Budgeting

PHILOSOPHY

Like all areas that we advise on, our approach to personal budgeting is to utilize proven and respected research and best practices, while leveraging technology and automation. Study after study has shown that people who have a budget plan will do better financially, and those that stick to their plan do even better. Have you ever tried to stick with the latest diet or exercise craze that involves very particular details (e.g. calorie counting, food restrictions, or an exact order of things)? Were you able to stick with it (no, not for a week or even a month, but a permanent change to your life)? If so, please stop right now and give yourself a round of applause - you are someone I have never met; I didn't think you even existed. For all of the rest of us, what tends to work best are systems that nudge us in the right direction, or even better, automate our choices towards things that support our goals. With that in mind, we have shared below several of the high-level approaches we use in advising our clients and creating a customized personal budget that aligns with their overall goals.

THE 50-20-30 MODEL

Start your budget planning with this model, and then customize based on your individual priorities and goals
50% Mandatory Expenses (loans, credit cards, mortgage/rent, insurance)
20% Investments

30% Guilt-Free Spending

Automate Budgeting

Automatic transfers to pay bills, invest for retirement, etc.
Setup all bills to be paid by credit card and those that can't be paid by credit should be setup to be paid by ETF (automatic withdrawal from a checking or savings account)

Emergency Fund

Start by saving $1,000
Work up to saving 3-6 months of expenses
Increase your emergency fund up to no more than 12 months if you have higher income or inconsistent income

Investments

First, max out 401(k) to receive the full match from employer
Next, work towards maxing out an IRA (Roth if eligible based on income)
10-15% of income towards retirement

Other savings goals

Children's education
New vehicle
Mortgage down payment
Vacations
Anything else you want!

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