Starting the Jars
I received a question yesterday that I’ve received before about the Magic Jars and how to get started with them. Rick wrote:
We are starting the money jar system tomorrow since it is the first of the month. We are behind on our bills going into the new month. How do we start the money jar and continue to play catch up at the same time?
People seem to have difficulty figuring out where the money for the jars comes from. It’s as if they think this is “extra” money, not money they would have been spending all along. So…
First off, the money that goes into the jars is the money that you would have been spending on things like gas, food, clothes, entertainment and medical costs – all your “variable” expenses. It’s not EXTRA money.
And the place to start in changing your money management is not with the jars. It’s with a balanced budget. You can’t actually make the jars work for you if you don’t start by making a budget that balances
Crap! Really! I have to do the math
Darn tootin’. You’re going to have to do some hard work before you can clean up the mess you’ve made of your money. If you skip this step you’re lazy, uncommitted and looking for an easy way out. There is no easy way out. You’ve muddle up your money and now it’s time to do the detail to sort it out. So get out copies of your bills, a pen, a piece of paper, a calculator and get ready to do the math.
Go to Gail’s Interactive Budget and the instructions, Gail’s Guide to Building a Budget. Follow the instructions and make a budget that balances. You can’t have a negative number at the bottom. It has to be positive or zero; the budget has to balance.
If you can’t make it balance, you have a problem. Either your expenses are too high or your income is too low. Start by cutting out EVERYTHING that isn’t essential to keeping body and soul together. This may include cutting back on fixed expenses. Cable, cell phone and telephone bills are one place to look. Turn down your thermostat and put on a sweater to save on heating costs. Get rid of a car you simply can’t afford to keep. If that’s not enough, then you’re going to have to find a way to make more money. (Am I starting to sound like I’m repeating myself yet?)
Once you’ve balanced your budget, the Interactive Budget Worksheet will tell you how much is going into each of the jars. I’m sorry, you can’t store this budget, but you can print a hard copy for on-going reference, and I recommend you do so.
Okay, now we come to the jars. This money is your “variable” spending. Assuming you’ve balanced your budget you now know how much to pull from your bank account each week for the jars. Some jars, like “clothing and gifts” or “other” may remain empty until you’re back in the black
All the rest of you money stays in your bank account and can be used to pay your bills. Your mortgage/rent is a fixed expense, and assuming you’ve balanced your budget, the money is in the bank to pay this bill. Ditto your car payment, insurance, childcare – everything that’s at the top of the Interactive Budget under the titled “Fixed Expenses”.
Two more things: First, if you can’t figure out how much you should be putting toward debt repayment, use the Own Up to Your Debt Worksheet (on the right hand side of this page, under Gail’s Other Pages) to determine how much should be going toward your debt repayment.
I know the budget says it should be 15%, but if your hole is deep – as is the case with many of the fams I work with – you may start off budgeting 30%, 35% or 40% of your income to debt repayment – whatever it takes to get you out of the red within three years or less. If it looks like it’s going to take longer, or your debt repayments are throwing your budget off kilter, you only option will be to MAKE MORE MONEY.
Second, you can’t sacrifice savings in the name of paying your debt off faster. Sorry, that’s cheating. You have to set aside some money each month for emergency and savings (which is long-term savings, not saving for a car or a vacation), so that you’re working with a balanced plan.
I know there are those who believe you should pay off ALL your debt before you start to save, but I don’t agree. If you have nothing set aside in an emergency fund, the first time you run into a problem, you’ll go back to using your credit; very defeating emotionally.
And if you don’t start the habit of long-term savings TODAY, you won’t ever start.
Ever heard of inertia? That’s the thing that keeps a body that’s at rest at rest until something acts upon it. It also keeps a body in motion in motion. If you aren’t saving today, you’re a body at rest. I am the force that has been sent to act upon you to get you moving in the right direction.
Lots of people are using the jars all over the world. I’m really surprised that such a simple – and really old – idea has caught on in such a big way. I think it’s because it’s a way to make money management really concrete. When the jar’s empty, you’re done spending.
And the jars really work. I haven’t worked with a single family to date who haven’t had money left in the jars at the end of my time with them, despite my having cut their budgets by 50%, 65%, or 85%! Wow! So y’all can live on less, if you’re determined to change your circumstances.
Course, determination is a big thing. If you’re at all wishy-washy about what it’ll take to get you out of debt, if you just can’t work up the guts to do things differently, it won’t be the jars that failed.