Basics to Budgeting

February 06, 2018 / Money

Ah, the money discussion….. “Easy to spend, hard to get.” I have noticed that money is always a heavy discussion among my clients … causing all sorts of reactions, from sad to angry and even resulting in full-blown panic attacks. The reason I think this happens is that money can be a major source of stress and a big roadblock for not achieving your goals. Money can prevent us from investing in our diets, fitness, and even de-stressing activities because the money has to go to things we deem more important. While I can argue that it is important to invest in yourself and that occasional spa treatment; it is more important to have your finances in order.


The most annoying and tedious way to do this is to make a budget. I can hear the groans and the previous page buttons from my computer. I understand that budgets aren’t the most fun things to put together, mostly because they are only good at telling us that we need to stop putting out money toward things we enjoy. Sometimes, however, they can actually be a surprise at how well things are going. I have tried dozens of methods of putting together a budget. Marisha Thakor is a CFA (certified financial advisor) who came up with the concept of the “healthy spending pyramid.” It is an easy system to help you keep track of where your money should be going. Many of you might already be on track with your spending, but others might need to move things around a bit.


Here’s how it works:  20% Savings, 30% Wants, and 50% Needs



(Graphic is from http://www.moneyzen.com/ )

Wants vs. Needs


While savings is pretty straightforward, wants and needs can be a little more challenging. A need is a necessity, something that you can’t live without or a commitment you have made. The first step toward making this budget is figuring out just on what you’re actually spending your money. This to mean feels like the hardest part. Compile a list of everything on which you spend your money and put it into these three categories. Side Note: If you have absolutely no idea on what you spend or where your money goes every month, just make a list of your needs and go from there.


Start with the amount of money you make every month, after taxes. Then figure out the cost of your needs.



-Mortgage / Rent

-Student Loans


-Transportation (Car payment/ Insurance)




Once you have figured it out, add up the total and subtract it from what you make every month. Then, from whatever is left over, take 30% to put it toward your wants and 20% towards savings. What happens if you don’t have 50% income left over? Most people who have student loans have this problem. To these people I say, grab your microscope.


Take a look at your needs and decide if there is any room for improvement. If not, then move the microscope over to your wants. Is there any place to improve there? At the very end of it all, savings is usually where the cuts happen. Rather than cut back on what makes us happy, we instead turn a blind eye to the future. My advice and the advice Marisha has given me is even if you only put 5% of your money into savings, that is still better than nothing. In fact, if that is the best you can do, wonderful!


Five percent is better than nothing at all. Then, you can make it a goal to start putting more and more away, as you determine where you can make changes. Many people find that just uncovering the mystery about their spending can do wonders for them … giving them more sense of control or relief about their spending.  Budgets can be an empowering tool; so, don’t forget that while you’re working on balancing your health, you also balance your budget.