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What I'm trying to say is that, some people may have multiple income streams but still struggle to determine their discretionary income
I see that you are still making this mistake again. I know that guys are still misunderstanding the concept of discretion and reserved fund. I see a lot of mistake in this thread even though no body corrected you in the aspect of 50/30/20 allocation.
Now bear it in mind that discretion income is a fund at your disposal, which signifies a fund that comes from any source of income to be used by you. From this discretion or disposable income you map out for family expenses, reserved fund, emergency fund and still the left over of that discretion wil be used to invest into Bitcoin. That is why they often said you invest from your discretion. Then the reserved fund now can be used to invest into Bitcoin in the absence of discretion fund.
This could only be the way I can describe it in my own understanding
Good idea with the flow chart, yet I would suggest that your chart is wrong.
Sure the top box is correct... some kind of income or your various sources of income.
The next box should be various expenses that you have.. and you seem to be suggesting that the expenses are for barious basic necessities food lodging and various aspects of expenses that you cannot really cut.
The next box, after you subtracted all of your basic necessity expenses would be discretionary income - so discretionary income is whatever you have left after accounting for all of your basic expenses.
From your discretionary/dsixposalbe income.. you can pend ono a variety of matters.. expenses, investments and/or the building of back up funds (that would include emergency funds and reserves and once your emergency funds and reserve funds are buil to a certain size you might not need to build them any more.. with the emergency funds being the most important to get up to size that is either the same as your bitcoin investment or up to three months of your expenses.)
Perhaps between income and discretionary income and maybe before expenses is floating funds.. since floating funds might not be established in terms of how they might be allocated until the expenses are known.. so maybe they are just held.. and then once your expenses are established then any floating funds that are left over would go into discretionary funds.
Reserve funds have a bit of optionality to them.. They can be used for the saving up of various expenses that you might have or buying bitcoin on dips or optional items .. and they have a lot of flexibility in terms of using them or not and whether or not to build them up beyond your emergency funds.
Emergency funds are the last line of defense once your reserve funds have been exhausted and if you have expenses that are greater than your income.
The flow chart could help people if it were4 to be in the right order.. and surely it could be the case that some of us are calling things in different ways too... but it may well be a good idea if a flow chart were to be made that was agreeable, understandable and not putting the terms in places that cause some confusion regarding what they are.... and yeah, maybe it is not easy to capture on a flow chart.
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I have reasons to disagree with the details and information provided by the diagram, maybe you're the one making the mistake after all.
To explain the diagram you brought up, you're saying that,
1. From your overall income, you get your discretionary income( which I agree with you)
2. From the discretionary income, you get the funds to settle your family expenses, save for future emergencies and also reserve funds.
3. And from your reserved funds, you can buy some Bitcoin.
So it's either I'm retarded as fuck and can't transcribe an obvious diagram, or you're the one who's not really getting this concept. Alright, I'll try making a diagram myself to further visualise my point, and if my idea is wrong then I'd be more than happy to take corrections because I'm always open to ideas and self development.
Here's my own illustration.
I find JayJuanGee to be quite experienced and knowledgeable in this field and so would like to invite him to give his own opinion on this (which I know he would love to) and like I said, I'm open to corrections if I find that my approach is incorrect.
This is wrong too.. since discretionary income comes after taking out basic expenses.
There are some expenses that come before discretionary income (such as food, water, shelter and things that cannot be cut) and their are other expenses that come after discretionary income (such as going out to eat, cigarettes, the costs of a luxury car versus a more practical car/transportation,).. We might not always agree on which of the expenses come before discretionary income and are mandatory expenses and which ones come after discretionary income, so for example if a person chooses a house that is $3k per month rent, even though they could reasonably live in a house with $500 per month rent, then $500 might come before discretionary income and the other $2,500 per month would come after discretionary income.. and of course, some of us will lock in our expenses in ways that it is difficult to change them in a short period of time and we sometimes might consider some of our luxuries as if they were essentials... but those are personal choices in which some guys might be able to generate more discretionmary income by increasing income and/or by cutting some expenses .. especially the non-essential expenses.
In your #3, savings would come out of discretionary income, and sure Emergency funds and reserves could be considered as a form of savings. I consider float funds to be a kind of funds that have not been allocated to discretionary income yet, since maybe every month we have an income of $500 to $2,500 with a usual income of $1,500... .. once we get our income we know what it is, yet before we get it we might not be able to spend money related to it and we might even wait until we get our paycheck before we make such allocations.. sure some folks get paid every week or every two weeks or even every month.. so frequency of payments can affect how we manage our funds.
Another thing that can happen is that we might not know certain amounts of our utility bill or even our food bill, so we might keep extra money in our float funds, but once we establish the amounts then the floats might convert into discretionary income. Let's say the person with the same above-mentioned income had a general expense amounts that very between $750 and $1,100 per month, and usually his expenses are $950. Maybe he already got paid $1,500, so he knows most of his pay, and some of his expenses have already been taken care of. He might have already figured that he could spend $400 and he does not have to worry, but he could have expenses anywhere in the range, and as they resolve then whatever is left of the floating money would go into the discretionary income.
I would suggest that debt repayment is prior to discretionary income.. so it is like an essential expense.. yet there could be debt repayment that fits into essential expense or debt repayment that comes out of discretionary funds.
So for example, if you have some kind of a loan, and so maybe the total was $2,100 or something like that, and you were scheduled to pay it off in 24 months for $100 per month.. and so as long as you are paying $100 per month you are meeting your minimum payment and those minimal payments would fit in essential expenses, yet you could also choose to pay it off early without penalty, so any of your payments that are extra would be taken from discretionary income. Whether it is wise to pay off your loan early would depend on the terms.. there might have had been origination fees, and maybe you are worried about having it hanging over you? If the terms are favorable, then it might not be financially wize to pay it off early.. you have to figure out the cost of the loan.
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1. Your Income. From your income then you get
income from work and/or other sources of income that you might have.. such as rent. Let's say that you have a regular job and you make $1,500 per month, and you rented a 3 bedroom and 2 bath apartment for $750 per month.. Maybe you share the apartment and you collect utilities from your roommate (you could consider the rent that you receive as income or just a reduction of your expenses same with the utility bill payments), or maybe your place has a garage, and you rent out the garage. You could also have some side jobs that you make money from.
i. Essential Expenses, that is our bills,
essentials are food, lodging, perhaps transportation to get to work, clothing such as work clothing and the basics.. luxury clothes might come after discretionary income.. but sometimes it is not clear if it is essential or not.
ii. Discretionary income, which you still that that from your income.
That is after expenses and even after float has been figured out. consumption, extra expenses, investments, and backup funds (such as emergency funds and reserve funds come out of discretionary funds)
iii. Emergency funds, reserve , floating funds which all still Comes from Income.
Emergency funds and reserve funds come from discretionary income, but I would suggest floating funds come prior to expenses.
iv. Bitcoin Accumulation, which comes from our Discretionary income.
Yes. Bitcoin investing money comes from discretionary funds.
I believe this is quite simple and easy to understand from your diagram illustration.
It is nice to see these matters in a flow chart, but the flow chart is not exactly correct, yet it is still helpful to see it in a diagram form.
I don't think only bitcoin accumulation comes from our discretionary income. It's our discretionary income that we use to invest in bitcoin and also use part of it to set up various backup funds like emergency funds, reserve funds and float. It's from your income that you use to take care of your monthly needs and expenses while the left over is your discretionary income. I don't know how to draw a diagram, I would have used it to illustrate.
It appears you have a totally different perspective and viewpoint on this matter. And I find this perspective of yours to be quite misleading because it's nowhere close to what we are arguing here.
From how I remember it, discretionary income is whatever amount that's left with you after you've settled and sorted out all other expenses which includes backup (and other reserved) funds allocation, expenses allocation.
If we suggest that discretionary funds are that money that is remaining after we have accounted for basic (essential) expenses, then everything that is not basic expenses would fit under discretionary. It might be a bit confusing to say that float comes before expenses, yet if we recognize that sometimes income and/or expenses might not be established right away, then we may well need to keep some float amount between pay periods to make sure that we have enough money to cover our basic expenses before that float money (or extra income) would be allowed to go into discretionary funds.
So if the discretionary funds is all the money that is left after deducting from basic expenses, then everything comes out of discretionary income including bitcoin investing, expenses beyond the basics, any kind of savings, back up funds (emergency funds and/or reserve funds).
Sorry but you don't use your discretionary income to set up your emergency funds.
You might want to consider your emergency funds as a higher priority or as basic expenses, but that would not be correct unless you were going through an emergency at that time. Emergency funds come out of discretionary funds which is part of the reason why we see that they can vary quite a bit in their amounts and even take guys a bit of time to build them up.
Again, you said that you use your discretionary income to invest in Bitcoin and set up emergency fund, and then use your income for your your monthly needs and expenses,
That sounds correct to me. The first thing on the list is monthly needs and essential expenses, so those come straight out of income, and whatever is left is your discretionary funds/income. Of course, some expenses are basic needs (such as food, lodging) so they come straight from income, and some expenses are optional (entertainment, smoking/drinking alcohol, vacations) so they come out of discretionary funds..
Some guys get confused about their expenses, and they might consider all of their food expenses as essential/basic and sure it could be difficult to separate out some of the optional expense such as junk food or the drinking of sodas rather than water.
if this is true, then where does the discretionary income comes from when all your income goes to settling and/or taking care of your monthly needs and expenses? I'd love to know.
If your basic needs are high and you don't have any money left over, then you don't have any discretionary income.. or perhaps you have a situation where you make $500 income every month, but your expenses are between $400 and $650, so you are going to kind of be fucked in the months that your expenses are greater than $500, and sure there might be some ways to cut some of your expenses, in the event that you are not able to increase your income. You can ONLY invest in bitcoin if your income exceeds your basic expenses...and if you are not sure and every month you are waiting to find out, then surely the months that you only have small amounts of discretionary income, you might not have confidence enough that your discretionary income is high enough to be able to buy bitcoin.. so you might have to wait until you are sure that you have enough extra money to be able to invest in bitcoin.
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The first line of your post seems to be confusing but you are still correct,
stable source of income is what give an investor the strength to invest because Bitcoin investment is not about age I mean how big someone is but rather it is about having a financial strength ( financially stable) and having the knowledge but then again It is not just about having a stable source of income but it is also about willingness to invest because some folks have the money but the willingness is not there. You don't need to draw a diagram because you have lay down the necessary things that are required for someone to carry out Bitcoin investment.
You don't needs a stable source of income to invest into bitcoin.
All you need are discretionary funds, and sure you have to have enough confidence that you have calculated your discretionary funds correctly, and if you are not sure if you have discretionary funds, then it may be better not to buy any bitcoin until you are sure that you actually have discretionary funds that are sufficient... (meaning all of your basic expenses are covered)
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Am a bit confused in this discretionary income aspect, at first what is discretionary income. This is the amount of money you have left after covering your essential expenses, such as food, rent, utilities etc.
Let me break it down more ;
•Monthly income = $3000
• Expenses = $1500
•Discretionary income = $1500 ( the left over after taken care of your essential expenses) , and also this is where your emergency funds (also get it from bonuses ) and reserve funds are gotten from .
Then
after setting your emergency and reserved funds , the remaining percentage will go to your investment. Everything you said makes sense I_Anime.. except emergency funds and/or reserve funds do not need to be set up prior to investing in bitcoin. You can set up your bitcoin investment simulataneously, and usually emergency funds has a higher priority than reserve funds, but reserve funds are more flexible.. ..
At the same time, it could take a year or two or more to build up a bitcoin investment and emergency funds that equal 3 months of expenses invested into them... especially if a person might be allocating only 10% or less of their income towards building emergency funds and investment in bitcoin and if both of those started out at or close to zero.
The percentage of you sharing it boils down to you I guess , you can choose 20% to emergency funds, 15% Reserved funds and 25% to your investment.
Sure. There could be some kindf of a formula for dividing out how to build out back up funds (such as emergency funds and/or reserve funds), yet I really doubt that the combination of the back up funds needs to be built faster than your investment into bitcoin..yet sure, guys can make those kinds of choices, but it seems strange to me to be overly waiting with investing into back up funds, when the back up funds are primarily meant to back up your bitcoin investment, but if you don't have shit for a bitcoin investment because you are stocking away a bunch of back up funds, then to me that does not necessarily come off as balanced.. though sure guys can come to their own conclusions (determinations) in regards to their level of aggressiveness when it comes to their bitcoin investment.
So this is the way I understand, if you have any opinion to add to this you can do so we are all learning frome each other.
Agreed. It is good to bat around the ideas and help guys to have some senses of what they are doing, why and even to explain to others, whether on the forum or in other places that guys might share their ideas about bitcoin investing and/or building up the strength of their cashflow management systems and/or practices.
