I was recently pondering why you hear so many stories about people that were dirt poor right before they became rich monetarily. I’m sure you hear the stories because they make good stories. But some of the greatest people in business were flat broke before they became wealthy.

Dan Vega was driving a car where he had to climb in through the passenger door without A/C or heat. He had no real assets and came from meager beginnings. One day he had enough and now drives a BMW, closes 7 figure deals and consults on business plans that are structured to produce tens of billions of dollars. Bill Bartmann was living with family, a million dollars in debt and filed bankruptcy. He started with a computer on the kitchen table and, in a short time, became a billionaire. Robert Kiyosaki had grown up poor, went through the military and started a business that amassed him millions which reversed and brought him millions in debt. He was living in a car and used his last money to go out to eat (burgers) with Kim (his wife). In short order, he became a multi-millionaire. Donald Trump built a slow and steady real estate empire that reversed on him and left him millions of dollars in debt.  He said that “the vagrant on the street had more money than him.” In less than a year, he turned it all around and is now a billionaire. Bill Gates started off without the ability to pay his employees. He was broke and sold “vision” to him employees. When vision didn’t work he paid them in stock. Now he is the richest man on earth.

Over and over and over you read about people that were broke and/or deep in debt that flipped it all around and became super wealthy. I was discussing this with a business partner of mine (who also happens to be my best friend and wife) as I pondered “must you be poor or deep in debt to become rich?” As the discussion grew I came to a few realizations that I hold to be true.

I believed that each and every one of these individuals had reached a point where they said, “enough is enough!” They had hit rock bottom and just resolved to not allow that to happen to them anymore. They made a conscience decision that they would not be broke anymore and that they would do whatever it took to change their situation. They all found that “gear” that would only allow them to drive forward and not allow for a reverse. They found their drive which pushed them forward when the world was trying to push them backwards. This made them efficient and focused earners which added fuel to their skills to make money.

It is also my personal opinion that you must appreciate what you have and have a healthy respect for money which leads to better money management skills. If you do not appreciate what you have, you take it for granted. If you cannot appreciate and respect the smaller things in life it is impossible to appreciate and respect the bigger things in life. Disrespect shows a lack of care. No respect for money or what you have means that you don’t care about it. If you do not care about it, then it is unimportant and consequently you do not hold onto it. People who have lost it all and bounce back as wealthy business people definitely learned to respect what they had and relegated to appreciate all that they were able to acquire. This made them more efficient and focused managers which added fuel to their skills to keep money.

And that is what it boils down to. Just as it takes one set of skills to make money and another set of skills to keep money. It also takes a trained and intentional frame of mind to make money and a learned mindset to keep it. That is what all of the people above had in common. They all achieved that mental station where they had their backs against the wall and their choice was to fight or flight. When they chose to fight, they also chose to never flight again. They also relegated to never let themselves get to the place where their backs were against that proverbial wall again. That place was o uncomfortable that they would do whatever it took to never return. The loss and then lack of everything in their lives made them driven and appreciative people.

So, do you have to be poor before you become rich? My final answer on this is “no.” However, all of those who became flat broke before they became wealthy, have the ability to do it all over again. If you took every penny and every possession away from each and every individual listed. They would be back on top of the world in less than a year. In order to become rich and stay rich, you need to hone your skills on making money and keeping money. They are equally important skills. You also need to find that gear that only pushes you forward no matter what and appreciate each and everything you have in your life. Hopefully, you can do all of this without becoming poor. But, in order to accomplish this, you must be mindful and find your “why” before life takes everything and your “why” is forced upon you as survival.

Everyone has struggled with money management at one point or another. If you do not have a firm grasp of money management as an entrepreneur, it can affect both your professional as well as your personal life. Developing the ability to manage money well is a learned skill. However, it is much easier to learn if you make it automatic. Making it automatic turns the learning process into a habit forming process. Although there are many different methods, I am going to discuss one that I have personally found success with. I will use personal money management as the example and you can adapt it to your professional life.

The system I prefer is called the Jar system. It is not an acronym. It was named that because the creator of the system actually used Jars. I learned this process from T. Harv Eker, author of Secrets of the Millionaire Mind. I modified his initial system and made it electronic for that is easier for me to utilize than a physical Jar system. In his original plan, you start out with 6 physical, glass jars and keep them in your house. I created 6 checking accounts with the same bank and manage them through online banking. I call them my Jar Accounts. Pick which ever way works best for you. If you routinely carry cash, the physical Jar System may work better. If you only carry a debit card around, the virtual Jar System will most likely be a better fit. It is the habit and the process that is important not the fact of the Jars being physical or virtual. For this post I will utilize the virtual system as my example.

The Jar System is comprised of 6 jars. Those 6 jars are necessities, financial freedom account (ffa), long term savings and spending (ltss), play, education, and give.

The necessities account is where you pay for all of your necessities which typically include mortgage or rent, food, utilities, fuel, etc. The necessities account covers your day to day needs, need being the operative word.

The ffa account is the account from which you will invest. You will utilize the money in this account to invest in businesses, to include your own, stocks, bonds, real estate or whichever mode of investing you prefer.

The ltss account is for big ticket items. Items in this category typically are things like a big screen tv, vacation, new car, etc. The item will vary dependent upon your income. But the habit is the same. These are items you normally have to save for.

The play account must be spent in full, or close to it each month. This account is designed to help you enjoy the money you work for and enjoy it guilt free. You utilize this money to go out and have fun whether that be to the movies or a shopping spree. It is your fun reward for working hard. You must spend it each month or you will begin to resent money.

The education account is to spend on your personal education. Although education is considered an investment in oneself, it does not qualify for the ffa account as it is not typically measurable in return on investment. Utilize this account to attend seminars, purchase paper and audio books, attend classes or personal tutoring.

The give account is for donations. It is important for every entrepreneur to give back. Regardless of how big or small it is the habit of giving we are trying to form. As bad as things may get in your household, there is always someone worse off that your donation can help. Pick your charity or cause and give to them regularly.

You divide your money amongst these account each and every time you generate revenue whether it be $1 or $10,000. Once again, we are trying to form a habit. Once I received a $7 check. And I proceeded to divide it up amongst my Jar Accounts. Harv Eker recommends the division to be as follows: Necessities 55%, FFF 10%, LTSS 10%, Play 10%, Education 10%, and Give 5%. When I started with the system my necessities exceeded 55% of my income so I modified the percentages. Again, another reminder that it is the process or habit we are working on developing not the intricacies of the percentages. I started out with 75% going to my necessities account and 5% into the remaining 5 accounts. As I paid down various balances I am able to adjust my percentages. Even if you have to put 95% in your necessities and 1% into each of the remaining accounts, do it. Just get started.

I have 6 debit cards and I labeled them with the appropriate accounts to make it easier for me to make purchases. If you purchase multiple things with a credit card or you are paying a credit card off with your accounts, divide the bill up so that you pay for the proper things from the appropriate accounts. Trust me, the credit card company only cares that you pay and will not gripe about receiving payments from multiple accounts. Each time I derive revenue I deposit it into my necessities account and then immediately login to my online banking and transfer the appropriate percentages to my other 5 accounts. As a side note, if you sell something that you acquired via your ffa account, it is considered revenue and you must divided it amongst your accounts. A portion will go back to your ffa account for further reinvestment.

It is the habit that we are concentrating on. Once you get in the habit, the rest is actually quite easy. When your spouse wants to go out to dinner, you look in your play account and if there is money in it then you can go. If there is none, then the plan is to eat at home. If you want to buy a surround sound system for the house and there is enough in the ltss account, then rock on. Otherwise, use your mp3 player until the money is in there. Once you develop the habit and become comfortable with the process, your life will become easier and managing your money becomes an automatic process.

Lastly, before you let the thought cross your mind and consume your rational brain, the answer is “yes you can do this!” The side of you that injects doubt may give you many reasons why you can’t do this. The fact of the matter is you can. The only thing holding you back is you and you need to get out of your own way and let yourself succeed. I did it and you can too. Regardless of your income or whether you utilize this particular system or not, one thing holds true, you must learn to manage your money. And it is much easier to manage when you form a habit and make things automatic.