posted on March 20th 2019 in WorthPointe News with 0 Comments /


When I bring up the “B” word — budget — in meetings with clients, invariably one spouse cringes and the other gives some other none-too-happy non-verbal response. I know keeping track of spending can be a tiresome task, but it’s not something everyone must do.

Surprised to hear that from a financial advisor? There is somewhat of a catch, of course. For those who are close to retirement, budgeting is absolutely a must; you simply must know how much money is going out when you’ll be living on your “nest egg.” But, budgets aren’t as critical for folks who are younger — and here’s that catch — as long as their financial framework is correct.

Perhaps the best way I’ve found to explain financial framework is Live-Give-Owe-Grow, from  Certified Kingdom Advisor®. It details the five uses of money:

  • Live — balancing provision and protection to cover day-to-day expenses
  • Give — making contributions to charities or other nonprofits
  • Owe — paying taxes and debt (two separate components)
  • Grow — saving for short-term goals and the long term

You might think of this as a quasi-budget, where half your income goes to support your lifestyle and the other half goes toward the other four uses. Thinking about your expenditures this way can help ensure you’re on the right track when it comes to your financial future.

To better illustrate this, let’s consider the financial lives of two hypothetical people, Jack, an entrepreneur, and Jill, a corporate executive. For the sake of this exercise, we’ll say they each earn $100k a year.

Jill’s situation is a bit more straightforward because she’s an employee. About 35% of her income never hits her bank account: 10% goes toward her 401(k) — Grow, and 25% is withheld for taxes and healthcare premiums — Owe. If she earmarks $500 a month for philanthropy — Give, that means she has about $5,000 a month left for Live.

Jack’s situation can get problematic, unless he sets up his personal finances in the same way he would structure a business. Because nothing is automatically coming out of his paycheck, he has to make those Live-Give-Owe-Grow determinations himself. Failing to do so — just going straight into spending mode — could be a huge mistake.

What’s the takeaway? You may or may not need to budget, depending on how close you are to retirement, but you do need to create a strong financial framework no matter how old you are. It can be extremely valuable to work with a financial advisor or tax professional to understand where you are today and what steps you need to take to ensure you’re on a path that leads toward the fulfillment of your lifestyle goals.

about the author: John Chapman

JohnChapman640x640John Chapman CFP® understands wealth management is as much about the relationships as it is about the numbers. Strategy, experience and knowledge allow him to create the financial solutions to catapult his clients toward their goals. With WorthPointe’s sophisticated technology at his fingertips, John loves helping families and businesses organize their finances and secure peace of mind surrounding their wealth.

He prioritizes his clients’ values and takes the time to listen to their unique stories. Together, they articulate a clear vision and map out a financial plan to support it. Innately fascinated by the financial markets and global economies, John has a healthy obsession for tracking market trends and formulating projections to better inform his clients about the future ahead. Proud of his CERTIFIED FINANCIAL PLANNER™ certification, John holds himself and his practice to the highest ethical standards and client commitment.

Learn more and/or contact John

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