Recently I attended a seminar featuring a very successful business person. During the seminar he outlined a very simple but profound money management system. I fell in love with it and adopted it as my own. Even better, I took action and I’m beginning to see great things happen already.
Only after a few months of implementing this system I’m motivated to earn more, and much more focused on achieving my goals.
Here is the breakdown of my money management system:
Go to your bank’s account manager and ask him or her to open for you six separate bank accounts. Label each account as follows:
- Financial Freedom Account
- Long Term Savings Account
- Education Account
- Necesseties Account
- Play Account (this one is awesome!)
- Give Account
I’ll go into each one of the above six accounts in detail very shortly.
Here’s what you need to do next; take any money you earn (after tax), and divide them into each account as follows:
Financial Freedom Account – 10%
Long Term Savings Account – 10%
Education Account – 10%
Necessities Account – 50%
Play Account – 10%
Give Account – 10%
Now, let me explain what each account is to be used for:
1. Financial Freedom Account
This account is what I’ll call your ‘Golden Egg’ account. NEVER spend this money. Continue to build this fund until you can live off the interest you will earn from the principle. Even after you pass away, don’t distribute this fund. Instead set up a foundation or trust so that your family (or a charity) can benefit from this fund forever.
2. Long Terms Savings Account
This account is for saving up for something special that will take you at least a year to save up for. For example, a nice car or a holiday. If you have more than one thing you’d like to save up for, open more accounts, however, don’t put more than a total of 10% of your earnings in these accounts combined.
3. Education Fund
Educating yourself is SO important. Steven Covey refers to it as the ‘sharpening of the saw’. Invest in your mind, it is your greatest asset and will bring you huge returns. Educate yourself in all areas of life; in relationships, business, health, etc.
4. Necessities Account
This account will take care of all your basic needs; your food, shelter and essential clothing. As you begin earning more and more money, this percentage can be reduced from 50% and the money transferred to the other accounts. Rich people are usually living off around 35% of their income.
5. Play Account
This one is definitely my favourite. I find it hard to spend money on myself but with this account you’re FORCED to! 🙂 In fact, you HAVE to spend this money every month. Use this money to a night out at a fancy restaurant, or to upgrade yourself to a first class flight. Pamper yourself!
(Hint: this account motivates me to earn more money than any of the other accounts)
6. Give Account
If you truly want to be wealthy and happy, then you have to learn how to give. Use the money in this account to give away to any person, worthy charity, pay tithing, etc.
Managing your money using the above strategy will profoundly change your life. It has mine and I highly recommend it.