Most people do money all wrong. It flows in and out of their lives without intention. I can help you change that, but first, let’s tee up this topic with a golf analogy.
According to the USGA’s Rules of Golf, there are five areas on a golf course.
They are:
- The Teeing Area
- The General Area
- Bunkers
- Penalty Areas
- The Putting Green
Each of these areas contains their own specific rules for what happens when a player’s ball lands in that type of area and what the player may do. To get intentional about money, we first need to define the five types of money. A ball in the bunker requires a different strategy than a ball on the tee. The same goes for money.
Here are the five places money can exist in your life:
- Human Capital
- Needs
- Wants
- Penalties
- Savings
Money in each of these areas has different rules and requires a different strategy. Once you can define and understand each of these five areas, you’ll view money in an entirely different light, and be able to make financial decisions with more confidence.
Each of these areas requires a unique strategy.
If we start by defining where we are on our financial course, we won’t end up attacking a bunker shot with our driver.
Think of human capital as your money on the tee box.
You haven’t earned this money yet, but it has a lot of potential. Increase this potential by developing new skills, building your network, furthering your education, or finding a job that values your time appropriately.
Things we want to spend money on are like the general area.
Ideally, dollars directed here will bring us the most fulfillment, however, some of our spending might end up in the rough if we’re not prudent.
Things we need to spend money on are similar to bunkers on our financial course.
If you play like me, they’re an inevitable stop-off on the way to your ultimate goal, but with some smart play, they won’t derail your round.
Nothing will inflate your score and erode your wealth like penalty areas.
The three different hazard areas on the golf course (marked by red, yellow, or white stakes) carry different severity penalties. Similarly, financial penalty areas, like taxes, interest, and fees all require a different strategic approach.
Saving is our putting green.
It’s where the ultimate goal of financial freedom lives, but just because we’ve hit the green doesn’t mean our work is done. There are numerous opportunities to gain and lose strokes on the short stuff so read the green accordingly.
In summary:
By mastering each area of your financial course and knowing your five types of money, you can unlock intentionality in your decision-making, swing with financial confidence, and master the green.
