How going to pot can make you rich

Having a good relationship with money also means learning how to manage your money effectively. I recently came across a very good budgeting system which is based on the idea of using 6 categories or pots for allocating your expenditure. The idea is to split whatever money you have coming in into different ?Pots? for different purposes. As money flows into your life, a certain percentage goes into each ?Pot? before you spend anything:

The 6 pots or categories are:

Necessities – 55% These are your day to day expenses and bills basically what it cost to live month to month , travel and petrol, food, toiletries and rent or mortgage payments, insurance policies , utilities the whole hog – As these are your biggest cost it’s the biggest pot and 55% of your income goes into this pot

Long term saving – 10% There is no point always wanting that house, car or holiday but never saving for it. So use this pot for saving for your dreams!

Investment – 10% This is your financial freedom pot, where your money works for you to create residual income. Use it to invest in shares, property, or put it in a high interest accounts. Seek advice about the best way to use this from and appropriately qualified person or better still use the resources in the next pot to improve your knowledge of investments so that you can effectively manage your long term investments yourself.

Education – 10% If you’re not growing/ developing yourself then neither will your bank accounts; so this money is for yourself improvement,i.e. training, career or personal development books, courses or mentoring.

Play – 10% All work and no play makes Jillian a dully sad stressed woman so we have a play pot – a pot for your treats – I can remember when I was a young single mum – yes there was a time when I was a single mum too; it was as if all my money when from my bank to my bills with nothing left for me. It was so depressing – you might not think that you can spare 10% for fun. So think about it like this – no fun and you will eventually implode so this is like life insurance making sure you keep happy and able to keep earning the rest of the money. This is your treat pot so make sure they are your treats too not the families alone if you using this system for family budgeting. It is very easy for women especially to get into that sacrifice, lack mentality and exclude ourselves.

And there is a golden rule for this pot! YOU HAVE TO SPEND THE ENTIRE AMOUNT EVERY MONTH!!!

Contribution – 5% Use this pot to make a contribution to a charity or organisation you care about or to support friends or family members. In this scheme it is set at 5% half what is suggested in the idea of tithing 10% – if you want to up this you could decide to reduce the necessities pot to 50%.

Although I’d not heard of this is system until very recently, I’ve always divided my money into categories. That’s because I follow 3 basic rule of money management

  1. Live within your means
  2. Save regularly
  3. Invest regularly and wisely.

The pot system is also based on these principles. If you are attracted to the idea or still a little sceptical or if you don’t already have a budgeting system you are happy with; you could try the pot system out by using it on a cash basis. In order to do this you need to decide on your budget for the week take out the money in cash and divide it into the pots and see how you get on. After you got used to dividing your expenditure in this way you could then set up an automated system for your monthly salary/ income.

What is your strategy for managing your finances? Please share your experiences so others can learn from them.

About Ola Agbaimoni

Known as "The Business Detective" due to her "Sherlock Holmes" like problem solving abilities, Ola works in partnership with her sister Carole Pyke, The Business Bard. Together they run Eélan Media, a new type of Business growth agency offering a forensic approach to business and a creative approach to marketing. As well as being an expert in business planning, training and development, Ola is also a certified coach, NLP practitioner; an accomplished author, speaker and presenter.

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