How do accountants manage to stay out of debt?
They learn to act their wage.
And here’s the truth: It isn't about how much money you make or how much you spend. In the end, it’s all about the net cash flow.
When it comes to budgeting, picking a method is like choosing a straw. All the straws can get the liquid from one end to the other, but the shape, length, and color – that’s up to you. Budgeting can be fluid, flexible, and fun if you have the mindset for it.
There’s an expression about having “champagne tastes on a beer budget.” I’m all too familiar with that mentality. I’m satisfied when I can buy more for less, yes, otherwise known as discount shopping. My kids have been trained to look for the yellow tags at Kroger, and our lifestyle mirrors that. We like nice things, but neither my wife nor I enjoy spending money just to spend money, so we go to auctions, live or online; shop clearance when we can; and only make big and little purchases that bring us joy because we find more fulfillment in saving.
I’m detailed about it; analytical may be the better word. For example, at auctions, if the condition of an item is considered “open box,” then I bid up to 1/5 of the retail price, “appears new” tops out at 1/3 of the retail price, and “brand new” at 1/2 of the retail price. As soon as the bidding surpasses my self-inflicted bidding rules, I’m out. Now, this behavior, this is not at all how I define budgeting. Budgeting is not the act of spending less. I decided that those items at those prices would make the purchase worth it to me.
Hear me when I say that.
Budgeting is not the act of spending less. Budgeting does though have everything to do with assigning value and understanding worth to you.
I’ve had people tell me, in earnest or jest, that of course I would advise them not to spend their money because I’m a financial advisor after all, but that couldn’t be further from the truth. Money is there to be spent. We can’t take it with us.
It’s impractical to think that you’ll never access what’s in savings, but a financial advisor exists to prevent mistakes, such as not saving enough for retirement, or later, withdrawing too much or too early. Both would deplete your financial security. I’m here to make sure you don’t spend in extravagance for your unique situation, at the wrong times, or from the wrong sources of income.
So then how does a budget help?
Well, first of all, it’s optional, but incredibly important regardless of your income level to prevent lifestyle creep.
By definition, a budget is “a plan you write down to decide how you’ll spend your money each month. A budget shows you: how much money you make and how you spend your money” (“Making a Budget”).
Here’s a top-line summary of a few budgeting strategies:
Strategy | Explanation |
Reverse Budget | We’ve done this method for the last couple years. It’s also known as “The No Budget-Budget” or the “Pay Yourself First Method.” Set up autopayments and auto-transfers on your pre-determined expenses and savings. The rest of the money in your checking account is a free-for-all. Anything goes. It works well for us because we don’t feel tied, constrained, to a budget, and because we’re both modest spenders to begin with, we usually end up building up surplus cash that we can use to bump up our emergency fund, maximize a Roth, fund our HSA, etc. I also see this working well with people who like to feel uninhibited. It’s budgeting for people who don’t enjoy budgeting, and it does the bulk of the saving upfront. |
The 50/20/30 Budget | It’s like a general guideline (i.e. buy a house at no more than 30% of your net monthly income) but expanded to incorporate all spending categories. With this budgeting method, of your net income:
This gets into conversations on needs vs wants and can get murky quickly (i.e. new flooring or clothing). It also bases everything on your current income instead of your goals. |
Envelope Budget | Cash stuffing at its finest. This doesn’t have to just be with physical envelopes although it started that way. The idea is to assign money by expense category, and the cash in the envelope is all you possess to spend that month. If you end the month with surplus funds in a budget category, you can roll into next month, reallocate to another spending category, or transfer to savings. You can do this method with spreadsheet tracking, apps, or virtual wallets, so there are variations to the actual execution. For some people, this works great. It organizes buying behaviors and enforces spending limits, and using cash helps retrain your brain from the mindless activity of swiping of a debit or credit card. Sometimes, this is a great option for a select few categories. With some clients, I've used reverse budgeting, but we envelope budget for eating out or a hobby. We've budgeted like this (electronically) for most of our adult life, especially in the years when we've had to sacrifice discretionary spending and prefer full control and accountability by expense type. |
Zero-Based Budget | Every single dollar has a pre-determined purpose to be either spent or saved based on your personal values. This requires upfront planning, and if I can go back to the straw analogy, it’d be as straight and narrow as they come. The envelope budget provides more flexibility with the same overarching concept. |
Now setting your target spending for expense categories shouldn’t be an arbitrary exercise. Start wherever you are and go with the flow of a waterfall. Choose a budget type and then outline your spending by prioritizing “how your money flows through your financial life” (Grimes). Budget money by priority like water flowing over a series of steps.
Hocking Hills, Ohio
The first step would be your day-to-day survival like housing, utilities, transportation, insurance (including life), groceries, basic recreation, and medical expenses. Then flow to the second step with an emergency fund, aiming for at least 3-6 months of living expenses. Next, flow to the third step of applying additional principal payments on high-interest debt. After that, slide to investments in retirement, beginning with your employer-sponsored plan, and then outside Roth IRAs or Traditional IRAs as an example. Your fifth step is the higher-level spending like rental property, business, travel, or projects.
Use the waterfall to inform where your money goes within the budget by prioritizing your financial wellness.
As for the budget you use? A, B, C… Find the one that makes the most sense to you. Whichever option you choose, your budgeting will fail IF you don’t have a strong understanding of your historical spending, expected variances by month, big one-time expenses, expected timing, and a plan for saving customized to you or your family’s future desires. Can't figure out that crazy straw?
Let me introduce you to a financial advisor.
Hi, I’m Hank.
Resources:
"Making a Budget." Consumer.gov, Federal Trade Commission, https://consumer.gov/your-money/making-budget#:~:text=What%20is%20a%20budget%3F,how%20you%20spend%20your%20money. Accessed 11 June 2025.
"Popular Budgeting Strategies." University of Pennsylvania, https://srfs.upenn.edu/financial-wellness/browse-topics/budgeting/popular-budgeting-strategies. Accessed 11 June 2025.
Grimes, Matthew. "Build Generational Wealth Using the Waterfall Method—Even If You’re Just Starting Out." LinkedIn, https://www.linkedin.com/pulse/build-generational-wealth-using-waterfall-method-even-matthew-grimes-ytnkc/. Accessed 11 June 2025.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.