Five things to spend your money on.

[kotajikikox]

I think that we should allocate our money into 5 categories.

1. Necessary expenses. I am talking electricity bills, food, school fees (if you are studying or have children), housing, healthcare, and transportation. I believe this group is where most of our money goes because we basically can't survive without these things.

2. Emergency fund. In cases of emergency, we should be able to get some money for it. Especially in countries where healthcare is not free, we should be prepared to pay if ever we get into accidents or we get sick though hopefully it never happens but still we have to be always prepared either way.

3. Savings. Some people save up for specific things like buying a better house, a better car, getting your kid into a better school among other things. Some people may just save for the sake of having money to pull for emergencies. I think emergency money and money I want to use into building a new home should be separate.

4. Investment. Aside from our day jobs where we get most of our money to pay for our necessary expenses, we should invest in assets to make our money grow. This could be gold, real estate or cryptocurrencies.

5. Luxury. When I mean luxury, I do not actually mean it has to be expensive. But I say luxury because there are things that we do not need but still want to have or experience like traveling or eating at a good restaurant. I believe that even though we should be smart in finances this does not mean we have to completely deprive ourselves of enjoyment.

[freedomgo]

Is that based on ranking? If so, the ranking looks accurate.

But I read a book that suggests a better approach, after you receive your income, it should be income → savings → expenses, instead of the usual way. It’s a way to discipline yourself and prioritize saving, because that savings will be the one to cover your emergency needs and future investments.

[Plaguedeath]

Is there any adult not spend their money in these 5 categories? I'm sure all adults spend like this!

They might not invest in gold, Bitcoin etc, but they invest in banks which generate 1%-7%, they call this low risk investment.

Luxury spending for men are quite different, they invest in their hobby, gambling or prostitution, but still those are belong to luxury.

The difference is the way people budget it, someone might budgeting 1% for luxury, while the other one budget it as high as 20% for luxury because they said "you only live once".

[dunfida]

I think that we should allocate our money into 5 categories.

1. Necessary expenses. I am talking electricity bills, food, school fees (if you are studying or have children), housing, healthcare, and transportation. I believe this group is where most of our money goes because we basically can't survive without these things.

2. Emergency fund. In cases of emergency, we should be able to get some money for it. Especially in countries where healthcare is not free, we should be prepared to pay if ever we get into accidents or we get sick though hopefully it never happens but still we have to be always prepared either way.

3. Savings. Some people save up for specific things like buying a better house, a better car, getting your kid into a better school among other things. Some people may just save for the sake of having money to pull for emergencies. I think emergency money and money I want to use into building a new home should be separate.

4. Investment. Aside from our day jobs where we get most of our money to pay for our necessary expenses, we should invest in assets to make our money grow. This could be gold, real estate or cryptocurrencies.

5. Luxury. When I mean luxury, I do not actually mean it has to be expensive. But I say luxury because there are things that we do not need but still want to have or experience like traveling or eating at a good restaurant. I believe that even though we should be smart in finances this does not mean we have to completely deprive ourselves of enjoyment.

You should include this one.

6. Leisure
This talks about travel, going outside with your family, an other things on which this would be that out of the budget.

7. Wants
We do have our own wishes in life specially on buying up gadgets, cars and other wants on which you should be that also putting up some budget allocation too.

We do know that there's something that would be that totally be those things that we do spend out on which it would be that resulting into that out of budget.
This is why its important that you do always allocate something for you not to get over dropped or would be that out of budget. It all matters about on how you do handle things
accordingly on which it will be that ended up for you to have that shortage of funds. It all matters about money management because if you dont have these things then you would be having
that problem later on.

[uneng]

First of all, you have to spend your income on necessary expenses. Then, after calculating how much it's going to cost you, the rest of money should be destined to savings. From savings, you split it between investments and emergency fund (which just remains on your savings, anyway...). Once you feel more comfortable and your financial life gets more organized, you can start giving yourself the right to spend on luxuries.

If you want to make financial progress faster, you have to postpone spending with luxuries, though. The point is: are you able to postpone pleasure and rewards without compromising your emotional? If it sounds unbearable, then it may be a serious issue...

[Dr.Bitcoin_Strange]

I think the list is partially accurate, there are people that never gets to the stage (5) of buying luxury things. Spending on the primary needs are definitely important for survival, savings and investing is to pursue more financial growth and wealth and only after one has archived that growth that is when they can afford luxury but when they are not able to have a stable financial status, it will be difficult. I agree with what the first comment said about considering savings first before expenses, because if you agree that you would save 30% every month, once the salary comes, you need to keep the savings apart first before you spend on your needs, that is how I believe it's done.

[lovesmayfamilis]

I would not separate the second and third; all of these can be combined into one category. Moreover, money should not lie idle; it should also work. If you have a certain amount that you consider savings (3), they should also bring you profit. Passive income does not necessarily have to be investments. Buying real estate, and renting it out; after receiving profit, you also make your money work, sending it to investments. As for the fifth point, it will be reasonable if you have already established all the other points. Sometimes it is worth being patient a little in order to live a measured life later.

[Fiatless]

These five categories cover, to a large extent, the areas we need to allocate our income to. But how we budget or allocate our income will depend on how much we earn and the cost of living in our country. Some people will never have savings except their earnings increase. This is because what they earn is not even enough to cover their basic needs.

But those who have enough should make provisions for emergency funds and investment because the future is not predictable.  

[rachael9385]

I think that we should allocate our money into 5 categories.

1. Necessary expenses

necessary expenses are the kind of expenses that we can not avoid because it's a daily basis needs. And like you said that it includes foods and other necessary things which you mentioned earlier.

2. Emergency fund. In cases of emergency, we should be able to get some money for it. Especially in countries where healthcare is not free, we should be prepared to pay if ever we get into accidents or we get sick though hopefully it never happens but still we have to be always prepared either way.

this emergency funds is very important to one's live because without it you might begin to sell of your properties when an emergency issues arose. This is needed even though you are not into investment. If you are into investment that will take long term before you make a better profits you actually need it so that you  do not take from your investment capital before it matured.

[Hewlet]

I think that we should allocate our money into 5 categories.

know your financial capacity and allocate your funds based on it while taking notice of the need to do proper scale of preference analysis so you focus first on things that matters most and then pay the lesser attention to things that does not matter all that much. the first things first is that there should be proper allocation for your needs. once that is sorted out, the next thing should be to allocate for your investment before you can even talk about allocating for other things which can be jointly referred to as wants.

it takes some sort of robust finance before you can easily allocate funds to all the options you have pointed out because for the majority of the average person that does not have too much, the highest you can really do is to ensure that you are taking care of yourself first and then you can talk about investing. it is in the long run when you must have balanced well that you can then consider making proper provision for emergency fund. everything is just in phases, it is when you have grown that you can really have the ability to implement a lot of financial strategies but getting the knowledge first is still not a wrong way to start.

[Marvell1]

Is that based on ranking? If so, the ranking looks accurate.

But I read a book that suggests a better approach, after you receive your income, it should be income → savings → expenses, instead of the usual way. It’s a way to discipline yourself and prioritize saving, because that savings will be the one to cover your emergency needs and future investments.

I like OP's arrangement better and that's what I'm applying to my life. I think we should prioritize essential needs before saving, we cannot save money when the family, especially children, still does not have enough food on the table or the bills are not paid...

5. Luxury.

Also, I guess many people will ignore this because they think it is a waste. But I think this is necessary, we should also take time to rest and enjoy life, we should not be too strict with ourselves.

[Marykeller]

An individual who is old enough, that is making their own money, it's certain that they will have themself spending their money on the five things you mentioned on without hesitation or being told about it because as it is, it is our responsibility to pay our bills, take care of ourselves, prepare ourselves ahead for the unknown, plan, and set goals for future.

[justinlamode]

But I read a book that suggests a better approach, after you receive your income, it should be income → savings → expenses, instead of the usual way. It’s a way to discipline yourself and prioritize saving, because that savings will be the one to cover your emergency needs and future investments.

These are books to keep people poor if you ask for my honest opinion. Any book that divides the income into savings and expenses only is encouraging people to just live an average life. This is because it is obvious that savings does not make anybody rich but investment does. Any money that is not creating more money is idle funds that will be dealt with by inflation. The right thing to do is divide the income into necessary expenses, investments, and emergency funds which will take care of things not planned. Investment is the right thing to do at this time and anyone without a clear view of where to invest in can simply invest in Bitcoin which have been a reliable asset that generate so much profits.

[BIT-BENDER]

One thing you should not tell a man and that is what to spend their money on, this is one rule I hold I highly esteem. The public these days is quick to tell a man that they did not help make money for how they should spend their money.
It better to advice people on having savings or using a conservative budget but actually tell them the things to use their money on is a complete no for me.

[Frankolala]

OP, you are right with the five categories the way that you listed it. However, I will love to keep my savings in bitcoin if I have plans to buy a house or a car or something very expensive so that inflation wouldn't eat up my savings in fiat. As bitcoin price increases, my savings also increases simultaneously with bitcoin price. Emergency fund is good in fiat or USD.

[DaNNy001]

These are good points, if I had to pick between saving and investing my money i would go with investments because savings don't appreciate overtime, an investment can build up and give you a high value in the future... necessary expenses Is a must because they're your responsibilities to take care of, these things cannot be avoided...The last point is also very important, eating good food and making sure you are in sound health isn't a luxury but a necessity

[SATWAT]

OP, you are right with the five categories the way that you listed it. However, I will love to keep my savings in bitcoin if I have plans to buy a house or a car or something very expensive so that inflation wouldn't eat up my savings in fiat. As bitcoin price increases, my savings also increases simultaneously with bitcoin price. Emergency fund is good in fiat or USD.

No doubt OP done good job for pointed out things like these but for me, he has done more work because here all can settle these things into 3 ways as well because Necessary expenses and Emergency fund can be gone into same way while Investment and Saving are also on same page with some love to have their savings in good investments.
Usually peoples those are stable in their life have things like these because they always think for long term and have good strategy for their life after retirement but many those are living in regions where things are not stable never have luxury like this to work out and stay in balance.
Few countries are developing good culture of having good saving plans for their citizens which keep them good in long run but this need strong and good strategy with good government which works for their peoples.

[Despairo]

One thing you should not tell a man and that is what to spend their money on, this is one rule I hold I highly esteem. The public these days is quick to tell a man that they did not help make money for how they should spend their money.
It better to advice people on having savings or using a conservative budget but actually tell them the things to use their money on is a complete no for me.

I agree, this is kind of toxic masculinity.

I know the @OP didn't specify it for men, but we're in Bitcoin forum, pretty sure most of the users are male.

When someone spend their hard earned money, we, as people who have no contribution to their life, have no right to suggest or give advice without they ask. Just like I see my friends spend money for donation, realistically speaking it doesn't give any return to us, but if they want, then why not?

[Rockstarguy]

Another thing you didn’t mention about what to spend your money on is investing in the development of your skills. If it costs you money to gain knowledge that will bring value, don’t hesitate to spend it. Learning to acquire knowledge is always expensive, and there is a benefit to every piece of knowledge. However, when people choose not to spend money on themselves, they remain ignorant. While considering how money should be spent, it is important for people to always think about value, things that will bring value, because if money is spent on things that don’t have value, then it is considered a waste of money.

[m2017]

1. Necessary expenses. I am talking electricity bills, food, school fees (if you are studying or have children), housing, healthcare, and transportation. I believe this group is where most of our money goes because we basically can't survive without these things.

It is impossible to get rid of these expenses and these expenses will accompany everyone until the end of their days.

2. Emergency fund. In cases of emergency, we should be able to get some money for it. Especially in countries where healthcare is not free, we should be prepared to pay if ever we get into accidents or we get sick though hopefully it never happens but still we have to be always prepared either way.

Having some spare money saved up for a "rainy day" (for emergencies) is also a necessity.

3. Savings. Some people save up for specific things like buying a better house, a better car, getting your kid into a better school among other things. Some people may just save for the sake of having money to pull for emergencies. I think emergency money and money I want to use into building a new home should be separate.

4. Investment. Aside from our day jobs where we get most of our money to pay for our necessary expenses, we should invest in assets to make our money grow. This could be gold, real estate or cryptocurrencies.

I propose to combine these two points, since saving/accumulation without investments becomes practically meaningless (long) due to inflation. Saving money is possible only under the condition that this money brings some income, and doesn't lie as "dead weight".

The result of investments (profit) can be used to buy

a better house, a better car, getting your kid into a better school.

5. Luxury. When I mean luxury, I do not actually mean it has to be expensive. But I say luxury because there are things that we do not need but still want to have or experience like traveling or eating at a good restaurant. I believe that even though we should be smart in finances this does not mean we have to completely deprive ourselves of enjoyment.

This is an unnecessary item that will only "burn" your resources in vain. I would call it "an unaffordable luxury".