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8 Forms of Capital

Understanding capital goes further than thinking of money alone. Most people think of financial capital and physical capital (buildings, gold, and goods) but we forget about the intangible forms. These intangible forms are interwoven into finances and physical forms that allow us to create real value that in turn will create real wealth.

So, what is non-monetary capital and how does it flow between people?

Consider a Software Development Team in a business. In the morning team meeting, they are discussing how to design a new app by exchanging intellectual capital. Once the meeting is done, a couple of them chat together about their weekends and this is a bonding capital called social capital. At the end of the month, the team leader takes them out to lunch at it build a cultural capital within the team (community). And, of course, there is a monetary exchange to pay for lunch, financial capital.

The 8 forms of Capital

Financial Capital
This is the one that we are all familiar with, the means by which pretty much all humans today exchange goods and services.

Material Capital
These assets begin as raw materials extracted from the Earth and are developed into more complex forms such as houses, cars, consumer goods, etc.

Living (Natural) Capital
Involves both the living organisms upon which we depend and necessities of life which sustain us: plants, animals, water, air, soil, and the like. The currency of living capital is the diversity, abundance, and quality of these resources.

Social Capital
A person who is wealthy in social capital might be described as “well connected” or “highly influential.” She is in good standing with the people around her and trades in gifts and favors.

Intellectual Capital
This is the knowledge that you possess, acquire, and exchange with others. We are taught that intellectual capital is the primary factor for success in the world, which means that it should be readily exchanged for financial capital; Although this is quickly fading in the new digital age.

Experiential Capital
The things that you do comprise your experiential capital: work, travel, build, cultivate, etc. This form of capital goes hand-in-hand with intellectual capital, and we generally learn best when they are combined.

Spiritual Capital
Your understanding of yourself and your place in the universe can be measured in terms of spiritual capital.

Cultural Capital
Unlike all previous forms of capital, which are held and exchanged by individuals, cultural capital can only function on the community level. Think of it as “zooming out” on social capital and observing the bigger picture of interactions between people. The currency of cultural capital is things like art, music, stories, history, and holidays.

In Conclusion

If you are not feeling right, even if you have loads of money, perhaps look at the other forms of Captial and add to those.

Compiled by: Mark Adams


Why You Need Some Fun Money in Your Budget

How does an indulgence allowance sound? You know, a little guilt-free spending that doesn’t find its way to creditors, insurance agents, utility companies, or grocery stores?

It’s called fun money and it’s just for you.

Fun money (or pocket money) keeps you sane as you continue to make the tough, daily sacrifices it takes to win with money. We like to think of it as the icing on the budget—a sweet topping that, in moderation, can actually help you reach your money goals. Here’s how it works:

Why You Need to Plan for Fun Money

You need food, water and shelter. You don’t need to get a manicure or play 18 holes of golf. But here’s what happens if you don’t budget some “me” money: you’ll spend it anyway.

The reason a cash flow plan works in the first place is that every dollar gets a name. So even if you have the discipline of a monk and vow not to spend on small luxuries, trust us, you or your spouse will eventually buy something just for fun. And then your beautiful budget is blown!

So do your budget a favor and factor in some fun before the month begins. Because the more realistic your plan is, the more likely it is to actually work.

What It Isn’t

Fun money often gets lumped into one of a few categories: your entertainment fund, your restaurant fund or even your miscellaneous fund. It’s none of these. It’s a separate amount to spend however you want, whenever you want.

The beauty of pocket money is you don’t know what you’re going to buy with it yet. You can use it as the mood strikes you, without guilt.

But try to avoid the temptation to use your fun money as a catchall for household items you forgot to work into the budget. Or if your light bill and car repairs exceed your monthly expectations, tweak your cash flow plan or dip into your emergency fund to seal the leak. Your fun money is not overdraft protection for life’s unexpected expenses. Protect it—or you’ll find a thousand non-fun ways to spend it.

How Much Fun Money to Budget

Your pocket money might be $10 or it might be in excess of $100 per month. Depending on your income, debts and long-term goals, the amount you budget could be drastically different from your neighbor.

If you’re just starting Dave’s seven Baby Steps and working toward building your $1,000 emergency fund, keep your pocket money to a bare minimum. But if you’re out of debt and working toward saving for a house or retirement, you have additional wiggle room. Just make sure you’re not spoiling yourself rotten and abandoning your long-term goals in the process. Ultimately, only you know how much fun you can afford.

Remember to Have Fun!

It’s okay to set aside some time and money for yourself each month. Even a small indulgence can do wonders for your money morale. Just be sure to set your fun allowance before the month begins and then stick with it no matter what. A healthy budget is a lot better with a little icing.

Need an easy, on-the-go way to stay on budget? Check out EveryDollar, our free budgeting app!