Personal Finance Strategies Season 1 Episode 4 Calculating Expenses for Your Life Energy

As we progress through life, we often find ourselves overwhelmed by the sheer number of expenses that we need to keep track of. From day to day living expenses such as groceries and utilities to more significant expenses such as rent or mortgage payments, figuring out how to manage our finances can be a daunting task. In episode 4 of Personal Finance Strategies, we dive into the process of calculating expenses for your life energy.

To begin the episode, we are introduced to the concept of life energy. Essentially, life energy refers to the time, effort, and energy that we expend to earn money. In the context of personal finance, it is important to keep track of our life energy as it allows us to make more informed decisions about how we allocate our resources.

Next, we explore the different types of expenses that we incur on a day-to-day basis. These can be categorized into four main types: fixed expenses, variable expenses, occasional expenses, and impulse expenses. Fixed expenses, as the name suggests, are expenses that remain constant and are typically paid on a regular basis, such as rent or a car payment. Variable expenses are those that change from month to month, such as groceries or utility bills. Occasional expenses are those that arise infrequently but require a larger sum of money, such as a medical or dental procedure. Finally, impulse expenses are those that we make on a whim and are not typically planned for in advance, such as dining out or buying clothes.

Once we have a clear understanding of the different types of expenses, we then move on to discussing how to calculate these expenses. The first step in this process is to create a budget. This involves taking stock of all your income and expenses and organizing them in a way that allows you to see how much money you have going in and going out each month. Additionally, creating a budget allows you to identify areas where you may be overspending and make adjustments accordingly.

To calculate your fixed expenses, you simply need to add up all of the expenses that remain constant from month to month. This can include things like rent, utilities, car payments, and insurance premiums. Once you have a total, you can then subtract this from your monthly income to determine how much money you have left over for your variable, occasional, and impulse expenses.

Variable expenses can be a bit trickier to calculate as they can vary significantly from month to month. To get an accurate estimation, it is helpful to track your spending for a few months to see how much you typically spend on things like groceries, transportation, and entertainment. Once you have this information, you can create an average monthly budget for these expenses.

Occasional expenses are those that can be particularly challenging to plan for as they are infrequent and often unexpected. One strategy for managing these expenses is to set up a separate savings account specifically for these expenses. This can be done by taking a percentage of your income each month and transferring it to the account. This way, when an unexpected expense arises, you will have the funds available to cover it without having to dip into other areas of your budget.

Finally, we discuss impulse expenses. These are expenses that we make on a whim without necessarily planning for them in advance. While it can be tempting to indulge in impulse purchases, it is important to be mindful of how these expenses can impact your overall financial health. One technique for managing impulse expenses is to set a spending limit for yourself each month. This can be done by taking a percentage of your income and allocating it specifically for these types of purchases. By giving yourself a designated amount to spend, you can still enjoy the occasional impulse purchase without risking overspending.

Overall, calculating your expenses for your life energy involves a careful consideration of your income and all of the expenses that you incur on a regular basis. By taking the time to create a budget and closely tracking your spending, you can gain a clearer understanding of how much money you have available for your various expenses. This, in turn, can help you make more informed decisions about how to allocate your resources and achieve your financial goals.