Reshape Your Thoughts & Tackle Budgeting

Despite the negative connotation that the word “budget” seems to carry, its side effects can actually be quite pleasant.  Deciding to create and stick to a budget will be the single most valuable financial decision you will ever make for yourself.  Whether it’s lack of time, trouble getting started or genuine disdain for the word, we’d like to encourage you to make budgeting a personal goal for 2024.

First, do yourself a favor by approaching the process as a step toward controlling where your money goes instead of letting it control you.  Budgeting doesn’t necessarily mean that you have to spend less.  It’s about knowing where your money is going, and knowledge is power.

Once you’ve reshaped your thoughts about the process itself, begin to collect information.  For some of you, this may take some time, and that’s okay.  Consider compiling pieces of information each week until you have everything you need.  You will be prepared to begin when you have two recent pay stubs, one year of credit card and bank statements, current investment and retirement account statements, last mortgage statement, most recent tax return, checkbook and, most importantly, a list of your living expenses.  Consider using an expense worksheet to help you remember everything and refer to your credit card, bank statements and checkbook as needed.

Next, organize your expenses into two categories: needs and wants.  We realize that these terms can be fairly subjective but, consider your “needs” to be expenses that cannot be avoided and are essential to your basic needs.  Don’t forget to include payroll deductions like medical or disability insurance.  Everything else will fall into the “want” category.

You are now ready to put your money habits to the test.  If your needs bucket is less than or equal to 50% of your after-tax income and your wants bucket is less than or equal to 30% of your after-tax income, your current spending habits are healthy.  This means that at least 20% of your after-tax income can be allocated toward savings.  If you’re not on track, determine where you are overspending.  If you are overspending on needs, first, make sure that everything is truly essential.  If so, it may be that your home is stretching you too thin.  Or, private school for the kids might be eating in to your retirement nest-egg.  If your wants are too high, you will likely see easy ways that you can cut back.  Many people – and we mean many – are often surprised at how much they spend on non-essentials once they take the time to write them down.

If you are on track, be careful before enjoying your next splurge.  Whether your spending is on track or not, the next step in the budgeting process is to see if your savings is on track.  After all, your current spending will not reflect your previous habits but, your savings will.  Utilize to our savings target chart by age and refer to your bank, investment and retirement account statements to see if you are within range.

Not on track?  Work with your financial advisor or use an online calculator to determine how much more you will need to save to catch-up. On track? Stay on track by avoiding lifestyle creep.  In other words, don’t let your lifestyle grow in proportion to our income.  Rather than spending more with salary increases or bonuses, save them.

The hard part of budgeting is now over.  Keeping yourself on a budget is easier than ever with online tools and mobile apps like Quicken or  If you prefer to do it manually, you now know what you will need and the process will only get easier.  Revisit your budget at least every six months to ensure that you are not over-spending.  Even if you don’t think so, we promise that you will be more aware of mindless credit card swipes in the future and your spending habits will start to change. Make it a habit of asking yourself, “Can I continue to save 20% if I make this purchase?”  That should be simple enough!



Important Disclosure: This content is for informational purposes only. Opinions expressed herein are subject to change without notice. Beacon Pointe has exercised all reasonable professional care in preparing this information. Some information may have been obtained from third-party sources we believe to be reliable; however, Beacon Pointe has not independently verified, or attested to, the accuracy or authenticity of the information. Nothing contained herein should be construed or relied upon as investment, legal or tax advice. Only private legal counsel may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the design discussed herein. An investor should consult with their financial professional before making any investment decisions.

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