Budgeting for Lifelong Financial Success

There is a common misperception that in order to be good with money, you must have a lot of it. But, this is not true.

What you need in order to be good with money throughout your lifetime, is an everyday “management” plan. Whether you are planning for yourself or your entire family, making the most of your money begins with creating a budget and sticking to it.

You can think of your budget as a roadmap to achieving your financial and personal goals, including but not limited to:

  • Buying a home;
  • Paying for your children’s education;
  • Retiring early;
  • Having enough to live the lifestyle you want when you retire;
  • Organizing your wealth so that you don’t pay too much in taxes; and
  • Creating an emergency fund to cover the unexpected, i.e. natural disasters, injury, illness, loss of income, etc.

In addition, if you are having trouble managing your money, a budget can help you:

  • Avoid overspending;
  • Understand exactly what you are spending on;
  • Establish saving goals;
  • Determine whether or not your spending is in line with your savings goals; and
  • Tackle your debts

When put into practice, budgeting can have a huge impact on your overall financial future. This might sound simple, but you would be surprised how few people actually do it.

Creating a Budget: The 50/20/30 Rule

Creating a budget that you can follow throughout your life will help you stay in control of your finances and achieve your financial goals. But, for many, the hardest part about creating a budget is not knowing where to start.

One popular starting point for creating an effective budget is the 50/20/30 rule. This simple rule can easily be applied to your finances to help understand and control your spending.

To use the 50/20/30 budgeting rule, you divide your net (after-tax) income into three categories—needs, savings, and wants:

Your Needs

First, focus on your needs. You want no more than 50% of your monthly after-tax income to go towards your necessities, which includes your housing, utilities, food, and transportation costs, as wells, certain minimum debt payments. These are your basic needs for survival.

Your Savings

Once your needs have been paid, and before any personal spending, the next 20% of your monthly after-tax income should be allocated towards your savings. This includes long-term savings, emergency funds, and excess debt payments.

This is where you budget to meet your financial goals and your future needs, such as retirement. Even if these needs are a long time away, keep in mind that starting early will allow you to take advantage of compound interest when saving to meet those needs.

Your Wants

The last 30% of your monthly after-tax income is allocated towards your wants. These expenses depend on your lifestyle and include eating out, shopping, vacations, memberships, hobbies, and entertainment. These are things that you don’t really need and can live without. If you find yourself spending more than 30% on your wants, then you need to re-prioritize your spending.

To illustrate how the 50/20/30 budgeting rule should be applied, let’s assume that your monthly after-tax income is $2500. In this case, $1250 (50%) should be spent on your needs, $500 (20%) on your savings and $750 (30%) on your wants.

Review Your Budget and Spending Regularly

Once you have created a budget to follow, you need to review it and adjust your spending, as needed, to ensure that you meet the objectives you have set for yourself. Budgeting isn’t just something you do once and then forget about it. Rather, it is an ongoing process.

If you find that you are spending more than the ideal amount in any one of the categories discussed above, you should go back and address your spending. For example, if you are overspending in the needs category, perhaps you can find a cheaper place to live or reduce your spending on food, transportation, or utilities.

Similarly, if your savings goal is $500 per month, but you are only saving $450, perhaps you need to spend less on your wants (the things you can do without) to maximize or even go beyond your savings budget.

Find a Budgeting Strategy That Works Best For You

The 50/20/30 rule is a great tool to help you become more financially aware. But, don’t feel guilty if that strategy doesn’t work for you. Budget according to your specific life and find out what works best.

Wealthy people are wealthy because they save more. As their wealth grows, they use the interest and dividends received from their savings to pay for their needs and wants.

So, ideally, you want to be spending as little as possible on your needs and wants in order to maximize your savings. However, if you have a great deal of debt, we highly recommend that you allocate more money towards paying them off first.


Creating a budget that you are able to follow is something you need to do if you are serious about staying in control of your finances and meeting your financial and personal goals. But, it is also something that many people attempt without the support of an experienced financial advisor and fail to do.

An experienced financial advisor can help you define your goals and devise a budgeting strategy that is easy to follow and will enable you to achieve those goals. When choosing a financial advisor to help you create an effective budget, make sure that it’s someone you will be happy to work with for a very long time.

Working with an experienced financial advisor can help you create a financial plan so that you will ultimately be in a position where your money works for you—instead of you working for your money. For help getting started with your financial plan, contact us or sign up below for one of our events.

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