Lesson from The Millionaire Mind Intensive written by Mr. Sara Nguon based his experiences attending the program on 2-4 October 2015.
Wealthy people are not any smarter; they just have better money management habits. How to win a money game (in order to have enough money to pay your desired lifestyle) is similar to how to win a soccer game.
To win the soccer game, each players need to have a clear role; who is the goal keeper, who are the defenders, who are midfielders and who are the strikers, and they must be discipline (consistently practicing) and follow the rules of the game.
To win money game, you have to be an excellent money manager – know how to separate your regular or irregular earning income into different accounts (players). Each account is reserved for specific purpose (role) such as for spending on daily expenses, on education, for investment, for leisure etc.
T. Harv Eker has introduced one of the world’s easiest and most effective Money Management System is known as Jar System or Piggy Bank that commonly has six accounts or jars:
1). Financial Freedom Account (FFA) or jar – equal to 10% of your total income. Never spend this money. It can only be used for investing in any passive income streams either passive investment income or passive business income that working for you.
2). Long Term Special Spending (LTSS) account/jar – equal to 10% of your total income which is reserved for buying luxury items (TV, car, etc), travelling, or for contingency.
3). Education (EDU) account/jar – equal to 10% of your total income which is reserved for educational expenses either for yourself or your children. This is the most necessary and important account for spending on improving and developing your skills and capacity. Remember – if you stop growing, you are dying.
4). Necessity (NEC) account/jar – equal to 55% of your total income – for spending on your food, housing, clothing, utilities and so on (for basic needs).
5). PLAY account/jar – equal to 10% of your total income – you have to spend it monthly to reward yourself on your most enjoyable and relax activities or hobbies like massage.
6). GIVE account/jar – equal to 5% of your total income which is reserved for charity or donation to the community event or person who in needed. You can increase it to 10% if you need to, but you have to decrease your Necessity (account) to 50%. Don’t trade in with other accounts.
Finally, you have to be discipline (follow the above system/rule persistently). Whenever you receive money, divide it into six parts/portions and deposit them into each account. Do it every day and every single time you earn any incomes. Soon it becomes your habit of compounding your money, especially the Financial Freedom Account (FFA) that can be used for investment in real estate or business that generates passive income. Remember – Pay Yourself First and spend the remaining after. If you spend before paying yourself, it is most unlikely that there is remaining money for you to keep for yourself.