When One-Size-Fits-All Budgeting Doesn’t Fit

If you’re a sports fan who likes to wear hats from your favorite teams, you might have noticed the shortcomings of one-size-fits-all hats: they’re stretchy and often lose their shape. On the other hand, fitted hats are sold in quarter-inch diameter increments, so it’s very easy to get one that fits just right. For a little extra cost, you can have a hat that you’ll look forward to wearing all the time, so it’s worth it.

And yet, people often take a one-size-fits-all approach to something much more impactful in their life: budgeting.

Clients often ask us, “How much should I spend on *insert item here*?” Our answer is almost always, “It depends.” Which is, of course, the last answer anyone wants to hear. But shouldn’t it depend? What works for one person might not work for another, and that’s ok.

Priorities matter

If you’re a homebody, you wouldn’t want to spend a large portion of your disposable income on going out to dinner or events, and you might want to spend more on a home that you’ll use and enjoy. The opposite is true if you’re someone who doesn’t like spending time at home. Why spend all that money on rent or a mortgage when you’d rather be out and about anyway? What you prioritize matters. Your lifestyle matters. Your preferences matter.

The first result of a google search for “budgeting” might give you a good guideline, but a one-size-fits-all answer probably isn’t going to work for you. Following arbitrary rules as to how much is too much to spend on one area of your life can lead to being unsure of yourself when your numbers don’t line up with the “rules.” You might feel guilty and end up not enjoying what you’re spending your money on. Who wants to feel bad about spending money on something they enjoy?

The numbers matter

Of course, the numbers matter too. You don’t want to find yourself living beyond your means and struggling financially. But far too often, people only focus on the numbers.

Finances are part art and part science. Understanding yourself and your priorities in life can do wonders for your relationship with your finances. The dynamic between your spending and saving is going to differ from month to month. Opportunities in life don’t present themselves uniformly, and they don’t follow a traditional budget. Splurging on something that improves your quality of life should not be viewed negatively or as a setback—everything in moderation, with occasional excess.

Part of your wealth manager’s job is to put context behind the numbers so you can have more knowledge and flexibility. Call it a more custom fit. You should enjoy spending on things that are meaningful to you, even if that means putting off saving toward a financial goal now and then. Life only happens once. Live it to the fullest.

ABOUT THE AUTHOR