for new all my arguments about losing money on making charges and damages fall on deaf ears she is confident that she is buying new jewels at a fraction of the full cost another books profits on his investments from time to time and uses that money to upgrade his phone car or some gadget he feels really smart about it why do i pick on these habits should one not be enjoying the money they make is long term investing the only route to wealth is there a virtue in trading the present for the future my concern is about wealth and sustainability of income let me explain whatever we do with our money we hold it only in two primary forms as assets and as income income is the cash flow that is readily available to use asset is the accumulated income that will be available whenever we want to use it our financial well being is not determined just by how much income we have today available to spend as we wish it depends critically on sustaining that income over our lifetimeat some level of intuitive understanding we should be able to strike a balance between the two mindlessly accumulating assets and not utilising it ever or bequeathing it to heirs who dont even need it are also forms of extreme imbalance the tendency to convert assets into income frequently not allowing assets to accumulate and grow with time is also an extreme imbalance asset allocation is a very powerful idea in personal finance we balance between income and growth depending on which asset generates income and which asset must grow to generate future income retirement is just a case of the income generating human asset making way for income generating investment assets while earning we set income aside to fund that future every time the asset is liquidated in the examples we discussed earlier growth is sacrificed for income each one of those innocuous decisions are asset rebalancing decisions that impact our personal finances and long term wealth when profit is booked on a growing asset like equity and we consume the cash we have reduced our equity allocation for cash when incomes are used to replace gold jewels allocation to gold has not gone up if all incremental cash went towards chargesthere is truly no escaping the asset allocation framework while explaining the everyday decisions we make to spend or save worse still spending is habit forming therefore the provisions for future incomes to be generated must also include this lifestyle that the spending has fostered the default answer is not no all spending is not wasteful and unnecessary just the mindfulness about where income is getting allocated and why an asset is being liquidated is enough the percentage allocation method is still my personal favourite i recast every saving and expense big or small as a percentage of my annual income for example 10 of the income on a holiday seems reasonable in my