24 October 2005


I heard a cool idea regarding the allocation of income the other day. It comes from Holistic Farming but is universally applicable.

The key concept is WIMP:

  • Wealth creation (basically purchasing assets, i.e. expenses that bring greater income in the future)
  • Inescapable expenses (expenses over which you have no discretion: you have to pay them just to stay in business, e.g. licence fees)
  • Maintenance (expenses over which you have some discretion that you pay out to keep things running)
  • Profit (money you take out of the business and put in your pocket)
So when your business makes sales, you have to decide beforehand how much of your income you will allocate to profit, how much to maintenance, and so on.

I found the idea sensible, easy to understand, and fun to play with.


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