A Financial Jar Story

I’ve been helping a friend of mine with her financial planning, not in any way suggesting where she save her money (I’m no financial advisor) more how she can have a budget that works for her! I’ll be using $ instead of pound signs since this computer doesn’t have pound sign options!

This friend was complaining about never being able to afford anything. That she was sick of feeling poor! While she is definitely lower household income, her expenses were so very low that I was amazed, under the circumstances, at how much disposable income she did have. Here are her pay and expenses:

• Mortgage $160
• Insurances $95
• Petrol $80
• Heating, Electricity, Water $85
• Tithing $110
• Council Tax $85
• Phone, Internet, TV $73

Take Home Pay was $1107 – Bills = $399 for food, entertainment, holidays etc.  Yet at the end of the month she was usually only able to put $50 into savings which was earmarked for Christmas and Birthdays! So we set to work

1. I had her write down ALL her expenses for a 2 week period, every single coffee etc.

2. We analyzed the results – she was spending a lot on running to the shop for things she forgot, she was seeing she was able to buy things but wasn’t really aware of it so still felt poor!

3. I was able to see that she was constantly pulling money out for things that she didn’t have saving jars/accounts for.

4. I had her telephone her insurance and bill companies and get lower rates.

5. I talked to her about what she was willing to compromise and she agreed to only visit family every other week (which basically reduced her petrol costs by 1/2 and to have her haircut every 10 weeks instead of every 6!

6. We made a list of the three goals for her money, first was an emergency fund, second a holiday fund, third to be able to give more!

So we set to work

1. I had her open an account for an emergency fund

2. I had her open an account for holiday/vacation money

After reducing her bills she had $515 a month left. We started the following jars:

• Food $100 a month
• Emergency Fund Account $200
• Holiday Account $75
• Heath and Beauty $20 a month (remember we have free health care, so it was more for beauty and dentist which again is heavily subsidized in this country)
• Spontaneous Giving $20 a month
• Sponsor Child $18 a month
• House and Car Account $40 a month
• $20 per month left for clothing
• $25 a month left for entertainment

She has just completed the first two months, week one she found it difficult, week two was exciting, by week three she was spending under in the food, petrol and entertainment categories so that she could top up savings or increase her giving!

I think the most exciting part is that this is only the beginning! We’ve said we’ll reassess the situation at the three month mark, she will also be looking at ways to generate more income and is so much happier now that she can see the blessings she does enjoy each month like dinner out with friends, a movie, a shopping trip twice a year to purchase new shoes or a new top. It really has already changed her whole financial outlook and while it is not easy surviving on 1 income, I’m convinced she will go from strength to strength!