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Money Jar System
For those of you who haven't seen the show, the money jar system is a cash budgeting system similar to the envelope budget system except that jars are used instead of envelopes. Each jar contains an alloted amount of cash used to cover one of your 5 variable expenses for one week. For example, let's say you have $80 for your transportation jar. That $80 should only be used to pay for gas or other transportation costs such as windshield wiper fluid, parking or transit passes for the week.
In This Article:
Money Jar Budget: Step-By-Step1 Before you start on the money jar system it's imperative to have accurate numbers that truely reflect your spending on a monthly basis. The best way to do this is to carry an expense journal or log book with you everywhere you go and write down everything you spend money on. Ideally you want track your spending for atleast a month before starting on the budget.2Enter income & expenses. Fill out Gail's Free Interactive Budget Worksheet . It will automatically calculate your fixed and variable expenses as you fill it out the worksheet. Your variable expenses will be the categories for your money jars. Your fixed expenses will be things such as your mortgage and car payments. Print out the worksheet when done as you may need it for reference later. 3Your money jar categories are: "Transportation", "Food", "Entertainment", "Clothes/Gifts" and "Miscellaneous". Take 5 mason jars and label each of them with one of the categories listed above. 4 The next step is to withdraw your jar money. Take out the amount shown for your total weekly Jar money. Round up if necessary. 5 Divy it up and fill each jar with the alloted cash amount for it's category. This is the money you will live on week to week. Redo the budget worksheet as your circumstances change. 6 Start an emergency fund. An emergency fund is a critical part of becoming financially stable and should be established as quickly as possible. At the very least you should have an emergency fund of no less than $1000. This amount will cover most short-term emergencies but it won't be enough to cover expenses should you suddenly lose your primary source of income. That is why most experts will tell you to build up a fund that could cover 3-6 months living expenses. 7 Wipe out your debt. List all your debts, including loans, credit cards, lines of credit etc and order them from smallest to largest balances (smallest balances at the top). Do not include your mortgage or what you may still owe on your car. Pay just the minimum payment on all your debts except for the smallest debt. Apply the remaining 15% of your net income onto the smallest debt until it's paid off. Target the next smallest debt on your list until it is paid and move on down the list until all your debts are paid. This is also known as the Debt Snowball method. 8 Save, save & save some more. This is the last of the money jar budget steps but by no means should it be put off. In fact, you should be saving 10% of your net income while you are getting out of debt. You're saving for the future and that should be a top priority. The best way to save is to pay yourself first - better still - make it automatic by setting up an automatic withdrawal from your pay account straight into a long term retirement investment such as an RRSP. Til Debt Do Us PartTV Host/financial expert, Gail Vaz-Oxlade has a tough, no-nonsense approach to managing money and helping couples in financial peril get on the straight and narrow. Gail's Tools: Gail's Books: Why it worksThe money jar system is a time-tested, proven method of managing money. One reason why it works so well is because you can see what you have left to spend in the jars. The advantage of knowing exactly how much or how little you have left is that you always know when you can spend and when you can't afford to spend. The best thing about the jar system in my opinion is that it's so easy...it doesn't feel like you're budgeting because you don't miss out on any of the things you enjoy in life.
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