9/22/2009
Written By: Jim Garnett - Consumer Credit
Category: Life  
School(s):

My question “A Whole Pie Or Sliced Into Pieces?” has to do with how one view’s his money. The answer to this question will largely determine whether we will control our money or our money control us.  Money management really boils down to this one simple perspective: “Do I see my money as a whole pie or do I see it as a pie sliced into pieces?” 

To illustrate, let’s say I invite you and two friends over for pie and ice cream tonight. I know we have a whole pie at home because I saw it freshly baked as I left for work.  In phoning my wife to see if my invitation is ok, I find out my three sons will be dropping by the house this afternoon.  I fear that when they eat as much pie as they want, there will not be enough left for you and your friends.  Therefore, to make sure I keep my word to you and meet my obligations, I ask my wife to do this simple task.

Slice the pie into pieces and separate five pieces (enough for you and us) from the rest of the pie.   My sons will then be free to eat the part of the pie that has not already been promised to someone else, and I will be able to keep my promise to you.  By dividing the whole pie into pieces, I can tell what part of the pie is “designated” for you and what part is “discretionary” for them.

Now, transfer this simple principle into how you view your money. The entire amount of money you bring home each month is the “whole pie.”  Not all of that whole pie is spendable (discretionary) for just whatever you want. Some of your money most likely needs to be set aside (designated) for specific obligations like  a car payment, car insurance, gas money, money for the upcoming class trip, repayment of the loan from your brother, or money for savings.  These “pieces” of the pie need to be kept separate from the rest, and seen as designated for those “have to” obligations.

If you view your “whole pie” (all your money) as spendable, you will not have enough left to meet the other important obligations So, you develop a perspective that part of your money is designated and not spendable for other things. Why?  Because all of our money is not discretionary; some of it has been promised already and needs to be designated for those things.

So, first determine how much of your pie needs to be set aside each month and designated to meet obligations. View that amount as set aside “pieces of the pie,” and not spend that money for other things!  It will then be easy to see what you can spend for extras and what needs to be left untouched for obligations.

Simply changing our perspective and seeing our money as divided into “pieces of the pie” instead of seeing it as a “whole pie” will allow us to meet our obligations, and at the same time know what is available to spend for other things.  That puts in control rather than being controlled.