A concept was shared with me recently that may be useful to help you to conceptualise and group your income in a way to help you save for those important things in life. It is called the, "Five Jars Concept".
We all have our everyday expenses, your leisure/ entertainment, your holidays, education tuition fees, medical costs, etc. So the Five Jars Concept is based on grouping those expenses into "five" categories ("jars") to help you manage them.
The five categories that were shared were:
- Domestic needs - everyday expenses
- Education - tuition fees, self-education, etc.
- Special purchases - a new tv, lounge set, etc.
- Leisure - holidays, nice fancy dinner, anniversary outing.
- Untouchable/ investment/ medical/ protection - savings/ investment for the future, medical and travel insurance, income protection, etc.
So basically you would organise your income and expenses into these five areas and ensure that you always have money set aside for each category. That is, if you have been saving to go on holidays then once you have spent all the leisure funds for the year then you wait until you build it up again. All other funds will stay untouched as they have been allocated for other activities.
And it's up to you what percentages you want to assign for each of these categories. One would also consider where you are in your life, if you're planning for children, a big holiday, etc.
I would go the step further as well and even think about having more than one jar, but you'll be the best person to judge that for your personal situation.
I hope by sharing this, this helps you think about how to organise and ensure you can save for those important things in your life. Enjoy! ;)
