Monday, April 26, 2010

Pizza Strategies for Personal Finance

"You better cut the pizza in four pieces because I'm not hungry enough to eat six." ~ Yogi Berra
I chuckle when I see this Yogi Berra quote because it reminds me of a personal finance illusion, overly focusing on how to divide up existing funds.  Cutting more slices may work for a while.  However, as the number of those eating increase,  the pizza is all used up and each slice isn't enough to satisfy anyone.  That's when it's time to get more pizza. 

  • Cutting more pieces.   When there is enough pizza to satisfy everybody and have some left over, slicing is a great strategy. Slicing is the equivalent of budgeting in personal finance.   Different amount of funds are allocated to each  piece of the budget.  Budgeting worked for me when I had no non-housing debt and was putting 5-10% regularly in savings. 

  • More pizza. When there isn't enough pizza to feed everyone, creating more slices is not a solution.  Everyone gets less than they need and no one issatisfied.   In personal finance, this is the equivalent of living paycheck to paycheck and having credit card debt.  If necessary expenses exceed income, budget, i.e. slicing the pizza differently, won't help.   In this case, it's time to get more pizza, i.e. earn more money.
  • Of course, another option may be to decrease the number eating the pizza :-)  However, if only necessary expenses exist, cutting back may not be an option.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2010 Achievement Catalyst, LLC

    1 comment:

    Conrad said...

    I love how you quote Yogi Berra. My favourite quote by him is: "90% of Baseball is mental. The other half is physical."

    I think the last option you forgot is to make your own pizza. Building personal wealth and following tips on budgeting can go a long way. Perhaps start your own pizza shop so that you are able to provide enough pizza for everyone!

    Thanks for the post.