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.
1.
Necessary expensesThis would be talking about those expenses on daily living but if you are that trying to cut cost then it would be just basing up on how discipline you are when spending up or make use of those necessities.
This would be always the main priority because this be talking about survival specially if you do have a family to raise then this will be always your main priority.
2.
Emergency fundA must thing to have because once you do end up on having no emergency funds and on the same suggest then you should be that allocating on the said funds since emergencies and unfortunate conditions
could happen in someones life unexpectedly. Its better to be prepared rather than nothing at all.
3.
SavingsThese funds are used for investment or making up a business. Trying out to expand as much as possible on which you should be mindful on how to multiple your sources because in todays years or era
on which economic situations do become shit each day passes.
4.
Investment.
Same with #3
5.
Luxury.
When you do have the extra funds then it wont be bad to make your self that get rewarded at least and buying something for yourself then it does ease out that feeling of being exhausted.
Its not bad to consider it out but of course you should be that wise on spending too and not that going some all in kind of purchase. Always take gestures and actions
on which it would be that getting in line on how much you are making.