This series will address financial planning topics ranging from budgeting to investment management and tax planning, targeting timely updates which I believe could be of interest and value to you.
Newsletter 1 of 10: Budgeting in 2025
It was 2002 and it was the best of times. I was a very happy man, and why wouldn’t I be? I had graduated from the University of Georgia and, roughly one week later, I married the love of my life, a beautiful, smart brunette with whom I had spent most of my short life – riding four-wheelers on the farm, taking long walks in the woods, sweating in a restaurant kitchen together, listening to 70s music and, more generally, finding every excuse to be together.
Taking on our new roles as husband and wife in our small apartment in Wake Forest, North Carolina, we were in agreement on most things, but few shared predilections have proven as valuable over time as our interest in creating a household budget. Because we were motivated to free up maximum funds for investment, and because we revered the frugality of our grandparents, we created a line item budget, very detailed and with many lines. Initially, we tracked daily expenses in a little flipbook and then I tallied them at the end of the month. The process was rudimentary but powerful, as it helped us:
- Be intentional about how we would spend, give and save our money
- Have clarity about our spend and how we were tracking to the budget
- Increase unity with strong practices in a household management area that leads many to frustration, conflict and even divorce
Fast forward, for 20+ years, Erin and I have had an annual planning discussion to set the budget for the year ahead and this has invariably felt empowering. The budget rightly understood isn’t a tool of austerity; it’s a tool for intentional planning that can be used to ensure that your money goes where you want it to go.
As a financial planner, I normally begin the data-gathering conversation with would-be clients by asking them if they have a budget. If they do not, and some of the most accomplished, intelligent people do not, I see an opportunity for large gains. I typically find that those without a budget admit to spending more than they realize, and often fail to graduate from high-income to high-net-worth for far too long. Without good budget tools, you should expect to at some point give the following personal testimony: “I just don’t know where it goes.”
If they are willing, I ask them to create or update their household budget, with this attendant guidance:
- Be as detailed as possible
- Do less imagining what you will spend, and more combing back through checkbook logs and credit card bills to see what you actually spent over the last 2-3 years, revising for foreseeable changes
In terms of budgeting tools, I use Excel spreadsheets, which like Google Sheets is very customizable. But, because it’s 2025, I would recommend some upgraded software option for anyone looking to begin or upgrade their budgeting efforts. To begin, consider these excellent options:
- Monarch – https://www.monarchmoney.com/
- Rocket Money – https://www.rocketmoney.com/
- YNAB – https://www.ynab.com/features
- Copilot – https://copilot.money/
If you fill large carts at retailers like Amazon, Walmart, Costco, etc., you will want to use their app tech to split and categorize your $500 buggies which represent food, clothes, home repair goods and a dozen other categories. If you frequent these one-stop-shop locales, you need a good software tool. Subscriptions are reasonable (some of the money goes to Plaid, the service that enables these apps to pull data from your financial accounts) and if you will use the app religiously, it will be worth far more than the cost of subscription.
As you embark on, or reengage on household budgeting, here are a few pointers that should prove instructive.
- Realistic Assumptions
Advisors work hard to get clients to drill down to “realistic assumptions.” As alluded to earlier, an intense focus on historical spending patterns beats forward-looking imagination. You can set aspirational belt-tightening goals if you are so inclined but they must first be grounded in reality.
- Accuracy in Budgeting as Multi-year Process
Advisors expect that clients creating their first budget are prone to be fairly inaccurate. This is due in part to just how many one-off expenses the average person encounters throughout the year, and just how big the “misc.” line item really needs to be.
- Gaining Discipline Through High-Quality Goals
Self-control comes down to giving yourself a command and being able to follow it. The behavioral finance secret that aids clients in gaining durable self-control entails an intense focus on high-quality money goals. “Spending less” is an inadequate goal not well-suited to hold up. On the other hand, the high-quality goals your family might accomplish through saving and investing more can be inspiring and sticky. Your goal might be to be more generous, to retire early and sail the world, to be in a position to partner with a friend or adult child to start a business, or even simply to maximize the estate you leave behind. High-quality money-goals fuel effective budgeting.
- No Shortcut Around the Workload
No matter the tool used, budgeting is quite a bit of work and the average person just doesn’t love it. Advisor surveys reveal that clients nor advisors love this work, but we keep talking about it because it is foundational to your financial health.
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