Percentage Spending – Explained Using Half-Life Idea

Last week, I attended a course on radioactive safety and was introduced to jargons and calculations. Being a graduate with scientific background enabled me to understand the topics discussed with ease but not some of the course mates whom I spoke to. Those who are from engineering, business did find themselves grappling with the theories and concept. Some of them did not see the connection between what was taught with their educational background and their scope of work back in office.

The lecturers tried hard in explaining to them and I really admired their patience and professionalism in making sure everyone understand the concept. So as they repeated for the second or third time, I found time for myself to ‘think of out the box’ and linked one of the topic discussed to finance management. You might be thinking now – hey.. is there really such a link? I will try to explain and see if it makes sense to you.

1. Introduction to Half-Life Calculation

In simple explanation, radioactive atoms like money will decay away with time. What I meant by decay is that it the packet of money/radioactive atoms will get less and less if you do not add anymore into the packet.  Radioactive atoms decay through the process of giving off radiation whereas money ‘decay’ whenever you spend them for countless bills, consumer goods and daily necessities.

There is one important calculation of radioactivity call –  Half-life (t½). It is defined as the amount of time required for a quantity to fall to half its value as measured at the beginning of the time period. While the term “half-life” can be used to describe any quantity which follows an exponential decay. This is how it look like in graphical representation:

decaycurve

It doesn’t rocket science to understand this graph. You just have to know that for every half-life, the original quantity will be divided by 2 (drop by 50%). It is as if the radioactive atoms has brain to think for themselves that making sure for every half-life they will only drop their quantity by half. Most importantly, do take notice that the graph will not hit zero. It takes infinite time for the whole packet of atoms to reduce to zero quantity.

2. Money Allocation Vs Half-life

So what has radioactivity and half-life got to do with money allocation? As I mentioned earlier that as you spent your money away you are decaying the quantity. But in everyday life, do you think of how you spend your money, do you do budgeting? Many people fall into the trap of consumerism in which they spend on impulse, without doing their sum correctly. As a result, the whole packet of money is gone without you being aware of it.

Learn to spend like radioactive atoms. Allocate a percentage to your spending. Tag to say a 20% to whatever you have for example to your saving etc. By saying so, I do not mean that you have to spend all the 20%! It is a maximum cap that we should set to ourselves. Especially for retirees who no longer has any income and has to live solely on his saving. As for us who are still working and have an income, it acts like controlling your budget. You only spend based on a percentage of what you have save. Once again, I do not imply that the more you save equates to the more you spend, although it really better than the notion of the more you earn, the more you spend!

By doing so, you will realised that you will never reach bankruptcy. It will require infinite of amount of time before you hit zero for your saving account.

3. Conclusion

Of course this is not the only money financial strategy that you can use on budgeting your spending. The intention is to  hope it can just give you an idea of percentage spending and its usefulness. You can derive your own money management ‘formula’ that suit you best. Feel free to share with me your own strategy that works well. I believe other readers will be just as interested as I am to know on what you practises.

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