I want to introduce to you the world’s simplest money management system which I learned at the Millionaire Mind Intensive seminar in Amsterdam of T. Harv Eker.
This system allows you to create positive money management habits and growth your money. It is not important how much money you earn and/or have.
The key of this system is to allow you to create positive powerful money management habits. As you growth your money, you have the habit to manage and keep your money.
If you know this money management system already, do you also apply it? To know and not to do is not to know ~Kevin Trudeau~. The difference between rich people and poor/middle class people is that rich people are excellent money managers.
In the money management system you separate your income (net income after taxes) in various accounts for specific purposes. The accounts are the financial freedom account (10% of your income), the long term saving account (10%), the education account (10%), play account (10%), gift account (5%) and necessities account (55%).
Any time you receive income (salary, passive income, taxes, bonus, vacation money) you should contribute to all accounts.
If your monthly expenses are higher than 55% of your net income after taxes pay all your expenses first and divide the remaining amount in the other accounts (financial freedom, long term saving, education, play and gift).
If you have EUR 1 after paying your expenses, divide the EUR 1 through the other accounts. It’s about the new powerful money management habit you create!
Contribute always to all accounts. You can also use auto payments. After receiving your monthly income automatically transfer the amounts to the specific accounts.
Financial freedom account (10%)
In my opinion is the financial freedom account the most important account. Have the habit to always pay yourself first. Care about your financial future! You should never spend the amount in the financial freedom account. You can use a part of the amount to create passive income streams.
The financial freedom account is the golden goose and you should never kill the golden goose. The golden goose (financial freedom capital) lays golden eggs (interest amount received). You can use the interest received from the financial freedom account.
Never use the capital, except to create passive income streams. Never use the financial freedom account to pay off any debt.
Long term saving account (10%)
The long term saving account can be used for your dreams (your dream car, house, vacation and/or contingencies). You can split the long term saving account in two or more long term saving accounts for several purposes.
For instance one long term saving account (5% of your income) is for your dream vacation and the other long term saving account (5% of your income) is to pay off your debt and/or credit card.
Postpone purchases (for instance television) before your debt is paid. Pay always your smallest debt first (EUR 100). After the smallest debt is paid, pay the second smallest debt (EUR 200) and use the amount of the smallest debt (EUR 100) to pay the second smallest debt (EUR 100 + EUR 200 = EUR 300).
Education account (10%)
The amount in the education account is for your education (books, seminars and other events). Expand your mind! Education is important for your personal and financial development. It increases your intelligence and confidence. You create an excellent attitude and power!
Play account (10%)
The play account is to pamper yourself. You have to blow this account every month. Use the money to eat at a restaurant, for massage or something else to give you a really good feeling.
Gift account (5%)
What you give you will receive back. Give love, help and support to families and/or friends. You can also use the amount for charities and bless the world.
Necessity account (55%)
The necessities are your monthly expenses like house, car, food, electricity, hair, clothes.
As from today you are an excellent money manager!