I try and use thinking frameworks and principles to guide my actions and decision making. The CEO spending framework is how I think about expenditures. The CEO framework allows me to quickly visualize how efficient I’m being with money and see if my spending aligns with my values and principles. Without a plan and a way to track progress we are destined to fail.
C.E.O. stands for Core Living Expense, Experience and Other Discretionary.
Core Living Expense
Think about what your finances would look like if you were running a business. Core living expenses would be the vital expenses you need to keep your business running. Call them fixed or mostly fixed expenses you need to keep your life moving forward. The lower your fixed or core living expense, the more efficient you are and the greater your profit. Make sense? Good. Below is a list of what I consider to be core living expenses. You may disagree with some and that is ok.
- Mortgage or Rent
- Home Repairs
- Utilities
- Groceries
- Insurance
- Transportation
- Child Care
- Internet
- Student loan or other debt payments
- Telephone
- Personal Care
- Healthcare
Experience
Overtime our Core Living Expenses should decrease so that our Experience Spending can increase. Spending money on Experience is generally planned and focused on personal development, education, recreation and travel. Through these experiences we grow personally as does our potential to contribute positively to society. Through experience spending we gain experience, perspective and empathy. We grow personally and professionally and expand our vision for ourselves and empathy for others. After Core Living Expense, Experience spending is only limited by net income, vision and imagination. Be careful not to overdo it, using credit cards to finance Experience Spending is not allowed.
Below is a list of what I consider to be Experience spending. Again, you may disagree or have your own priorities.
- Martial Arts
- Cycling
- Dance
- Travel
- Education
- Art
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Other Discretionary
Other Discretionary spending should be the smallest category on your personal income statement. This category is filled with consumer goods, subscriptions, clothing, electronics, and misc. stuff. Generally this type of spending brings short term satisfaction but either won’t last or is discarded in the long-term.
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