VPS | Exploring Rules to Build a Smart Financial Lifestyle

The remarkable development of technology is gradually shaping how humans operate in life and significantly altering the financial sector's activities worldwide. Concepts of personal financial management intertwined with digital finance are no longer unfamiliar to anyone. However, grasping and building a bright financial lifestyle has yet to become a widespread practice and a top priority for everyone.

Join VPS in exploring renowned income and expenditure management rules to be well-prepared to create an intelligent financial lifestyle.

The 6 Jars Rule

The 6 Jars Rule" (JARS Money Management System) is a spending management method created by author Harv Eker and widely practiced worldwide. With this rule, your income is divided into six jars corresponding to 6 different expenditure purposes. Specifically, they are:

• Necessities Jar (55%): This Jar covers essential needs in life, such as food, daily expenses, bill payments, and necessary purchases. Many people allocate over 80% of their income to fulfill these needs due to a lack of appropriate spending management and lavish lifestyle habits. However, cutting down or controlling expenses on non-essential activities and purposes is possible.
• Investment Jar (10%): In every stage of life, especially during career development or towards achieving financial stability, it's crucial to establish habits of generating additional passive income sources. With the second Jar, the long-term investment jar, you allocate 10% of your monthly income to start investment activities such as stocks, real estate, etc. Investment is a long-term journey, so you need specific plans and thorough research to avoid risks.
• Long-term Savings Jar (10%): Accumulating savings will ease the financial burden of significant life goals such as buying a house or a car, paying for wedding expenses, or raising children. To achieve savings goals, explore various saving methods offered by banks.
• Education and Training Jar (10%): Knowledge is invaluable, and learning is always relevant. Investing in education is essential for improving the quality of life, regardless of your age. You can start investing in education by buying books based on your interests, participating in short courses and workshops, or learning from people around you. Every day, you'll enrich your knowledge, increasing opportunities for personal development.
• Enjoyment Jar (10%): Relaxation and enjoyment are crucial amidst life's chaos, work pressure, and health concerns. Allocate a portion of your income to indulge in relaxation and enjoyment. Releasing stress will help balance your life and rejuvenate your energy for the journey ahead.
• Giving Jar (5%): Depending on individual ideals, we all have ways to spread goodwill to others and our community. Giving isn't solely about receiving in return but about sharing with those less fortunate, with the hope of making everyone's lives better and creating a better environment and society.

50-20-30 Rule

The 50-20-30 Rule is one of the classic guidelines for personal financial management. According to this Rule, your income is divided into three parts: 50% for necessities, 20% for savings and investments, and 30% for wants and other personal needs.

• 50% for Necessities: This portion covers basic and essential expenses in life, such as food, daily living expenses, bill payments, rent or mortgage, and necessary purchases.
• 20% for Savings and Investments: This money helps you realize long-term investments and savings goals. Investments will generate returns over time, providing passive income to deal with unexpected financial needs or to fund significant goals such as buying a house, a car, weddings, or raising children.
• 30% for Wants and Other Personal Needs: This portion is for discretionary shopping, celebrations, or other personal needs. However, controlling and reducing spending in this category is essential to save a portion for future contingencies.

Here are some other rules and methods you can apply

Depending on preferences and lifestyle, each person may have their methods of managing personal expenses. In addition to the two classic rules mentioned earlier, you can also consider some other rules and methods and start applying them for yourself today:

• Envelope Budgeting Method
• Kakeibo Method for Personal Expense Management
• The 9-1 Method of Financial Management from Jewish Culture
• ...

Start applying these rules and methods suitable for managing expenses from today to reach your dreams of upgrading your quality of life and achieving financial freedom.