Before you rush out to spend your new-found wealth in a jar, choose which of the seven priorities you want to assign to your cash.
Priorities Spectrum Explained
- Red: Emergency (specialized cache)
- Orange: Monthly Fixed (regular) Needs (rent/mortgage, insurance, debt)
- Yellow: Cache (Money with longer cycles, like taxes, insurance, clothes)
- Green: Retirement (specialized cache)
- Blue: Monthly Variable Needs (groceries, diapers)
- Indigo: Monthly Regular Wants (subscriptions)
- Violet: Monthly Variable Wants (eating out, treats, new tv)
I put together a quick illustration that shows how to prioritize. An emergency is an immediate need. Retirement is long-term. Both are needs and are on opposite ends of your timeline.
Below is a small video I put together to help visualize how it fits together. I'll be uploading additional videos in the coming weeks for members. Sign up to get notifications and early access at the end of the video.
Priorities in Real Life
Before we started caching, these variable costs for longer than a month would sabotage our monthly budget every time. It used to be that if someone needed a haircut, back to school shopping, or birthday gifts would leave us scrambling to cover other bills. We were so busy that we forget to plan for expenses that only came in every few months.
My husband would say: What's the use of budgeting when you can't cover it anyway?
Here's a quick example of how it works for us now in real life.
My husband had to travel for work and needed a new pair of pants. Between our cache cash and points, he was able to purchase clothing, without making a dent in our monthly paycheck at the end of thirty days.
The purchase of pants is a need, but not a monthly one, so it belongs in the Cache or priority three (yellow).
Difference Between Allocation and Priorities
You allocate your money to budgeting categories (clothing, housing, food). You prioritize your funds according to this chart based on time and needs/wants.
Sometimes it's hard to differentiate between needs and wants. You need clothes, but you shop at designer stores instead of thrift stores. Your cache is the determining factor. If the money is there, prioritized and allocated, then you can afford it.
Where You Are Now
If you've been following along with the steps in your overview, you have now covered steps 1 (commit to life), 2(dare to dream), and 5 (chart your priorities spectrum), with a sneak-peek at step 3 (eliminate surprises) using your cache.
You have prioritized your money; go spend it (allocating it to emergency or retirement counts as spending too).
With a quick success under your belt, it's time to start going through the steps in order while measuring your happiness, security, and course.
Video Sneak Peek: Quadrant I