https://thefinanalyst.com/what-is-risk-budgeting/
Budgeting.
Budgeting is telling somebody they have to make choices. And you know people, they don't like making choices, they would rather have it all, me included, why can't I have those Mint Milano cookies and the Mansion, because I deserve it damn it!
Joking aside, there is a common misconception that one needs to spend more in order to have a higher standard of living. That is false! All we have to do is find what gives us the most value, and then cut out the things that give little or no value.
Three concepts that I follow help me keep my standard of living and save me money; Law of Diminishing Returns; being practical with how much time I have and remembering “the shine always wears off.”
Law of Diminishing Returns.
“The law of diminishing marginal returns states that adding an additional factor of production results in smaller increases in output.”
So for our budgeting purposes, this means, for every “fiat” we spend, we get less utility out of it.
For example, I go to my favorite restaurant on Monday, order a steak for $20, and it's really great! Then on Tuesday, I go to the same restaurant and order the same steak for $20, and it's not as great as it was on Monday, but it's pretty good. Then on Wednesday and I do the exact same thing, and the steak is okay. The more I get the steak, the less utility or pleasure I get from it for the same $20.
Solution, only eat out once a week instead of three times a week. You get the greatest utility out of your money and you save money...a Win Win.
Being practical with how much time I have.
Being practical about how much time I have, saves me a lot of money. I just don't have the time to do everything. I love video games. And even though I can afford to buy a lot of video games, I don't, because I literally do not have the time to play them.
People sometimes buy a lot of leisure items thinking that they have the time to enjoy them, like a boat or a new car. This leads to a lot of wasted money when they realize they don't have the time to use them like they wanted. Being practical with how much time you have will save you a lot of money.
The shine always wears off.
Everybody likes shiny new toys. A brand new tool, a beautiful dress, a new car, a big expensive “dream” house you tell yourself you will keep forever! But you should always keep in mind, you will pay a premium for that shine...that new...that dream. And that shine wears off quickly, but your money is still gone. Or even worse, you're stuck with the debt.
Buy most things for the long term utility. Not short-term shine and new. It will save you a ton of money over a lifetime.
In conclusion.
Considering that I get less utility out of things the more often I use them, being practical with how much time I actually have in a day and knowing the shiny new always wears off; saves me a lot of money. What do I do with that saved money? I invest it in crypto, and it makes me more money. And having money gives me a piece of mind, which is much better than the pleasure I would get from a steak.
Stay frosty people.
50% allocated to ph-fund.
The best thing is to always be organized and have a planning, because this will lead us to success.
And we must always have a positive mindset, focus on our goals and follow a daily discipline, I for example make an effort and try to save 30% of all my income.
And in this way in the last two months I have seen how it has given me very good results.
Your recommendations are positive and I believe that every entrepreneur should follow them.
Great advise and thank you very much @reinaldoverdu.
It is certainly not necessary to spend more than you have in order to appear a fictitious bonanza, although that is what we are taught. And we must also make a budget and be faithful to it, including in this a percentage, even if it is minimal, of savings and if at the end there is something left over we can add it to what we have saved or give ourselves some extra pleasure. @tipu curate 2
Upvoted 👌 (Mana: 64/192) Liquid rewards.
Thank you @tipu.
"fictitious bonanza"
I love this phrase! And totally agree, making a budget and sticking to it...that is super essential to building wealth.
Certainly you have to buy things that really give them a utility not just for appearances or for believing that you must always have what is fashionable. Greetings!
Well said.
Hello friend, that's right, we have to give value to what really deserves it, sometimes we want everything, I include myself but most are superficial things that actually fill us for a single moment and then the emptiness remains. We must focus on what really has a value for us. Greetings!
"fill us for a single moment and then the emptiness remains."
Its crazy how many people do this and how much money they waste in the process.
You raised valid points. Things do ffade but I guess it's just the rush if getting it at that moment. Lol
The rush. I guess people need to slow down, haha :)
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