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Discussion on: Businesses Should Have 3 Months of Savings? It’s Not as Simple As You Think

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Sandor Dargo

Thanks for the article, tt's an interesting perspective.

I just want to change a couple of words in one paragraph to show that personal life and finance is also not so simple as one might imagine.

Every “saved” dollar could have been spent — spent on a better school for my children, on an investment that could generate a little but secure money even through bad times, or, oops, on someone doing the cleaning as such giving me back some of my free time.

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Erik Dietrich Author

The reason that I think of personal finance as simple, relatively speaking, is that almost all of the tradeoffs you face are various flavors of "do I slightly defer financial independence for X bit of spending in the moment?" That would apply to decisions about money for kids, hiring a cleaning service, do you fix the sink yourself or call a plumber, etc. (I'm not saying these are easy or trivial decisions -- just that they're all essentially similar variants on the same basic theme of a zero-sum apportioning of fixed income.)

A business is essentially a revenue-generation machine, and the people running it are constantly looking for ways to take the money that it generates and spend that money to turn it into a more efficient machine. This dynamic is very rare in personal finance -- maybe earning a graduate degree or some kind of cert. (I suppose one could theoretically argue that hiring cleaners makes them a better worker at the day job by making their spare time more restful, but that seems like a reach)

The investment of personal money in a some kind of venture is interesting because it casts you as a business owner. If you buy a rental property (or even, to an extent something like equities), you're now thinking about things like cash out vs. long term equity, the health of the investment/enterprise, etc.

Anyway, I didn't include that to suggest that personal finance decisions aren't consequential or anything like that. It's just that the overwhelming majority of them are basically asking yourself the same essentially straightforward question: "do I really need this or can I live without it?"

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