#10 - 5 Uses of Money
The following concept was the main point that stuck with me after going through the CKA® training. It is practical and straightforward. Ron Blue, the presenter, made the case that there are five uses of money:
Most, if not all, of our money transactions can fit into these five categories.
The case was made that budgets should be constructed in this order. Giving first, taxes next, and so on. If you switch debt and lifestyle, you could get into trouble. For example, you can see how if you set your gas and eating out budget (lifestyle expenses) before taking into account your mortgage payment that could be problematic.
Inevitably if you start with your income and then begin subtracting out these categories, you will end up with either a deficit or an excess at the end. If there is a deficit, you need to walk back through and figure out how to zero it out. Can you increase income in some way? Can you eliminate debt by selling an asset?
What happens if there is excess? This is a question I have been pondering and occasionally talking to my wife about (everyone say poor Allie). My natural default has been to save (invest) the excess. Others natural default may be to apply it to the other categories (giving, debt, lifestyle). Is there a universal right answer? More on this later.
Interesting Article(s) or Video(s) A Wealth of Common Sense - When Performance Leads Assets
Ben Carlson looks at two examples in history comparing fund performance and the correspondingly fund inflows. “There have always been performance chasers and there will always be performance chasers.”
On October 12th, Kipchoge made history by running a sub 2 hour marathon. Mike Boyd goes into detail about how great of a feat this was and how Kipchoge made it happen. This was too fascinating not to share
Thank you for reading! What should happen if there is excess? I would love to hear your thoughts!