Emergency fund, Reserve fund, Discretionary income (difference/usage)

[Sunshine1525]

Some people confuse/mix up these three and at the end wonder why their investment doesn't go smoothly despite having plans to hold longer. The og's here who understand the right funds to apportion for investment would agree with these but this is to enlighten those who are yet to understand the right funds to channel into Bitcoin investment and avoid complications in the long run. I'll start with the discretionary income cause it's the most important for investment purpose.

Discretionary Income
In a lay man's understanding, it is the money that's left after our essential needs and saving have been sorted out, and it is the most appropfiate funds that should be channeled into Bitcoin investment if investors wants their investment to be sustainable for long term without worry about future complications or pressured to sell before meeting their target. For wealth to be achieved through investment, a beginner should know that it's the discretionary income that's used for the investment.

Emergency funds
An important or mandatory amount of money (might be fixed) that's also saved after settling essentials but basically set asides for emergency situations. Not for investment, entertainment/fun but simply set aside and dedicated for emergency situations from the income. For instance, health/medical issues, loss of job, automobile repairs, natural disasters. All these are emergency situations where this particular fund is chanmelled to. One thing people forget is that we don't wish for emergency situations but should be prepared for them so if the emergency funds is used for investment, how would an emergency situation be sorted out if it happens within same period the emergency fund is used for investment? Those are the kind of complications that would hinder the growth of an investment which investors should avoid.

Reserve fund
It's a disposable funds that's planned or set aside after settling important bills and it's used to cover up extra expenses, for instance a leaking roof, damaged door, changing of damaged phone and so on people often mistake this for the emergency funds but the difference is that the emergency fund is dedicated for unforseen emergency situations while the reserve funds is the extra cash from income that's used for extra expenses, it's important cause it helps an investor to avoid being in debt to cover up expenses, it can also be used as back up for investment but not sustainable like the discretionary income.

I believe that newbies who would come across these would understand and know the right things to channel different parts of their income into, most importantly the discretionary income that's it's best part of the income that should be channeled into an investment amongst others. So the bottom line is Income- Emergency funds- Reserve funds- Discretionary Income,  the emergency and reserve funds shouldn't be negotiable so they should be set aside after sorting out essentials so they won't be end up used for discretionary income. For better understanding,
The Discretionary Income is money for investment.
The Emergency funds is for survival
The Reserve is to settle extra expenses.

[ColdLava40]

The difference is not quite much. I just put all of them in a single category.

The main point is to have a spare amount at hand in cases where needed. This helps you avoid going to your investment unconsciously. If we separate this into too many categories, one might get confused to some extent.

Though I see the need for your break down, which is very important and shows the usefulness of why we need to have a spare amount at hand while keeping our investment amount growing.

[OsaiEmma]

I honestly feel the description of reserve funds can be given to non-discretionary funds or emergency funds if there are added context:

Context 1 : If the "extra expenses" was already budgeted before hand, then it should be non-discretionary funds.

Context 2: If the "extra expenses" is made after the income comes in, that is it wasn't planned for before hand, it should be under emergency funds.

Personally, I feel Reserved Funds are essentially savings set aside to achieve a particular goal ranging from just extra money saved for the purpose of saving to buying or achieving something huge like buying a car, house, planning a wedding etc.

Other than this, I agree with your assessment generally

[Sunshine1525]

I honestly feel the description of reserve funds can be given to non-discretionary funds or emergency funds if there are added context:

Context 1 : If the "extra expenses" was already budgeted before hand, then it should be non-discretionary funds.

Context 2: If the "extra expenses" is made after the income comes in, that is it wasn't planned for before hand, it should be under emergency funds.

Personally, I feel Reserved Funds are essentially savings set aside to achieve a particular goal ranging from just extra money saved for the purpose of saving to buying or achieving something huge like buying a car, house, planning a wedding etc.

Other than this, I agree with your assessment generally

Questioning that is much okay cause people get confused on it alot. Well thanks for the addition, the reserve fubds almost seem like both essential and emergency fund cause it can be planned or unplanned, planned in the sense that, for instance you could be paying a tuition fees in few months time or renewing a decoder/Netflix subscription.

Where it seems unplanned and looks like the emergency funds, is in cases like repairing a spoilt roof or fixing a spoilt door, you didn't plan for that to happen but know it might happen anytime, but it's different from emergency funds and discretionary income cause it's not basically used for investment or used to solve real time emergency situations that deals with survival, however I purposely think it should come after an income because it's non negotiable and people could spend it on investments if it comes after discretionary income which isn't a good act.

The difference is not quite much. I just put all of them in a single category.

The main point is to have a spare amount at hand in cases where needed. This helps you avoid going to your investment unconsciously. If we separate this into too many categories, one might get confused to some extent.

Though I see the need for your break down, which is very important and shows the usefulness of why we need to have a spare amount at hand while keeping our investment amount growing.

The difference might not be too much but it's clear, I had to break it down for beginners to understand and know the right funds to channel for investment so they don't go using their emergency funds or reserve funds for investment, most importantly emergency funds and end up complicating the investment on the long run.

The way I explained it is very understandable, except the person who find it confusing is kinda dull in comprehension and needs broad explanation to understand simple things like these. Ofcourse they're of separate categories cause they're not same thing, do you think they're?

[AVE5]

I believe that newbies who would come across these would understand and know the right things to channel different parts of their income into, most importantly the discretionary income that's it's best part of the income that should be channeled into an investment amongst others. So the bottom line is Income- Emergency funds- Reserve funds- Discretionary Income,  the emergency and reserve funds shouldn't be negotiable so they should be set aside after sorting out essentials so they won't be end up used for discretionary income.

All you've outlined here is obviously the same thing we talks about in the discussions of how to invest with the right funds so that we can always maintain our grounds to achieve our investment goals.
And yes the right set of income to invest with in bitcoin is your discretionary incomes which is a assumed to be spare funds after you've sorted your immediate needs and as well have reserve for your emergency needs.
These are important to be adhered because bitcoin can only be guaranteed to be profitable for a long term goal and therefore, you need backup funds while investing in bitcoin so that you don't go astray and sell at your press need.

[ZeroVinsonN]

I honestly feel the description of reserve funds can be given to non-discretionary funds or emergency funds if there are added context:

Context 1 : If the "extra expenses" was already budgeted before hand, then it should be non-discretionary funds.

Context 2: If the "extra expenses" is made after the income comes in, that is it wasn't planned for before hand, it should be under emergency funds.

Personally, I feel Reserved Funds are essentially savings set aside to achieve a particular goal ranging from just extra money saved for the purpose of saving to buying or achieving something huge like buying a car, house, planning a wedding etc.

Other than this, I agree with your assessment generally

Not necessarily, I could be planning to go and see a particular movie that would be coming a few months from now and I want to take someone special with me, I could also be planning to visit a tourist attraction location later this year and I need to save for it, these are not essential expenses they whatever you spend on them comes from your discretionary income and if you are saving for them then that's also a part of your reserve fund, there are not non- discretionary, neither are they are part of your emergency fund, they are reserved for a purpose that's not essential but it's still something you want to do for yourself.

[OsaiEmma]

however I purposely think it should come after an income because it's non negotiable and people could spend it on investments if it comes after discretionary income which isn't a good act.

Certainly! they all should be coming from your income.

Snip

Not necessarily, I could be planning to go and see a particular movie that would be coming a few months from now and I want to take someone special with me, I could also be planning to visit a tourist attraction location later this year and I need to save for it, these are not essential expenses they whatever you spend on them comes from your discretionary income and if you are saving for them then that's also a part of your reserve fund, there are not non- discretionary, neither are they are part of your emergency fund, they are reserved for a purpose that's not essential but it's still something you want to do for yourself.

I think you're misunderstanding me. I didn't say they're your non-discretionary funds. This is what I said

I honestly feel the description of reserve funds can be given to non-discretionary funds or emergency funds if there are added context:

I felt what the OP is describing as reserve funds could fall under non-discretionary funds or emergency funds depending on the context.

And this is what I said a reserve fund is

Personally, I feel Reserved Funds are essentially savings set aside to achieve a particular goal ranging from just extra money saved for the purpose of saving to buying or achieving something huge like buying a car, house, planning a wedding etc.

Other than this, I agree with your assessment generally

[DiMarxist]

The difference is not quite much. I just put all of them in a single category.

The main point is to have a spare amount at hand in cases where needed. This helps you avoid going to your investment unconsciously. If we separate this into too many categories, one might get confused to some extent.

Though I see the need for your break down, which is very important and shows the usefulness of why we need to have a spare amount at hand while keeping our investment amount growing.

You made a very important point here because, looking at the different types of funds which we are expected to save. They look almost the same and only have a slight difference in their meaning and how they are used when spending them. But the underlying thing when it comes to money is that, no matter the name you call it there is serious need for us to always practice the act of saving money because, that is helpful to us if we are to make progress in life.