In the context of financial planning, Human Capital can be seen as the net present value of an individual’s skills, experience, and abilities on future earnings and the accumulation of wealth. Investing in human capital can increase an individual’s productivity and, consequently, their contribution to economic growth.

Education and Training (Impact: 1) - Examples: Investing in advanced education and training can unlock a higher productive power in the workforce.
Professional Development Opportunities (Impact: 2) - Examples: Having an awareness to explore new ideas and engage in professional development can lead to innovation and improved performance throughout an individual’s earning years.
Skill Development (Impact: 3) - Examples: Skills learned on the job can contribute to a large portion of an individual’s lifetime earnings.
Wellness (Impact: 4) - Examples: Wellness can lead to improved health and productivity, which in turn can contribute to economic growth.

In the context of financial planning, Bonsai refers to Current Expenses as the ongoing costs and expenditures that individuals or households incur on a regular basis to maintain their standard of living. These expenses typically cover essential needs, discretionary spending, and debt payments.

Current expenses are typically covered by active income from employment.

Current expenses are managed through budgeting and cash flow management strategies to ensure that income covers these ongoing obligations and discretionary spending while leaving room for savings and investments.

Living Expenses (Impact: 1)
Includes housing costs (rent or mortgage payments), utilities (electricity, water, heating), groceries, and transportation (car payments, fuel, maintenance).
Discretionary Expenses (Impact: 2)
Non-essential spending on entertainment, dining out, travel, hobbies, and other personal interests.
Debt Payments (Impact: 3)
Monthly payments on credit cards, student loans, personal loans, or other debts.

In the context of financial planning, Bonsai refers to Retirement Expenses as the costs and expenditures individuals will face after they retire and are no longer earning a regular income from employment. These expenses may change significantly from current expenses due to lifestyle adjustments and reduced income sources.

Retirement Expenses are future-oriented and require long-term planning. These future expenses rely on passive income sources and savings accumulated during working years.

While Healthcare Costs, Travel and Leisure, and Legacy and Charitable Giving are technically Retirement Expenses, Bonsai will refer to each of these seperately from a future planning perspective.

Basic Living Expenses (Impact: 1)
Similar to current expenses but adjusted for changes in housing (downsizing or relocation), reduced commuting costs, and potentially higher healthcare expenses.
Healthcare Costs (Impact: 2)
Including premiums for Medicare or private health insurance, out-of-pocket medical expenses, and long-term care costs.
Travel and Leisure (Impact: 3)
Depending on retirement plans, expenses for travel, hobbies, and leisure activities may increase.
Legacy and Charitable Giving (Impact: 4)
Considerations for leaving an inheritance or charitable donations.

In the context of financial planning, Bonsai refers to Aspirational Expenses as a type of spending that reflects one's desires, ambitions, or long-term goals rather than immediate needs or necessities. These expenses typically represent items or experiences that individuals or households aim to achieve or acquire as they progress towards their ideal lifestyle or personal fulfillment during their active working years or early retirement phases.

Aspirational expenses are often considered discretionary spending and may require careful financial planning and budgeting to achieve.

Travel and Exploration (Impact: 1) - Trips to exotic destinations, luxury vacations, or travel experiences that offer cultural enrichment or adventure. Higher Education (Impact: 2) - Pursuing further education, attending prestigious institutions, or investing in specialized training or courses to advance career goals. Home Ownership and Upgrades (Impact: 3) - Purchasing a dream home, upgrading to a larger or more luxurious property, or investing in renovations and interior design to create a personalized living space. Luxury Items (Impact: 4) - Acquiring high-end consumer goods such as designer clothing, jewelry, luxury vehicles, or technology gadgets that signify status or personal taste. Philanthropy and Giving (Impact: 5) - Donating to charitable causes, supporting community initiatives, or funding projects that align with personal values and contribute to societal well-being. Personal Development (Impact: 6) - Investing in hobbies, skills development, personal coaching, or wellness activities that promote physical, mental, or emotional well-being. Early Retirement (Impact: 7) - Planning for financial independence and early retirement to pursue personal passions, hobbies, or volunteer work without the constraints of traditional employment.

In the context of financial planning, Bonsai refers to Healthcare Expenses as the costs associated with medical care, treatments, and services aimed at maintaining or improving an individual's health. These expenses encompass a wide range of healthcare-related costs incurred by individuals, families, or healthcare systems.

Medical Services (Impact: 1) - Doctor Visits: Fees for consultations with primary care physicians, specialists, or other healthcare providers. Diagnostic Tests: Costs for laboratory tests, imaging studies (e.g., X-rays, MRI), and other diagnostic procedures. Hospitalization: Charges for inpatient care, including room and board, nursing services, and surgical procedures. Emergency Care: Expenses related to emergency room visits, urgent care services, and ambulance transportation. Prescription Medications (Impact: 2) - Medication Costs: Out-of-pocket expenses for prescription drugs, including copayments, deductibles, and the cost of medications not covered by insurance. Mail-order Prescriptions: Costs associated with ordering medications through mail-order pharmacies, which may offer discounts or savings. Dental and Vision Care (Impact: 3) - Dental Services: Fees for routine dental exams, cleanings, fillings, and more extensive procedures such as root canals or crowns. Vision Care: Expenses for eye exams, prescription eyeglasses or contact lenses, and corrective procedures like LASIK surgery. Medical Supplies and Equipment (Impact: 4) - Durable Medical Equipment (DME): Costs for devices such as wheelchairs, walkers, CPAP machines, and home oxygen equipment. Medical Supplies: Expenses for bandages, dressings, insulin pumps, and other disposable medical supplies. Therapeutic Services (Impact: 5) - Medical Supplies: Expenses for bandages, dressings, insulin pumps, and other disposable medical supplies. Preventative Care (Impact: 6) - Routine Check-ups: Expenses for preventive healthcare services, such as annual physical exams, vaccinations, and screenings for conditions like cancer or diabetes. Wellness Programs: Costs for health promotion initiatives, including smoking cessation programs, weight management services, and fitness classes. Long Term Care (Impact: 7) - Nursing Home Care: Expenses for long-term residential care in nursing homes or assisted living facilities. Home Healthcare: Costs for in-home care services provided by nurses, aides, or therapists to individuals with chronic illnesses or disabilities. Insurance Premiums and Deductibles (Impact: 8) - Health Insurance: Monthly premiums paid for health insurance coverage, as well as deductibles, coinsurance, and out-of-pocket maximums. Medicare: Costs associated with premiums, deductibles, and copayments for Medicare coverage, including Parts A, B, C (Medicare Advantage), and D (prescription drug coverage).

In the context of financial planning, Bonsai refers to Terminal Wealth as the future value of an investment portfolio or financial assets that an individual wishes to distribute as an inheritance (liability) for their designated beneficiaries.

Real Assets (Impact: 1)
See Definitions of Real Assets
Defined Assets (Impact: 2)
See Definitions of Defined Assets
Investable Assets (Impact: 3)
See Definitions of Investable Assets

In the context of financial planning, Bonsai refers to Inheritance as assets, property, rights or wealth that an individual receives as a beneficiary from a deceased person (decedent).

Real Estate (Impact: 1) - Properties such as houses, land, vacation homes, or commercial buildings that are owned outright or have equity in them. Financial Investments (Impact: 2) - Stocks, bonds, mutual funds, certificates of deposit (CDs), retirement accounts (e.g., IRAs, 401(k)s), and other investment vehicles. Cash and Bank Accounts (Impact: 3) - Savings accounts, checking accounts, money market accounts, and any cash or liquid assets held in financial institutions. Business Interests (Impact: 4) - Ownership stakes in privately held businesses, partnerships, or shares in corporations. Personal Property (Impact: 5) - Valuables such as jewelry, artwork, antiques, collectibles, vehicles (cars, boats), and household items. Intellectual Property (Impact: 6) - Patents, copyrights, trademarks, and royalties from creative works or inventions. Insurance Proceeds (Impact: 7) - Death benefits from life insurance policies payable to beneficiaries. Annuities (Impact: 8) - Fixed or variable annuities that provide regular income payments to beneficiaries. Debts Owed (Impact: 9) - In some cases, inheritances may include debts owed to the deceased, which beneficiaries may inherit responsibility for settling.

In the context of financial planning, Bonsai refers to Investable Assets as any financial asset or instrument that can be bought or sold in financial markets with the expectation of generating a positive return. These assets are typically considered suitable for investment purposes because they have the potential to appreciate in value over time or generate income. While Real Estate is technically considered an Investable Asset, Bonsai places this in the Real Assets category.

Stocks and Bonds (Impact: 1) - Shares of publicly traded companies (stocks) and debt securities issued by governments or corporations (bonds).
Mutual Funds (Impact: 2) - Investment vehicles that pool money from multiple investors to invest in diversified portfolios of stocks, bonds, or other assets.
Cash and Cash Equivalents (Impact: 3) - This includes physical currency, checking accounts, savings accounts, money market accounts, and short-term certificates of deposit (CDs) that are readily accessible for immediate use. This asset is generally a short term or current asset on a Personal Financial Statement and expected to be converted into cash or used up within a relatively short period, usually within one year.
Commodities (Impact: 4) - Physical goods such as gold, silver, oil, and agricultural products, traded on commodity exchanges.
Cryptocurrencies (Impact: 5) - Digital or virtual currencies like Bitcoin and Ethereum, traded on digital currency exchanges.

In the context of financial planning, Bonsai refers to Defined Assets as intangible assets with intrinsic value that will provide a future benefit. While Defined Assets can also be classified as Income Asset, we look at these as a specialty classification. Defined Assets differ from traditional assets like stocks, bonds, and real estate, which can be bought, sold, and directly managed by the individual.

Social Security (Impact: 1) - Social Security is a government program that provides monthly payments to eligible retirees, disabled individuals, and survivors of deceased workers. It is funded through payroll taxes. It is not an asset that can be bought, sold, or transferred. Instead, it represents a guaranteed income stream based on one's earnings history and contributions to the Social Security system.
Pension (Impact: 2) - A pension is a retirement plan that provides regular income payments to retired employees, typically based on their years of service and salary history. There are two main types of pensions: Defined Benefit Plans: These plans promise a specified monthly benefit upon retirement, which is calculated using a formula based on salary and years of service. Defined Contribution Plans: In these plans, employees and/or employers contribute to individual accounts, and the retirement benefit depends on the account's investment performance (e.g., 401(k) plans).
SPIA Annuities (Impact: 3) - Only SPIA & FIA Annuities which provide guaranteed income streams fall into the Defined Assets Category. A SPIA is a type of annuity contract where an individual makes a one-time lump sum payment to an insurance company in exchange for a guaranteed income stream that begins almost immediately, typically within one year.
FIA Annuities (Impact: 4) - A FIA is a type of annuity that offers a guaranteed minimum interest rate combined with interest credits linked to the performance of a specified stock market index (such as the S&P 500).
Royalties (Impact: 5) - Royalties are payments made to the owner of a particular asset for the ongoing use of that asset. These payments can be structured in various ways, but they are generally based on the revenue generated by the asset or a set fee per unit of use. Royalties are common in industries where intellectual property (IP) plays a significant role, such as music, publishing, technology, and natural resources.

In the context of financial planning, Real Assets are tangible, physical assets that have an (economic) intrinsic value and can be quantified. The value of these assets can fluctuate over time due to factors such as market conditions, depreciation, or appreciation. It’s important to keep an updated Personal Financial Statement (PFS) for both risk and estate management.

Real Estate (Impact: 1) - This includes net equity in primary residences, vacation homes, land and other properties that an individual owns.
Business/Business Interest (Impact: 2) - A business asset is an item of value owned by a company, and can span many categories. They can be physical, tangible goods, such as vehicles, real estate, computers, office furniture, and other fixtures, or intangible items, such as intellectual property.
Personal Property (Impact: 3) - These generally encompass items such as furniture, electronics, jewelry, artwork, collectibles, clothing, and other personal possessions.
Personal Valuables (Impact: 4) - Assets like antiques, heirlooms, valuable collections (coins, stamps, etc.), and other high-value items.
Vehicles (Impact: 5) - Personal vehicles such as cars, motorcycles, boats, or recreational vehicles.