Everyone has a money bucket. The status of your money bucket determines if you have financial freedom or financial bondage.

Financial freedom brings freedom, savings, and enjoyment in life. Financial bondage brings extreme debt, worry, pressure, stress, and other problems.

Let me explain about the money bucket

Imagine a five-gallon bucket with a garden hose pouring water in the top. In the bottom of the bucket are many small holes. Water is constantly leaking out of the bucket at a rapid rate.

You money bucket is the same. You have your income coming in the top through your job, investments, etc. Since it takes money to live, your money is leaking out the bottom to pay bills, house payments, food, etc.

--Financial Bondage = your money is leaking out faster than it is going in. In other words you are spending more than you make.

--Financial Standstill = income and spending are equal. You are living paycheck to paycheck and are not getting ahead or behind.

--Financial Freedom = the money is coming in faster than it is leaving so you are building up your savings. Freedom!

If you have financial freedom, great! However, what if your money is leaking out faster than it is coming in?

If this is the case, you need to

Improve your Money Bucket

There are two ways to improve your Money bucket:

Option #1: Open the hose more (increase your income).

Many opt to for this solution. Usually this is through working more hours or having a second job. This at first seems like the best option and it can improve a person's situation. However, it is not as great as it sounds.

Take this example:

Joe is making $2500 a month. Currently he is spending $2800. $300 a month is leaving his bucket. This is financial bondage.

Any extra hours he works will earn him $15 per hour. He can work 20 hours more per month and the $300 will be taken care of-- Right?

Wrong. In his tax bracket, every extra dolor will be taxed at 25% federal, 7.5% social security, possibly 4.5% state, plus sales tax when he spends the money. So at least 37% percent of his additional income will go to taxes.

He has to earn not $300 to balance the budget, but $476 dollars. Instead of working 20 extra hours he will have to work an extra 32 hours! This does not include extra gas and other expenses.

Turning on the hose of more income is good and sometimes the only option. However, it may not always be the easiest or best.

The second option can actually be the easiest and best, though it will take some effort.

Option #2: Plug the holes (Spend less).

Impossible, you may say. Three steps will help you.

Step 1: Identify the leaks.

Keep receipts and write down the exact amount you. It only takes a few minutes a day or week. At the end of the month look through and see how you have spent your money. It can be shocking learning where all the money is leaking out.

Step 2: Identify the leaks that can be reduced plugged.

Some can be plugged others may be reduced. Americans spend an average of $3 a day at vending machines. If this describes you, that will save you over $90 a month if you cut back. Evaluate and see what leaks can be taken care of.

Step 3: Plug the leaks.

Now that you have identified what can be cut out, do it. Reduce the spending. Take the necessary steps. Will it be painful? Probably! You have two choices in life:

Choice #1: Short term pain (spend less), long-term gain (Financial freedom).
Choice #2: Short term gain (spend more), long-term pain (Financial bondage).

How is your money bucket? If it is leading you towards financial bondage, take action now. Either plug the leaks or increase the income. Financial freedom is found in a sound money bucket.