Quote from: Tungbulu on July 03, 2025, 11:32:17 AM

Quote from: JayJuanGee on July 01, 2025, 09:42:43 AM

[edited out]

One aspect of your perspective that really resonates with me is the fact that expenses can be both essential and discretionary, depending on the individual circumstances, and I believe this was the area I was having confusion.

Sometimes these matters can be difficult to communicate in the abstract, since even though we likely realize that individuals are quirky (including recognizing that same kind of quirky characteristic within ourselves), there are still some folks who are better able to deal with various kinds of subtleties in regards to their own expenses, and even learn to rethink their own managing of their expenses based on their spending some time to rethink how they might have had prefiouysly been considering which of their expenses they might have had previously considered to be mandatory and for what reason.

Even some guys who seem to have some pretty bad spending habits and seemingly poor priority choices (and even difficulties deferring gratification), they may be able still learn from a process of spending a bit of time reflecting on their own budget and/or practices.. and so maybe they don't want to sit down for 2-3 hours per week, but they might be willing to compromise and sit down for 1 hour per week (extra beyond whatever budgeting that they are already doing) and just spend that time reflecting on their various income pieces and their various expenses, and maybe brainstorm about some ways that they can increase their income and/or maybe some ways that they might be able to cut some expenses.. and surely if they sit down and they reflect on their own situation and maybe even jot out some notes, any change that they end up choosing to make ends up coming through their own justification that they are the one who had thought through their own personal situation and had considered some ways of trying to improve it.

So maybe we have a guy who smokes and drinks a lot, and he realize that these are largely bad for him and for his budget, yet on previous occasions, he had refused to cut either of them from his budget and/or lifestyle because he considered that they were his way of blowing off steam, socializing and just he felt that he got a lot of pleasure from the drinking and cigarettes. He had been considering his cigarettes and his alcohol as mandatory expenses rather than optional expenses.

He had previously not had limitations on his cigarettes and drinking, yet on review he noticed that there was quite a bit of variance with the smoking, anywhere between $5 and $45 every two weeks with an average of around $21 every two weeks. Upon reflection he sees that he had quite a bit of potential room for improvement for his budget and from his further consideration of the matter, and that it would not really cramp his lifestyle in any kind of meaningful way to cut back a bit and perhaps to limit his 2-week maximum to $18. He considers that the money saved (and to be able to invest) may well really justify any inconveniences. So maybe he would even consider shooting for a two-week target of somewhere between $5 and $10.. and so even though he had established some targets, he considers these to be fairly good exercises to help him to place some reasonable self-imposed limiits.

Maybe the guy considers similarly in regards to alcohol.. .. and surely once he goes through the process regarding certain of his more common expenses, then he can use a similar process for other expenses.

He might look at his junk food. His transportation expenses. His vacations. His frequency of eating out versus eating in or packing his lunch.

He might look at his clothing, and his various household expenses. He might look at his phones and computers, even his coffee consumption.

So initially, the exercise may well was to distinguish between basic and not basic kinds of expenses and to attempt to figure out why some of the expenses had been considered as basic, but then some of his expenses he realize are mixed with basic and non-basic and he may well need to rethink how he thinks about some of his expenses and what purpose some of them have, including his housing choices, food choices and energy consumption that might seem to be basic expenses, yet even within some of the basic expenses there might be ways to cut or reformulate some of those expenses.

Quote from: Tungbulu on July 03, 2025, 11:32:17 AM

But I've only got one question that I believe not just me but others would love to know and gain clarity on. The question is, how individuals can be able to balance the need to build an emergency fund and pay off high interest loans, particularly when the loan repayment amount is actually fixed, but the emergency fund allocations can be flexible? Would you advice prioritizing loan repayment over building the emergency fund or would it be more appropriate to simultaneously do both and what factor would you advice to be considered when making the decision?

Frequently the trade offs will depend on the particulars such as considering the fees, and many folks may already know folks who get into problems with their cashflow management, including their historically having had used debt to consume or even using debt to invest, but their investment went bad and maybe they were gambling with their investment money rather than really being prudent. So then they may well have several kinds of debt, and some of them have higher interest rates than others, so usually there would be a justification to pay off the higher interest rate ones first, even if there might be some other attributes to them that are advantages, such as flexible payment options or that they are have very long timelines before they have to be completely paid off.

Of course, if we are thinking about emergency funds versus debt servicing, the debt servicing has an interest rate, so there would be some desire to pay it off, yet we still might want to compare that to our investments too.. and with bitcoin we have a place to put value that likely will have greater than a 10% annualized return rate, yet any money that we put into bitcoin ends up being locked up 4-10 years or longer and we are not even guaranteed to receive the greater than 10% annualized returns that we consider to be likely, yet at the same time, we likely could put the expected returns into a probability calculator to help us to determine which debts to pay off first or to consider how important it is to have an emergency fund, when the emergency fund may well end up being 3 months of expenses in cash and the emergency fund is not likely to be earning any amount of returns, since it is in cash. The purpose of the emergency fund, is of course, to be able to last 3 months or even longer during periods of uncertainty, and we might even have some other resources that we can draw upon so that we don't have to dip into our bitcoin investment, so the emergency fund might serve as a kind of quickie (and easy to access) resource that lessens the likelihood that we are going to have dip into our bitcoin at a time that is not of our choosing.. and maybe we also hold some stocks and bonds, and some of those could be liquidated too.. but if we run out of everything to liquidate, then out bitcoin might be our last recourse before we might end up homeless or otherwise suffering ramifications of no longer having money and/or no longer having anyone willing to pay for our expenses and/or to bail us out.

Hopefully by inference I have addressed the issue of calculation, and sure sometimes there are priorities in regards to which ones to build up first, and surely a loan/debt that is 4-6% interest per year is way less burdensome than one that is 15% to 24% per year, so we should be able to see that there is a bit of justification regarding which debts to pay off first, and surely sometimes our emergency fund might suffer and/or our bitcoin might suffer.. and surely in these bitcoin sections of the forum, we are trying to emphasize on getting started wiht bitcoin, yet surely if we have ourselves in a pretty bad situation, our ability to start out aggressively on bitcoin or even to really shore up our emergency funds, we might be balancing with inferior circumstances and/or even dilemmas regarding which ones are more important to fix first in the event that we consider that there might be advantages to taking care of the most egregious of circumstances..

including.. yeah, maybe an example can come in handy. Let's say if we are making ONLY $500 to $1,500 per month, with a usual income of about $1,100 and our various expenses (prior to our servicing of our debts) are tending to be between $550 and $950 with a usual amount of $750.. ... so we already have variance build in, so we have to make sure that we have plans for the worser scenarios within our income and expenses, but then we also have some debts that we need to pay off. Maybe we have 3 different debt payments that have a minimum of $20 per month, $40 per month and $70 per month, so our minimums add up to $130 per month, so this has to be taken from our income right away prior to calculating our discretionary income, and within those debts we can choose to pay extra which likely would mean paying off the higher interest rate debts first, and sure maybe some loans could penalize for early payment of debt, so there might not be any incentive to pay early if the loan is already set up to be spread over time without any early payment benefits... and so then the extent to which we service debts with extra (discretionary income versus building our emergency funds, versus investing into bitcoin is likely going to have to do with whether the BTC and the emergency funds are growing at around the same rate and then considering how much each of our loans are costing us.. If they are costing less than 6% annualized, then there might not be any major incentive to pay them off early. .but if they are costing more (such as between 6% and 15%), then the investor might be mixed about whether to focus on paying them off sooner or just paying them off on their regular payment schedule, and surely we then start to get into the 15% to 24% or more, then those higher rate debts are seeming to be quite expensive ways of living that I personally would not be wanting to pay loans with those levels of interest rates, so I personally would be wanting to giving higher priority to paying off loans with those kinds of higher rates.

By the way, there could be some advantage for this thread for any of the members to try to set forth a better flow chart in order to attempt to show how he thinks about the various categories of income versus expenses, versus discretionary funds, floating funds, emergency funds, reserve funds, loan servicing, other discretionary expenses, bitcoin investing, and etc. etc. etc.