Click here to learn more about our Physician-Centric Advisory Services.

Presented by Wes Boatto

When I first bring up budgeting with new clients, I often get a kind of deer-in-the-headlights look. It’s not uncommon for people to hear the word “budget” and want to run for the hills. This is especially true for those who have the fortunate burden of a higher-than-average income. To be clear, I am not necessarily advocating for you to track every expenditure (but that can be helpful!).

In fact, for some of our clients who are closer to retirement, budgeting in the traditional sense may not be necessary. However, if you’re a young family, and have a large number of financial goals in your future, it’s important to talk about budgeting from a big-picture perspective: What is important to me, and what is not important to me?

When you have more than enough income, budgeting can seem like it is not necessary. However, it’s critical to have a plan in place for your wealth that sets you up for success both now and in the future.

So, let’s remove the stigma from budgeting and talk about why it’s an uncomfortable topic, and how you can reframe it in your own life to find financial stability and success.

Why Do We Hate Budgets?

The problem with budgets today is that our culture has made them all about saying “no.” It is challenging to stick with a budget when it feels like you’re constantly depriving yourself of the things that make life worth living. Budgeting is not about depriving yourself or living in a constant state of saying “no” to things you want. I believe that budgeting is a tool you can use to spend money purposefully on the things that you value most to live a more fulfilling life both now and in the future.

A budget is something that is completely unique to the family creating it. Everybody’s value system is different, and so everyone’s budget will be different. If you are creating a budget with line items that the world tells you that you “should” have, you may have to start from scratch. The best starting point is determining what you care about

When you’re able to step back and evaluate your goals and values and apply those concepts to your spending, you get a budget that’s creating more freedom in your financial life. Your budget becomes a guideline for living in a way that makes you and your loved ones happy, not a jail cell you’re stuck in while the rest of your friends and coworkers have fun.

Setting Up Your Budget for Future Success

The best way to start your budget is to think about what you currently value, and what your long-term lifestyle goals are. These ideas can start to guide what you’re willing to spend your money on, and help you to steer clear of expenses that are happening without intention. For example, when my wife and I moved into our new home, we realized that there were so many small upgrades we wanted to make. Any homeowner knows exactly what I mean – your space is fine, but it’s not 100% “you” when you first move in.

We had a laundry list of to-do’s around the house that ranged from updating light fixtures to buying a new couch. Then we sat down to look at our budget. We thought about our life when we’re 70 – “What would we value then?” – the answers were obvious: we’d value spending time with our kids and grandkids, taking them on trips, helping to fund a college education, and giving back to the organizations and charities we love. In order to continue funding those goals, the new couch and updated light fixtures had to wait a few more months.

Likewise, your budget should reflect your goals right now and for the future. When you keep in mind that you need to balance your spending now on things that bring fulfillment to you and your family in the moment and someday when you’re retired, you are more likely to make empowered, intentional spending choices without feeling limited.

A “Yes” Budget In Practice

The truth is, this version of “budgeting” takes the traditional sense of what budgeting looks like in practice and turns it on it’s head. We’re helping clients say “yes” with their budget, not focusing on what they need to say “no” to. Our process is actually enjoyable in practice, not painful like so many other failed budgeting tricks and tips may have been in the past.

Here are the steps I usually recommend taking when creating a “yes” budget:

  1. Get clear on your goals and values. Just like we decided to delay some of our home improvement projects, you may end up deciding that some of your more immediate upcoming expenses are worth delaying in order to better balance them with saving for your future.

  2. Evaluate your spending. You may find that you’ve been spending a lot in one category that isn’t bringing you fulfillment at all. For example, how many nights have you picked up overpriced takeout that could have been funding your next family vacation? Is what you’re currently spending reflective of what you value most?

  3. Live on last year’s income. This can be very impactful – especially for high-income earners like physicians or executives. Many times in your career, you’ll experience a notable salary increase. A great example is a doctor going from a resident or fellow to attending. When this happens, it can be tempting to step up your lifestyle to your new income. Instead, when you get a large salary hike, think about living on last year’s income and using the rest of your income to take big steps toward your financial goals. I will have to do another blog post on this, but believe me, a short delay in stepping up your lifestyle to your new income can make a significant impact on your future.

  4. Know when it’s okay to splurge. This is my favorite step – because it is important to actually enjoy your life even if you are on a budget. For example, if your income did increase, and you’re planning on living within last year’s budget in spite of the pay hike – it’s okay to splurge! Maybe that means upgrading a piece of furniture in your home or taking the family vacation you’ve been talking about for forever. Sometimes, doing a one-time splurge to “reward” yourself actually makes it easier to stay on track for the rest of the year.

Are you ready to give it a try? This is an important step to ensuring that you are on track to meet your financial goals.