How to Save a Significant Amount of Money with a Low Income

I used to be the person who fears the end of the month. It could only mean one thing: running out of money. I remember so well handing my debit card to the cashier with my heart beating fast praying that the transaction will be successful and I do not have to face the shame of walking out of the shop without the bag of goods I intended to buy. I remember turning out every pocket of my wallet hoping for an extra banknote to appear and checking my fridge if I have enough food until the glorious payday arrives. And then start the whole cycle all over again. It was exhausting and devastating and it didn’t do any good for my confidence either.

All I need to do is to earn more, I said to myself, and I felt relieved when I got accepted for a job with a higher salary. Now I can breathe, I thought and celebrated my new, carefree life until the 25th of the month when I ran out of money again. This is just temporary until I settle my debt, I had to buy stuff now for the future, and it won’t be always this hard. Next month, it will be better.

A year later I joined a company that gave me a raise again. Excuses, sudden expenditures, temporary fixes, no money in the bank. That was the night when I sat down tired and stressed on my bed and I burst out: Why is this happening? I couldn’t keep any money by the end of the month and no matter how much I earned I spent it all. This was the realization that pushed me to look for answers until one day I stumbled upon a blog post of T. Harv Eker.

He has shared a system so simple that even a first-grade student could understand it. That’s it? – I asked. Is this what transformed Harv from a penniless immigrant into a self-made multimillionaire and financial expert? After studying personal growth for years, though, I had to admit that the most powerful techniques, tools, and concepts are the ones anyone could do but nobody is doing. What really makes a difference is to trick our instinctive brains into a frame of thinking that serves us better in the long term, and this is the psychology his system is built upon.

As simple as it sounds, managing one’s money consists of only 3 things according to T. Harv Eker:

1. Earn money.
2. Keep some of it.
3. Grow it so it makes more.

Most people get stuck at the second step and never get to number three because they don’t have a system to put a break on their spendings. Our ultimate dilemma is whether to enjoy life right now or to build a better future. In the financial context, it is no different: we make decisions every single day about spending on our present happiness or saving up for our ideal future. The best thing about the JARS system that it includes both areas and eliminates the pressure of decision making from the process.

It goes like this: take all the money you have earned, whether it is your salary, your pocket money, a bonus from a client, or any other income stream, and divide it into 6 different categories aka jars. This can be literally jars on your night table with coins and banknotes, 6 different accounts, or the combination of both. Even if it is just a few dollars or an irregular, one-time income, stick to the framework and trust the process.

Here are the 6 categories you will need to follow:

Jar 1 – 10% For Your Education Jar

No matter your age, status, or where you are in life right now: Growing yourself will always be your most profitable investment. Every single element of the life you see around yourself is a creation of you, whether voluntary or involuntary. Millionaires and A-players know that their success depends on their speed of growth and their personal fulfillment and they actively allocate time and money to evolve as a human being.

We often think that once we become wealthy, we will be able to spend more on our personal growth when, in reality, we cannot grow rapidly unless we invest in our education. This jar will guarantee that you won’t delay your chances to take a leap and upgrade your models of thinking which will directly result in a higher income. Be it a seminar, a personal coach, or an online course, now you know where to go for the funds to make it happen.

Keep in mind that this jar does not have to be spent on learning about money and business. A meditation and yoga retreat, a program that improves your relationships, or learning a new form of art all make you a whole person and contributes to your collective improvement. It is more connected than you think and I cannot stress the importance of this area enough.

Jar 2 – 10% For Your Long Term Savings For Spending

This 10% is also known as the Rainy Day Fund. This is where you can go for help when sudden expenses and unexpected situations show up that you were not planning to spend on. This is like a life vest that will protect you so that you don’t need to worry when medical bills or an emergency situation show up because you will always be covered without compromising on your dreams. It is better to be prepared and later have more rather than less.

Besides this jar is for your long term dreams: that car or that tropical vacation you have given upon because you thought you cannot afford it will now be made possible. The key is consistency and once saving becomes a habit, you don’t need to overthink where your money goes. The best part of this system is that there is a space for everything: long term aspirations, short term cravings, and more.

If your “money blueprint” as T. Harv Eker calls it is about making yourself and your loved ones happy with buying stuff for them then it might be hard to put a break on your spendings. If you are like me, you might have had thoughts like this before: Why would I compromise my happiness now in order to make my uncertain future better? Life is about experiences and I need to enjoy my life while I’m young! And then the universe has shown the answer right in my face: Because you are struggling every month and you are constantly stressed about running out of money! Does that make you happy? It certainly didn’t.

Have I been able to change my money blueprint? Not really. But that’s the beauty of the 6 jars system: I divide my money into these categories without thinking and I don’t touch the amount set aside until it passes the requirement of a certain jar. There are only a few rules to keep but they make life so much easier.

Jar 3 – 10% For Your Financial Freedom Account

I can hardly make ends meet, why should I think about financial freedom right now? – you might ask. But the truth is that you don’t need to wait for building your financial freedom or saving up until you earn more. You can earn a little more every year but if you don’t change your mindset, it won’t make any difference. If you are a hedonic spender, you can spend ten dollars, thousand dollars or ten thousand with ease.

The mindset that sets wealthy and balanced people apart from the ones who are struggling is how they think about money not how much they earn. This is why people who win the lottery think their life will change and then they lose it all or fall into depression. Financial freedom is not the privilege of the rich! It is simply a result of consistently setting aside a little and making this money work for itself. Remember the 3 steps of managing your money? This is where the third category comes in: After you earned and saved, it is time to grow what you have.

Unfortunately, investing is not a part of education for most of us. This is why the rich get richer and the poor get poorer: inflation affects everyone and if you simply keep your money in the bank, it will keep losing its value and you will find that even after you got into the habit of saving, your efforts didn’t get you where you wanted to be. Your ultimate goal should be to create systems in which your money makes more money without you putting in more work for it. Nowadays, micro-investments are widely available so you don’t have to wait until you have a large amount of fund to start investing. You just need to start with a little and keep practicing until you learn the know-how just like with any other skill.

Jar 4 – 10% For Your Play Jar

As a person really good in spending, this is my favourite jar of all. There is only one thing you have to do with the money that goes into this bucket – to blow it! It is a chance for fastidious savers to let loose a bit and find a way to enjoy the present moment with the money they have worked for. After all, there is no point in working and saving if you don’t feel comfortable enjoying the little moments of life, right? For spenders, this is the line not to cross. This %10 helps them be aware of how much it really is that they can spend on their lavish treats and impulsive desires. If the jar is empty, the game is over so be wise about how far you reach.

On the other hand, this is a good opportunity to overcome subconscious limiting beliefs such as I cannot afford that kind of thing or expensive experiences are not for me. Instead of going to the same parties every weekend, you can book a night in the most luxurious 5-star hotel in the city and enjoy all services like a queen, go all out and order everything on a fine dining menu, or spend a day in a spa. This is where your creativity comes in and by trying things you were always longing for, you can eliminate the vicious cycle of I’ll be happy when…

Maybe you cannot afford all of this at once yet, but you can indulge in some of the things that you thought are unavailable without feeling guilty. Contrary to the LTSS jar, you don’t have to wait for long for these experiences to happen. These will be your dreams coming true from your vision board and the moments you can write about in your gratitude journal.

Jar 5 – 5% To Your Giving Jar

Giving back to society and helping people will only make you richer. What goes around comes around and it is empowering to feel that you can help people even with a small amount. We often think that donating and helping the ones in need is the privilege and responsibility of the wealthy and so we delay our generosity even though the people who need help need it right now.

It is a frustrating dilemma how much we can afford to give because we don’t want to cross our limits but we don’t want to be stingy either. This is why this jar was created so that we can give without worrying and know when to say no. If you are in a position to increase this amount, you can certainly give as much as you are comfortable with but %5 is enough to make it a habit.

Jar 6 – 55% To Your Necessities Jar

This will cover your basic daily needs such as rent, food, bills, and so on. You might wonder, How could I live on %55 percent of my income when I can barely afford living on the entire sum? I have asked the same question when I started out and I was full of doubts. But the whole point of this simple system is that it is not the amount of money that matters but how well you manage it, in other words, the habit of allocating it to the right places.

There were times it was tempting to take cash out of my LTSS jar for something I wanted badly but when I asked myself if it is really that important that I would compromise my financial security and my long term aspirations I could say no. There were times I had to work on weekends to earn a bit more and I really wanted to keep the bonus in my pocket but I decided to put it in my jars as per the thumb rule. You would be surprised how much difference it makes to have certainty about your finances and awareness of your expenditures. Start making it a habit now and you will see incredible changes happen in your money mindset.