While it is perhaps not your favorite cup of tea or even the first time someone told you, you need to start managing your money if you truly want to create financial freedom for yourself and your loved ones. A few years ago, I started to follow a great system after hearing it from the man who created it.
But why is it so important to have a good management system in place?
Because managing money doesn’t restrict freedom, it creates freedom.
Yes, it does!
Let me give you a short story. Through my life, there were times where I earned a lot of money, but instead of keeping it and investing it, I subconsciously always spent it all; by giving or helping other people but not myself. You see, I wasn’t paying myself first. I had a lack, some of the people I knew growing up were takers and I hated it, so I became a giver…to the point of doing it with no limits until I almost had nothing left for myself; it was a problem.
When I learned this management system, I had to get rid of the pattern I had and acquire the new habit of managing money. It was so difficult at first because I was addicted, I had to literally force myself to divide money and put it away in different accounts, and not touching it was even harder.
My mind was driving me crazy, telling me to spend it, that I could always put it back later, and each time I had to fight back. Today, I am a different person because I took action. And I owe it to this system.
Anyone Can Use This System
Anyone can start using this simple method of managing their money even if you think that or do not have a lot of money to manage. The critical factor here is to develop the habit of managing money, and not how much money you have available to manage.
You need to get into the habit of managing your own money. You could begin by splitting as low as 1, 10 Dollar/Euro or more every month in using this system. I started with small plastic containers.
Below here are the various accounts used in the management system as well as the standard percentage of how you should divide your money and manage it:
- Financial Freedom Account (FFA) = 10%
- Play = 10%
- Necessities =55%
- Education = 10%
- Long Term Savings For Spending = 10%
- Giving = 5%
In the process, I understood that the account percentages are not critical. To guarantee your financial success, just start using the system and build the habit by dividing any money you get, no matter the amount. This is the vital clue. It doesn’t have to be flawless when you start. Here is a breakdown of the different accounts and what they are meant for:
FFA: Financial Freedom Account (10%)
Put 10% of any sum of money you receive into a ‘FFA’ account. The money inside this account can only be used for investments and building or creating your passive income streams to grow your money.
Therefore this account is your ticket to financial freedom. Think of it as your “Golden Goose” that lays you “golden eggs”, if you spend the money inside the FFA, it will kill your golden goose that was bringing you golden eggs.
Note: The time to spend your FFA capital is NEVER…I mean NEVER! The only time you would touch this money is once you stop working or retire at 30, 40, 50 or 60 and become financially free, you then get to live off the eggs but do not ever use the goose which is your principal!
You could keep some of the golden eggs (interests, dividends, earnings) that the mother goose is creating you to grow more golden baby geese (wealth) even quicker. So if you didn’t already get it, the idea here is to create a Golden Goose at first and make it grow!
If you believe in the “law of attraction”, this account is essentially your money magnet. Continue to put more money into it and attract more money into your life! Add money into it each day if you can, even if it is just your “loose change”.
The amount doesn’t matter but the habit does. The secret again is to place your “attention” on your objective of getting financially freedom.
Put 10% of any sum of money you receive into a ‘Play’ account. The purpose of this one is to nurture or pamper yourself. It can be anything your heart desires…I mean anything. You are supposed to blow this money away every month so that you will feel great about having money and spending it!
This is my kind of account. You could accumulate this account on a 2-3 months period if you want and go on a getaway trip or buy yourself a new gadget. The important factor here is to feel guilt-free when you spend this money every month.
Go ahead, be outrageous and do something crazy so you can feel really good as you are recommended to blow this money every month.
Put 55% of any sum of money you receive into a ‘Necessities’ account. You should use this fund to pay all your essential bills such as mortgage, rent, bills, utilities, taxes, clothing, eating, driving, public transport, hair, manicure, etc.
Basically it includes anything that you need to live, all the necessities.
If you cannot live on 55%, I would suggest simplifying your lifestyle. Sell your car and take the public transports, or buy a cheaper car instead of a luxurious one. Buy inexpensive clothes instead of Brand names.
I had a hard time living on 55% for all necessities when I started this money management system but after a while, I was able to simplify my life and live on 55% or even less at times!
When your usual need for instant satisfaction kicks in, think of this:
“Wealthy people think Long term. Poor people think Short term.” – Secrets of the Millionaire Mind
Put 10% of any sum of money you receive into an ‘Education’ account. You can use this capital to further educate yourself, books, courses, seminars, events, etc. Everyone needs to learn, especially in this changing world or if you are creating your own business.
The money here is meant for personal growth. Since you are your most valuable asset, an investment in yourself is a great way to use 10 percent of your money. And it is tax deductible!
Get out of your comfort zone through learning and taking action. If you are not growing, you are declining!
Long Term Savings for Spending (10%)
Put another 10% of any sum of money you receive into a ‘Long Term Savings for Spending’ account. The money here is to purchase and have long-term assets.
This could be buying a house for yourself, a cottage or apartment in the country side or a piece of land somewhere. You could also keep it aside as emergency funds or savings for your children’s education.
Finally, put the 5% left an account for ‘Giving' away. You can use the money for donations to charities or foundations, or use it to help someone in need. Giving is important. I give money each month to the Animal Rescue.
You could use this money on other’s birthdays, special occasions and holidays.
You could give away your time instead of giving away money. You could volunteer in your community to help others.
Who said you had to give 10%? Only churches started saying things like that. Go by your experience.
This money management system can work for anyone who has never saved a 1 dollar or euro, and for those that need to learn and grow with a little help in managing their money. It covers all aspects on how to manage your money and get ahead. It is an insightful method that helped thousands of people!
Thank you for reading.
Sergei VanBellinghen, Founder & CEO of First-Class Lifestyle and sergeivanbellinghen.com, Success & Self-Improvement Coach, Freedom entrepreneur & business partner of Stuart Ross, also counselor in East Europe-West relationships, a passionate Globetrotter and an avid audio booker