Written by: Sarah E.J. Collier, J.D – Associate Advisor

Budgeting isn’t about limiting yourself

it’s about making the things that excite you possible.

– Author Unknown

One of the most underestimated and least taught life lessons in my opinion is learning to budget in a mindful and optimistic way.

As I talk with individuals, regardless of age, I find that many have anxiety about money. For some, this trait was learned from other family members growing up, while for others this stems from how they perceive themselves as low income earners. Whatever the reason may be, it’s important not to think about how limiting a budget can be, but think of how it can open the doors to helping you achieve your goals (as long as they are reasonable of course).

To get you on the right path of feeling in control and confident about your spending, it is important to first break down your budget into four different categories: Fixed Necessary Expenses, Variable Necessary Expenses, Savings Strategies and Discretionary Expenses. Everyone processes the discussion around budgets and cash flows differently, but this is how I like to organize my discussion with clients.


The first step is to list your monthly expenses for Category 1: Fixed Necessary Expenses and 2: Variable Necessary Expenses.

Category 1: Fixed Necessary Expenses

  • Rent/mortgage
  • Phone bill
  • Car payment
  • Insurance
  • (if you are me, this includes board and farrier services as well! )

Category 2: Variable Necessary Expenses

  • Utilities
  • Gasoline
  • Groceries
  • Medical
  • Pet Food

After reviewing these expenses, you will need to total them and subtract that total from your monthly take home pay. The remaining dollars can be applied to Category 3: Savings Strategies and Category 4: Discretionary Spending.

Category 3: Savings Strategies

  • Retirement
  • Emergency Savings
  • Targeted Savings

Saving in general is a good habit to get into when you are young, even if it is only in small amounts. There are two points in life establishing a good savings habit should be emphasized. For many, this starts early with saving birthday/holiday money or from a job in high school. The next stage is when an individual moves out after high school or higher education, obtains their first job, and starts on the path toward full independence. It is oftentimes difficult to establish and maintain a habit of saving during these times because the euphoria of being one step closer to independence can influence impulsive spending.


Why Contribute – Example #1

  • You contribute $50 per week ($2,600 per year)
  • You begin contributing at age 25
  • Assumes 5% growth each year
Age Balance
25  $                    –
30  $            14,367
35  $            32,703
40  $            56,104
45  $            85,971
50  $          124,090
55  $          172,741
60  $          134,833
65  $          314,079


As you can see in the example above, there are three different strategies for saving you will want to consider. Retirement is one category that is more difficult for younger individuals to start saving for because this money will not be used for an extended period of time. However, as shown in example 1 you can see that contributing a relatively small amount at an early age can have a large impact when you arrive at retirement age. When determining how much to contribute, be sure to contribute at least the minimum amount to receive the full match of any employer contributions if this is offered as an employee benefit.

The next step is establishing an emergency savings. The general rule of thumb is to save 3-6 months of expenses to cover emergencies. Typically, this savings is to cover emergencies that result in loss of income. However, you should also incorporate funds for emergency spending on health care, vehicle repairs, housing maintenance, etc.

Next, review your targeted savings. Finally, we get to the part where you can talk about your short term and long term goals. Many of these may include expenses for a trip, purchasing a new vehicle or buying a house. Whatever your goals are, it is at this level where you will want to weigh in, strategizing how much and for how long you plan to fund this “pot.” When analyzing how aggressive you save for these targeted savings goals, you want to review how much of your monthly income is to be allocated towards targeted savings and discretionary spending. This leads to the final step, which is incorporating discretionary spending.

Category 4: Discretionary Spending

  • Entertainment/Leisure
  • Travel
  • Monthly Subscriptions
  • Dining Out

Discretionary spending is spending allocated to those items that are not necessary, but you feel have some importance to your general wellbeing and interests. Above I have listed items that are commonly linked to hobbies and social living, all of which are important and should be incorporated in moderation to reflect your income and budgeting limitation in order to avoid a rebound effect. It is okay to treat yourself, even when you are on a strict budget, to be sure that your enjoyment of life is not being compromised.

Closing thoughts and words of wisdom.

  • Budgets are flexible and can be tailored after overspending setbacks. Maybe you have to dip into your emergency savings to cover a month where you over spent, THAT’S OKAY! Don’t feel ashamed. Instead, think “how will I reimburse myself.”
  • Don’t try to “starve” yourself. Thinking of a budget as a diet. Mental health plays a huge role in whether you are successful or not in reaching your goals. If you are too set on the negative aspect of budgeting (i.e. I can’t do this and can’t afford to do that) then you are more likely to fail in reaching your goal.
  • Take ownership in your finances. Avoid playing the blame game and keep moving forward even when you have setbacks

Establishing and maintaining a budget is fundamental to achieving any long term savings goals. My role as an Associate Advisor allows me to coach my clients and their families along the way to establish these savings strategies.

Looking for assistance to get back on track with your budgeting? Contact me or one of my fellow colleagues to help guide you back on the path to achieving your financial goals.