A person makes a certain amount this year (based on salary and/or commission or profit). The next year they make a little bit more. The next year they make even more.
Should this person base their fourth year spending on the assumption they will continue to increase their earnings or should they assume it will stay stable or should they go back to year one earnings, spend as if that would be repeated and know that anything above it is a bonus can be applied toward savings?
This is for personal spending and not reinvesting in a company.
Do you think most people would spend with the assumption their income will continue to rise or would most people take a more conservative approach?
Are you different than most people in this example? What would you do?
These questions are mainly asked to make you think but if you prefer feel free to email me with your thoughts.
Have a great day!