A Better Way to Manage Your Everyday Money - Book - Page 5
The Financial Elephant In The Room
I’m sure you are familiar with what happens when three blind persons are
asked to describe an elephant. One is holding the trunk. Another is rubbing
an ear. The third is holding the tail. Each blind person’s description of the
animal is very different because none of them have a complete picture of the elephant.
Personal finances can seem similar when you are dealing with the independent, yet interrelated
parts of your household finances which are a complex mixture of activities that result from the
simple acts of receiving money and then either spending or saving it. The activities that make up
your household finances are the same for everyone; what makes them complex is that everyone
does the activities differently.
Spending
Using cash that you currently have
Bills
Making payments to a creditor or servicer
Credit cards
Going into debt that you intend to repay with
money you expect to receive in the near future
Sinking funds
Accumulating money over a specified period
of time to pay for something with cash at a
future date
Savings
Setting aside current income to use in the
future
Adding to the dynamics of your household finances is when the events happen.
Income
No standard schedule
Spending
Weekly
Bill and credit card payments
Monthly
Setting aside to sinking funds
and savings
Your choice
