What to do when you don’t ‘need’ to budget.
If you're financially comfortable but couldn't say what you spent last month, you're not alone. Many people with substantial wealth have little visibility into their spending patterns. This rarely creates immediate problems, but it can lead to a nagging sense of uncertainty. It also makes it hard when your financial advisor asks you to list your outgoings. But if you’re not worried, does it matter?
Yes, because of the importance of your values, and the ongoing impact of compounding.
But you don't need the same budgeting approach as someone on a tight household budget. Instead, you need to know that your spending aligns with your values, and is within your financial plan.
Why Traditional Budgeting Doesn't Work
Standard budgeting advice wasn't designed for your situation. Tracking every purchase and setting rigid monthly limits makes little sense when you have multiple income streams, irregular large expenses like rates and insurance premiums, and frankly, better uses of your time.
This disconnect is why most budgeting attempts don't last.
The Reverse Budget
Instead of tracking every dollar going out, focus on two numbers:
Your annual savings target
Everything else
Decide how much you want to save/invest this year, how much to give or donate this year, then spend the rest guilt-free. This "pay yourself first" approach eliminates detailed expense tracking entirely.
How to Implement It
Set your annual savings and givings goals. A reasonable starting point is 20-30% of gross income for saving, while many set a 10% annual giving goal. Your financial advisor can suggest what would be suitable for your retirement timeline, major purchases anticipated, and current net worth. Convert this to a monthly figure.
Automate your savings. Set up automatic transfers on the day your primary income arrives. Direct funds to investment accounts, superannuation, offset accounts, or savings for specific goals. If the money never sits in your transaction account, you won't miss it.
Spend what remains. Everything left after automated savings is yours to spend. No categories, no tracking apps, no guilt. If you've met your savings target, you're on track. Your spending amount is the budget. If it’s fit for purpose, you’re never running out of money. The account can be treated similar to a ‘slush fund’ if it’s fit for purpose.
Review quarterly. Every three months, spend 30 minutes checking whether your automation is working and if your account balance is growing or declining between pay cycles. Your financial advisor will also check in and measure progress in your managed wealth account and at your annual or quarterly meetings. If your balance steadily grows, increase your automated savings. If you're dipping into reserves, adjusting your savings target will fix the trend.
When You Need More Detail
This simplified approach works for most people, but consider more granular tracking if you're a business owner mixing personal and business expenses, approaching retirement within 2-3 years, going through major lifestyle changes, or just feeling uncertain about where your money goes.
Getting Started
Review your last three months of bank statements to estimate average monthly income. Decide on your savings target and divide by 12. Set up an automatic payment for that amount. Done.
No spreadsheet required.
The Bottom Line
Budgeting for high net worth individuals shouldn't be restrictive. The goal isn't to limit spending but to ensure intentional progress towards long-term objectives whilst maintaining lifestyle flexibility.
The reverse budget does this with minimal time investment. Automate your savings, spend the rest however you like, and review quarterly. Simple and sustainable.
Talk soon,
Amy Eriksen
Financial Advisor | Director
Eriksens