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. They’re on the right hand side of this page, under Gail’s Other Pages. 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.
May 1st, 2008 at 6:31 pm
I can attest to the jars working folks, hubby & I have been on jars now nearly 8 months and we have money in the bank (totally new experience for us) PLUS we are paying down our debt, as well as having our own allowance. Wished we had known of “Gail the budget guru” sooner.
Thankyou Gail so much for showing us the way out.
P.S.
I have also spread the word I now have 3 friends about to start on the jar system, Regards Kay
May 2nd, 2008 at 9:22 am
Gail, I’m wondering if your original poster is asking a question I had, which is that assuming that the familes on TDDUP are living paycheque to paycheque, how - literally - do they get the funds for the month in advance? In other words, if they can’t normally pay a bill due May 21st until they get paid May 20th, where does the money come from so that it’s all literally in the jars on May 1st? I kind of assumed they borrowed it to get started, but that seems counter-productive.
May 2nd, 2008 at 8:21 pm
Geoff, since “bills” are usually part of either “debt repayment” or “fixed expenses”, the money is in the bank from their regular pays. If they don’t have enough money to cover fixed expenses and the jars, I usually send ‘em out to find more money.
May 5th, 2008 at 2:28 pm
I totally get this now. I’m watching TDDUP online and couldn’t wrap my mind around how the jars worked until one of the shows yesterday. Once the fixed expenses are taken care of, then the variables go into their jars each week. Go to the bank and take out what you need weekly. D’oh! Separate it from there.
I TOTALLY get it. I’m going to buy jars and labels at lunch today and then make up my jars at home tonight…And start meal planning - that’s a huge one for me.
Thank you, thank you, thank you, thank you Gail!!!
May 6th, 2008 at 8:56 pm
As an addendum, I bought 6 little plastic jars at the Dollar Store. I have 5 for my “essential” variables, and have set up the sixth one for my charity donations. I figure if I don’t save for that, I won’t and if I can budget it in weekly, so much the better. I even got myself a new notebook to write down my expenditures in…
I get paid tomorrow, so I start tomorrow and am looking forward to seeing how I do.
May 6th, 2008 at 9:31 pm
I am planning on starting the jar system on Friday when my husband and I get paid. I have used Gail’s interactive budget worksheet to get us started. I now know what goes in the jars!
Taking a trip to the dollar store is a great idea to get jars.
May 7th, 2008 at 8:47 am
Just a note about the jars - a better place to get jars is a recylce store, bluebox store, you know the stores people donate their junk to. You can get jars for pennies!
May 7th, 2008 at 12:05 pm
That’s a good idea about the jars, Helen! I hadn’t thought of that. My jars, although not fancy, cost me $3 for the six. Still pretty good!
May 7th, 2008 at 1:59 pm
I have another question about the jars: the idea is to have money left over at the end of the week. Assuming that I do (and this is probably a really dumb question) what do I do with it? I was thinking I would turn around and put it back into the bank, but then I thought that perhaps I could just carry it over into its respective jar, meaning that I would take less out of the bank the following week…
Help!
May 7th, 2008 at 2:18 pm
Annie, I am thinking that if some of your jar money is for things like car repairs/maintenance, you would keep it and save it until you have a repair. Alternatively, you could put your leftover cash toward debt or savings.
May 7th, 2008 at 5:15 pm
Annie: I totally get this now. I’m watching TDDUP online and couldn’t wrap my mind around how the jars worked until one of the shows yesterday.
I had a similar experience a coupla weeks ago. I’ve watched every episode, sometimes more than once … but something about an explanation a couple of episodes ago made it all click. I actually rewound the segment on my PVR … noticed that the percentages are applied to the whole take-home … and the “what’s left”/variable part was divided among the jars.
I turned to my spouse … jaw dropped … and said … “Has she explained it like this every time and I missed it, or is this new?” She had the same realization. Something additional must’ve been in there, ‘cuz the journey to the numbers suddenly made a whole lot more sense. It actually made me want to try a Gail budget just to see how it’d break down vs. the seemingly-working budget we’re already running.
May 7th, 2008 at 6:46 pm
Just a question, if you have negative total you can’t do the budgetting I guess? I want to start it but after I finished the calculations, it came down to a negative and trust me I did all the cut backs already!! No more allowance, not even a clothing allowance. Is there any other way? Also down at the bottom, what are TAXES for????
Hope someone can answer my inquiry/ Thank you!
May 7th, 2008 at 7:01 pm
If you have a negative, then you’re trying to spend more money than you make. If you can’t find a way to cut back any more, then you’re going to have to find a way to bring in more money. Or you’ll have to reconcile yourself to being in debt forEVER!
As for the “Taxes”, that’s for taxes owed because you’re self-employed or on contract and have to remit your own taxes (so you’re accumulating money, or remitting monthly or quarterly) or because you got a tax bill.
May 7th, 2008 at 7:46 pm
Bigasssuperstar: Yeah, that’s sort of how I felt, like “oooohhhhhhh!” It now seems so simple, but maybe I was trying too hard to understand? And now Gail’s budget makes sense, too. I had filled out the info prior to my lightbulb moment and was still going “what the hey?”. There was one extra bit of information that was offered that hadn’t been before.
NOW it makes sense. I took my fixed amount out of the bank today and once I’m home, I’ll be divvying it up accordingly. Unfortunately for me, Tim Horton’s steeped tea is back after its recall…but at least I got a receipt for it, so I can subtract it from my food budget and start the ball rolling…
May 7th, 2008 at 8:58 pm
Admin: we actually spent more on paying off our debts. nothing is spent on luxuries. not sure what else to cut down. we are looking for part time/weekend jobs to supplement. does anyone has any idea where to look for home based admin works?? also on the budget table where do you input school expenses?
May 7th, 2008 at 10:43 pm
My finance and myself have been on the jars for the last few months and absolutely love it. Our “jars” are actually coffee cups, just so we didn’t have to spend money on them.
In the next coming and past months, we have had a raise and will be moving to a new place (which has lower rent). These types of life events constitute a change in budgeting, right? I am just worried about changing the budget too often, or should it be changed whenever events like these happen.
May 8th, 2008 at 1:46 pm
Be frugal and recycle empty jam/tomato sauce/salsa/nut butter/dressing jars - no need to spend money - anything with a lid works so the hard-earned contents don’t spill - label and voila! Happy tracking…
May 8th, 2008 at 4:03 pm
Lynn: You can’t focus on debt so much that it pushes you out of balance. Better to make a budget that balances and then get extra work to pay down the debt faster. Lots of people I work with think they’re paying off their debt, but they’re racking it up on the other side by going into overdraft or taking cash advances to make it to the end of the month. Don’t fall into that trap. As for types of work: I think we discussed this a while ago, so check the past blogs. And the school expenses? If you aren’t using one of the other LIFE categories, convert it to “school expenses”. Good luck. Gail
May 8th, 2008 at 4:27 pm
Lynn, Funny that you should ask where to look for ideas on home based jobs. I was walking by the magazine section in my grocery store last night and my eye caught a magazine specifically focussing on home based jobs. I will look tonight, give you the name and the cost tomorrow (better to go to a bookstore where you can sit and review it). My son just delivered some posters this week looking for extra work (mowing lawns, carting away garbage, etc., etc.,).
May 8th, 2008 at 6:41 pm
Hello Wanda, Thank you for your attention, This is my first time to join a discussion room and I’m loving it. I am getting a lot of ideas!
Admin: I have 2 consolidation loans that we are sticking with, no missed payments. After using your budget, I found out that our debt repayment is 45% of our income. I will definitely check the past blogs for job ideas.
May 14th, 2008 at 11:09 am
I watch the show everyday but only recently found GV-O.com. Not surprising as I am very technologically challenged. The information here is incredible and the site is beautifully designed. I have no trouble navigating it and all the links WORK! Wonderful. And the comments from real people and the fact that Gail answers them and takes questions makes me feel very connected.
We (the Hubster and I) use nearly all the information and tips we have learned on the show and are doing well and even have a nest egg for the first time EVER. Even though we have watched for years we are still learning something new every week. I am so comfortable with trying new things now that I have even started to be venturesome on my own –fly little bird, fly.
All of our financial lives we lived from pay check to pay check, spent up to and way beyond our means and for some strange reason (da!) were stressed and unhappy and felt that no matter how hard we worked we were always running behind and could never get ahead.
That is until I discovered “Til Debt” and he had his mid-life crisis - left a great job and went back to school. Believe me it would have been a lot cheaper if he had just gotten the red sports car and the blonde but also believe me that although this was really stupidly unplanned it turned out to be the best budgeting education that no money could buy. Living on my self employed earnings and his student loans taught us the value of tracking every penny and planning ahead and the show showed us how. It was hard work, we were dirt poor, but have never been happier or more relaxed about money.
Getting a budget sorted and the jars (we actually used envelopes because we have a cat whose greatest joy is to smash things by pushing them off the counter) started takes work and lots of tweaking but is sooooooooooooooo worth it that once you get it done you will never look back.
By actually being present in our financial lives we did better (and are doing better) than we could ever have imagined. In fact – like the old Doublemint gum commercial said “Double the gum, double the fun” we were able to “double the jars, double the funds.”
The “spare jar” (made up from what was left over in the other jars) filled up after 6 months and we were going to put it into savings when we had our first idea. Create another set of jars so that we were always running a month ahead and would never have to play catch up again. You see even with careful budgeting we had a few close calls because of time issues – pay checks not coming in until the very last day before bills were due and a power outage that took the phones, computers and ATMs down – so the fear of bouncing checks was still always present.
This save ahead system worked so well that over the next year we deposited every dollar we could get (scrimped, sold stuff and rerouted tax refunds and overtime) into our checking account until we had a whole extra months worth of expenses just sitting there. Now at the beginning of each month all the money we need for that month is already sitting in the bank (and jars) so what we earn during the month is for next month. Makes budgeting even easier.
Both my best friend and our banker made the comment that having so much “extra” money in a checking account was silly because we were losing out on the interest it could be earning. My reply to my friend was that the peace of mind this afforded us was worth every penny in lost interest and my husband’s reply to our banker was that no amount of interest paid to us by his bank would equal the cost of a single NSF check or the monthly interest rate charged on our credit cards.
We think of it as budget insurance that buys us extra security and at the same time is just another form of savings.
May 14th, 2008 at 1:23 pm
Maureen, such a great entry! The way I see it,having the extra month ahead is part of your emergency fund and this money needs to be kept in a fairly accessible account. While it is great making interest, as you know, peace of mind is far more valuable!
May 14th, 2008 at 2:56 pm
Hi Wanda!
Who would have thought it? I used to get all hot and bothered over a virgin credit card, a 50% off shoe sale, photos of Antonio Bandaras and the sweet nothings the Hubster would whispered in my ear as we were charging up yet another extravagant night out on the town. How times change. Now all the Hubster has to say is “Savings Account” or “Emergency Fund” and call me his “Cheap Little Tightwad” and I just go all weak at the knees. Especially when he says it with a Spanish accent.
Money is sexy - especially when you’ve got some at long, long last. Maybe it’s the feeling of being free and in control. Maybe it’s getting a little power mad! and - as Gail wrote - being able to tell anyone to go to Hell.
May 14th, 2008 at 4:00 pm
Maureen, loved your posts - haha!
May 14th, 2008 at 4:56 pm
Maureen, I am sooooo proud of you. I feel quite honoured to have your success story on the site. Thank you for taking the time to tell your story. I am impressed by both your determination and your sense of peace. They come through very clearly. Would you like to do a guest post on my site? You could tell your story, what you changed, how it worked for you, and how your feel now. If you’d like to do this, let me know through the “questions” section (remember to include your email address), and then we’ll chat by email. cheers, Gail
May 14th, 2008 at 7:38 pm
Hi Mary
I am just thrilled that I could make you laugh too because although I know that debt is a serious matter I cannot help laughing out loud every time I think that all it took to give me back my giddy, giggly sense of humour and sense of financial well being were Gail’s rules and a bunch of canning jars – that weren’t even filled with Home Brew.