Ways to financial freedom - The six accounts model
Hint: This post is the English translation of an own article I published in German here.
"Only those who know their goal will find the way". Laozi, Chinese philosopher, 6th century BC.
In his book "Secrets of the Millionaire Mind", author T. Harv Eker shows that financial freedom starts in the mind.
You've probably heard or read about people who got rich quickly and unexpectedly and then blew through their fortune within a few years. They clearly lacked the right money mindset. Other people are content with what they have and think they can make ends meet. When their income increases due to a raise or a new job, they immediately find ways to buy something new or spend the money in other ways. Most people fail to put something aside on a regular basis and build wealth over the long term. If you recognize yourself here, I can highly recommend reading this book. First of all, I would like to introduce you to the "six accounts model", which will help you to better organize your handling of money.
The six accounts model according to T. Harv Eker
You should divide your net income into six different accounts as soon as you receive it. This does not mean managing your money in an Excel spreadsheet or similar tool, but different bank or investment accounts. The physical division of money has a completely different effect than just a theoretical plan.
Account for everyday, necessary expenses 50 - 55 %.
this account can be your normal checking account, from which all expenses such as food, rent and other running costs are paid.
Account for financial freedom, 10 %
This is the most important account of this model. You must never, never, never touch the deposits in this account to consume them. Instead, you will invest them in various profitable investments. The Financial Freedom Account is your your golden goose, which you can feed regularly, but never slaughter. Only the the eggs that your golden goose lays, the profits from these investments you may take out and consume. The more this account grows, the more you are allowed to harvest until you finally achieve financial freedom through passive income.
Fun account, 10 %
Joy is part of life. That's why you need a fun account. The money on this account you should spend every month and without a guilty conscience on things that you might not otherwise afford. If there is any money left at the end of the month, you are allowed to accumulate it for a maximum of 3 months. Then you have to spend it because this account is called fun account, not savings account.
Savings account for long-term and unexpected expenses, 10 %
Washing machine or refrigerator broken? Or you are saving for a new car or laptop? That's what this account is for.
Education account, 10 %
10% You should invest in yourself, especially in your education. Every good book, every useful seminar and every educational trip will bring you further. Knowledge is power. The more you acquire knowledge in financial matters, the better you can manage and increase your wealth.
Donation account, 5 - 10 %
another important account in this list. Yes, it's not just about making money it's also about giving. If you regularly donate 5 - 10 % of your net income, you will learn what it feels like to let go of money. In addition, you will experience the joy that comes from helping people (or even animals) in need "Giving is more joyful than receiving" Jesus knew more than 2000 years ago.
"What if I have nothing myself?"
"Just enough to live on?" Here, too, the author of the book knows advice. In this case, you may start very small. Take $1 from your pot for everyday expenses and divide it among the other five accounts. 20 cents per account. Next month, plan to divide $2 among these accounts. You'll manage that with ease, too. Then double each month and in the third month you will distribute $4, in the fourth month $8. After a year you will have learned so much about money and financial freedom that you will actually be able to divide €2,048 between your accounts!
"I don't have six different accounts"
"I also don't plan to open that many accounts at different banks." Again, this is not a problem. The important thing is to start planning your money in the first place and work on your financial freedom. Take empty jam jars or envelopes and label them. For small amounts, that's enough. In one of the following posts I will give you tips on how to proceed.
Finally a question
How important is the topic of financial freedom to you? Please write your opinion, questions and suggestions in the comments.
Best regards from your @germansailor
Photo: own work. Of course I own this book. My own Post, Translated with www.DeepL.com/Translator (free version) and slightly reworked by me.
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