problems with your financial management? You need a system!
And the 6 jars budgeting method might help you with your quest for financial freedom.
The 6 Jars Method
Think of the 6 Jars method as 6 physical jars of expenses where you drop your money inside. Regardless of the amount, the accumulated values are the amounts you can spend per classification. Every time you get income, you distribute it into 6 jars.
Here is a sample distribution percentage per classification:
- 55% Necessities (food, rent, utilities, insurances, debt repayments, etc.)
- 10% Financial Freedom Account (money for investments that you grow and don’t touch)
- 10% Long-term savings for spending (savings for big-ticket items like a car or trip abroad)
- 10% Education (seminars, online classes, etc.)
- 10% Play (budget for leisure or anything you want to spend on)
- 5% Give (charity, gifts to friends, donations, etc.)
It’s All About Building the Habit
Take note; these are just ideal numbers percentages. If your expenses are higher and the 55% cap is too tight, you can adjust the number. Financial management is a habit. So the percentages don’t matter. What matters is that you practice distributing your money now.
We must accept our current situation and work on improving it in the future. So if you’re in debt or you have too many expenses, you can have these percentages instead:
- 75% Necessities
- 5% Financial Freedom Account (FFA)
- 5% Long-term savings for spending (LTSS)
- 5% Education
- 5% Play
- 5% Give
Customize the numbers as much as you want. But don’t forego any jar. Each jar has a purpose to make it easy and systematic for wealth accumulation. Aside from the Necessities Jar (which is quite obvious), here is the significance of each jar.
Financial Freedom Account (FFA) Jar
Your financial freedom account (FFA) is your Golden Goose to success. It’s the account that allows you to build your wealth even without working for money. You let it grow until it can produce enough golden eggs for you.
The ideal amount is 10% of your monthly income, but it depends on your current financial status. The rule is that you don’t touch the principal of this account. You use this for investments that can yield more money. And when it’s big enough, you only withdraw the income.
It’s like only getting the eggs from the Golden Goose. Don’t kill the Golden Goose. Protect it at all costs.
Long-term Savings for Spending (LTSS) Jar
Most of us want something expensive, like a house or a car. A lot of people can’t buy it in one go. So, where do you get the money? You get it from the LTSS account.
The Long-term Savings for Spending (LTSS) account is the money jar for big-ticket purchases. It’s important that you maintain this account out because it gives you an inspiration to still push through with your goals.
After all, we do need to reward ourselves. And this jar makes those purchases planned and attainable. It’s quite exciting to persevere more if the amount draws near the goal price tag.
The income you can earn is based on the value you can give. You are not entitled to anything in this world. You need to provide value to your possible customers or employers to get more income. And you can do that by always upgrading yourself with better skills.
But some of the best courses have a price tag. That’s why you need to invest money in education. That’s the purpose of the education jar! If you suddenly see a seminar that’s highly related to your field, you have the money to spend on it.
And more than the learnings, you can also network with the people in those classes. The people surrounding you greatly affect your net worth. As an additional perk, the opportunities will be far greater because, in business, it’s not what you know but who you know that counts.
At the very least, the conversations of like-minded people are more meaningful. It can even birth new ideas and businesses in the long run.
A lot of financial management systems are too restrictive. They tell you not to buy that milk tea or sway away from Samgyupsal just to save money. In essence, that may be logical, but why are you working if you can’t enjoy your money? What’s the point?
I tell you, you can have both! And with your Play Jar, you can responsibly YOLO your wants. The rule with the Play Jar is that, as much as possible, it should be wiped out every month. You need to spend every penny.
The rationale behind this is that you need to enjoy your money. Most people save up so much and suddenly blow up everything just because they feel so deprived. We want to take out that tendency to make you happier and make the jars method more sustainable.
We must feel abundant first before we can be one. Ironically, the more we give, the more blessings come. And we can practice that abundance when we give to people.
It’s not necessarily for charity. You can give to your family, friends, or just anyone you want to help. When we don’t have a constrained hand with money, we won’t feel bad if some go away, because you know that more will come in the future.
Increasing Your Income
What if you’re stuck in unfavorable percentage values? There are two ways to accommodate higher percentages for faster wealth accumulation. It’s either you lower down your expenses, or you increase your sources of income. Don’t worry, though.
Because this financial management system allows you to roll your income to get more skills for better opportunities. With the education jar in place, your grateful and abundant standpoint, plus your own drive to succeed, you can find opportunities that can give you more money.
There you have it! This financial management system is simple enough that you can follow it without heavily changing what you do. With that, it’s time to get your physical jars, or you can use a bank account like Security Bank’s eSecure Online Savings Account for separate bank titles to monitor. Good luck!!