How to Budget – An Introduction to Grandma’s Jars

In How to Budget Series by Phil McGilvrayLeave a Comment

After finishing school back in the late 80’s I spent a year working in the UK as an adventure training instructor. Throughout this year I was fortunate to spend a couple of months living with my elderly Grandmother in a seaside town called Weston Super Mare.

I have some wonderful memories of living with my Grandma. Her beautiful garden, the forest full of squirrels and the endless plates of cakes and crumpets just to name a few. But the thing that has stuck with me the most was the lessons I learnt from Grandma about money management.Every two weeks, my Grandma would walk around to the local post office at Worlebury Hill to collect her fortnightly pension. When she returned home, Grandma would immediately take down 5 glass jars from the kitchen cupboard above the stove. Each glass jar was labelled with a specific expense; Gas, Electricity, Milkman, Rates, and Water.

Grandma knew exactly how much she needed to put in each jar each pay day to ensure she accumulated enough money to pay each bill as it turned up. Once these Jars were topped up Grandma would put an amount in her purse for the fortnights ‘housekeeping’ (Everyday living expenses) and the rest she took to the bank the next day.

It was a really simple system that had allowed Grandma to pay off her mortgage very quickly and to accumulate a fairly sizeable nest egg.  As someone just finishing their education with my whole life ahead of me, these lessons that I got from her would prove invaluable as I built my life and my career. I can proudly say that it was thanks to Grandma and her wisdom that I was able to get on my feet financially and enjoy life with less stress and worry.

And now I want to share her lessons with you.

While our lives are significantly more complicated today than they were in the 80’s, the timeless principles of Grandma’s budgeting system (Grandma’s Jars) are just as powerful and relevant in managing our finances today.

I thought I would use this Blog to break down the key principles of Grandma’s Jars and how we can apply them to set up and manage a successful budget in today’s world of credit cards, ATMs and online banking.

These 5 key principles are and always will be, essential to any successful budget.


Principle 1: Have a comprehensive understanding of all your expenses

To set up a successful budget, you first need to truly understand what all your expenses are. Grandma knew exactly what her expenses were,  when they were due, and how much they would be.

There is no doubt that there is far more ‘stuff’ that we can spend our money on today than in Grandma’s time and it is much harder to get a good grasp on our spending. But all it take is a bit of time and commitment.

While it is easy to identify the major bills such as insurance, utilities, loan repayments, and car costs, the real test is identifying the more irregular, discretionary expenses such as clothes, haircuts, gifts, groceries, entertainment, bought lunches and so on. This is typically where the money slips through our fingers.

With an overview of where and how your money is spent, we can create an effective budget plan to make sure you have what you need, your goals can be met, and you have enough set aside for enjoyment.

In a couple of weeks I will be writing a blog post that outlines the process I give all my coaching clients to help them get a thorough feel for their expenses.


Principle 2: Calculate how much you need to put aside for each expense on a monthly basis

The second thing that my Grandma did was at the start of each year, she calculated exactly how much she needed to put into each Jar every pay day to ensure that when the expenses turned up, she would have enough to pay them.

Since we have already produced a comprehensive list of your expenses and a dollar value for each expense as set forth in Principle 1,  the next step is to calculate how much you should set aside each month to ensure that when that expense turns up, you have enough to cover it.

I recommend that people budget their money on a monthly cycle for the following reasons:

  • Most Bills are multiples of months.
  • Budgeting to a monthly cycle helps break the pay cheque to pay cheque cycle.
  • It is far easier to reconcile the budget with bank accounts monthly rather than fortnightly or weekly.

My Grandmother knew the importance of keeping up with bills. By never falling behind on them, she made sure that she did not accumulate any debts or obligations that might put her budget and nest egg in jeopardy.


Principle 3: Always make sure your income is greater than your expenses 

While it is not spelt out in Grandma’s example above,  you will notice that after my Grandma had topped up her Jars and put aside money for housekeeping, there was always money leftover to be taken to the bank as long term savings.

The amount set aside in the Jars for upcoming bills was non-negotiable. However, the amount Grandma set aside for housekeeping, such as the day to day living costs, was somewhat flexible. Grandma ensured that these more discretionary lifestyle costs were kept to a level that ensured there was always some money left over to put towards savings. She was still able to have fun and do what she needed to do, while her savings accumulated over time.

At heart of every budget there needs to be a line in the sand that ensures we are not spending more than we earn. While this isn’t rocket science, many people find this principle very difficult to come to terms with. They will persistently try to justify what they are spending rather than accept the fact that there is only so much money and we need to live within our means.

When learning how to budget, this principle is one of the hardest for people to follow.


Principle 4: Have a system for tracking your spending

By virtue of the fact she had physical money in either her Jars or her purse, my Grandma always knew exactly how much she had left to spend. If the money in her purse was running low and it was still two days till the next pay day, she knew she needed to be careful.

While we may no longer use glass Jars, there are plenty of tools available that enable us to track our spending.

A successful budgeting plan requires us to be disciplined and aware of our current funds.  An effectively budget system should always tell us three things:

  • What we have budgeted for each expense each month.
  • What we have spent against that expense so far this month and most importantly,
  • How much we have left to spend against each expense.

Early on in married life my wife and I used a simple paper budget, then for many years we used a spreadsheet that I also used with my clients for the best part of 10 years. Now we have our Grandma’s Jar online budgeting system and phone apps that use virtual Jars.

The common theme through all of these was that the budget was only as useful as the last entry.

A budget will only ever be as good as the last entry, you need to update it every couple of days so that you can at any point in time look at the balance of your ‘jars’ and know exactly how much you can spend before you start spending. Your budget must be kept up to date. Otherwise it will  be a report of your spending, rather than a guide to your spending

By closely monitoring what we have, we know when we need to be careful and when we can be more carefree. A good budget system should be able to tell us what we need to know at a glance, just as Grandma could see what she needed to know by looking at her jars.


Principle 5: Make sure you physically have the money to cover your budgeted expenditure.

Once again, before the internet, ATMs, and electronic banking, this was always easy. Either the money was in Grandma’s Jars or in the purse or it wasn’t. It was always quite clear if you had the money to cover your expenses.

In today’s world of virtual money, we need to take time on a regular basis to reconcile what our budget says we have we what our bank account really has. Here at Grandma’s Jars, we can help you use bank accounts and other virtual money technologies to best simulate the feeling of having physical cash. There is no point having an entertainment Jar that tells you that you have $200 to spend on Friday night if your bank account is running on empty.

I wanted to give you a brief overview of our philosophy, history, and principles here at Grandma’s Jars. Over the coming weeks, I will dedicate individual blogs to each of the 5 key principles above. Here at Grandma’s Jars, we take these principles to heart and it is our passion to help all of our clients to successfully follow them.

Stick around as we go deeper into the principles of Grandma’s Jars and the foundation of how to budget.

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