top of page

A Financial Coaching Blog

Send us an email at blog@monthlyfinancialcoaching.com if you have a topic you would like discussed.

Writer's pictureTreavor Dodsworth CFP®, CPA, CKA®

5 USES OF MONEY

During the CKA® training, I learned this simple and practical way to think about cash flow. Ron Blue, the presenter, made the case that there are five uses of money:

piggy bank with money coins

  1. Giving

  2. Taxes

  3. Debt

  4. Lifestyle

  5. Savings


Most, if not all, of our money transactions can fit into these five categories. Giving is self-explanatory, as are taxes and debt. Lifestyle is essentially everything you are spending that isn't in one of the other categories. This is all living expenses like groceries, eating out, travel, etc.

 

The case was made that budgets should be constructed in this order. Giving first, taxes next, and so on. If you switch debt and lifestyle, you could get into trouble. For example, you can see how if you set your vacation and eating out budget (lifestyle expenses) before taking into account your mortgage payment that could be problematic.

 

Inevitably if you start with your income and then begin subtracting out these categories, you will end up with either a deficit or an excess at the end. If there is a deficit, you need to walk back through and figure out how to zero it out. Can you increase income in some way? Can you eliminate debt by selling an asset? Can you reduce expenses in some manner?


Tracking expenses can be difficult. Thinking of it in terms of identifying these five variables can bring some simplified order to your cash flow.

All written content on this website is for information purposes only. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. The owner of this website takes great care to thoroughly research the information provided to ensure that it is accurate and current. Nonetheless, the content on this website is not intended to provide tax, legal, accounting, financial, or professional advice, and readers are advised to seek out qualified professionals that provide advice on these issues. All information or ideas provided should be discussed in detail with an advisor, accountant, legal counsel, and/or other pertinent professionals prior to implementation. In addition, the owner cannot guarantee that the information on this website has not been outdated or otherwise rendered incorrect by subsequent new research, legislation, or other changes in law or binding guidance. Neither Monthly Financial Coaching or it's owner shall have any liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website. In addition, any advice, articles, or commentary included on this website do not constitute a tax opinion and are not intended or written to be used, nor can they be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. Any mention of an investment product or solution is not a recommendation to buy or sell. Past performance is not a guarantee of future results. Any mention of rates or return should not be seen as a guarantee those rates or return will be received.

bottom of page