Boss-level Budgeting
In 2013, I had a lucrative job in real estate finance. I was in a stage of career where my responsibility - and in some cases, my income - was increasing. It felt good. I felt that my wife and I were doing a good job managing our household finances. In those days, when it was time to file my income taxes, I’d grown accustomed to two types of outcomes. There were several years, where nearly the perfect amount had been withheld from our paychecks. We’d get a small but pleasant tax refund in February, when we’d file our taxes. This was the first type of outcome. Back in 2004, the year we acquired our first home, we experienced the second type of outcome. It was our first time experiencing the interest deduction and our tax return felt like a windfall!
But in February 2013, after gathering all the necessary tax documentation at our kitchen table, I sat down in the evening to begin to prepare our tax returns. I still remember the gut-punch feeling I experienced when I finalized the calculation and saw that we owed a substantial amount. This had never happened to us before. I assumed I must have made some mistake. I started from the beginning and recalculated it again. When I saw the same amount owed that I calculated the first time, all the physical energy left my body and I laid my forehead down on the table and actually fell asleep. I actually woke up several hours later with a crick in my neck.
In hindsight, in 2012, I’d benefitted from a bonus at work and I’d set the money aside for various things. Fortunately, I hadn’t already spent all of the bonus and I was able to use some of the remaining funds to pay the taxes that the bonus generated. But I learned a valuable lesson about budgeting.
I was doing a great job budgeting on a monthly basis. I always made sure I set aside enough of my paycheck to pay our mortgage and pay for our food and other essential needs. I had even learned to anticipate certain periodic costs, like auto-repair for example. But when I received that bonus, I should have at least tried to re-calculate what taxes would be owed and set an amount aside for that. This way, I could still enjoy the good feeling that came with receiving a bonus and avoid the bad feeling of finding out several months later that I couldn’t do with it the things I’d imagined.
For better or for worse, most of what I’ve learned about budgeting over the past 25+ years has been through trial and error. It’s been years since I’ve generated the kind of income or experienced special bonuses like the one I earned in 2012. I’ve found that the same principles, which work when the money spigot is flowing also work in the leaner times.
Use this checklist and avoid “forehead on the kitchen table” moments:
Step 1 - The Basic Monthly Budget
The basic monthly budget starts with the six-essential costs:
Housing (rent, mortgage, utilities, home repair, property taxes and property insurance)
Groceries (food, toiletries, and household cleaning products)
Clothing
Healthcare (copays, deductibles, medications and other out-of-pocket costs; insurance where applicable)
Transportation (auto gas, auto repair, auto insurance, parking, public transportation fares, auto replacement)
Communication (cell phone service, internet service, cell phone replacement)
Next, the following “important” costs should be included, when appropriate:
Giving
Investment
Saving
Life and/or Disability Insurance
And finally, the applicable discretionary costs should be included, when applicable:
Free spending funds
Subscriptions and cable TV
Eating Out
Entertainment
Alcohol
Holiday Gifts
Household Goods
Travel
Whatever else floats your boat
To see an example of the basic monthly budget, click this link and look at the first tab, called “Budget."
Step 2 - Reserve for “periodic” expenses
When I first started budgeting seriously back in 2000, I was pretty good at accounting for the basic monthly expenses. I knew that I had to set aside our rent and funds for our groceries and car note. However, in those early years, I was constantly getting “surprised.” I’d take the family car in for an oil change and learn we needed new brakes and new tires. I distinctly remember being frustrated the third time I took my car in for routine maintenance and was surprised when the mechanic (who was likely taking advantage of me to some degree, but that’s a whole ‘nother topic) called to tell me I was facing another substantial cost. The third time was a charm and I remember doing some research on how much I should expect to pay to maintain my car and beginning to set aside funds each month. It felt so much better, the next time when I was prepared. Moreover, I also remember becoming a more informed car owner and being better able to smell “hogwash” when presented with it.
A critical element of budgeting is to prepare for “surprises that are not really surprises,” including:
Home repairs (especially for home owners); because an appliance will need to be replaced and the plumber will need to be called at some point
Auto repairs; because tires and brakes will need to be replaced periodically in addition to regular oil changes
Clothing; because seasons will change and clothing will need to be replaced
Health Care; because copays will be required
Auto replacement; because the car will need to be replaced at some point
Cell Phone replacement; because likewise, phones don’t last forever and will need to be replaced
Holiday Giving; because most likely, you will want or feel obligated to give a gift
Travel; because though most of us don’t travel each month, when we do, it likely will cost more than we are accustomed to spending each month
Over the years, we’ve migrated to a system whereby we keep our reserves in a separate high-yield savings account, FDIC-insured and held with a reputable bank. For example, we set aside $200/month for clothing. Each month, we literally transfer $200 into a separate account and we treat that money as if it’s already been spent. When we actually need new clothing, the funds are there and we are just “using” money we’ve already “spent.”
In the example budget I have provided, which you can view by clicking this link, there are several reserves including those on lines 23, 24, 25, 26, 31, 32, and more of the budget.
Step 3 - Keep Budget Alive
By 2013, I was doing a pretty good job of “Part I” of keeping my budget alive.
Part I of keeping the budget alive is using the budget each month to plan for the month’s transactions. We create a “template,” which is essentially a list of transactions we anticipate, which fully reflects our budget. Then we note where we start (the current balance), and where we expect to finish the month (current balance +/- anticipated transactions = expected ending balance).
In the sample I have provided - accessible by clicking this link, you can see an example of the template by clicking on the second tab of the spreadsheet. Note that the template perfectly reflects the budget.
Also, take a look at the “August 2026 Set Up” tab to see how to use the template to plan a specific month (for example, if on July 31, you are preparing for the month of August).
Finally, see the “August 2026 Example” tab to see what your financial tracking might look like by the time you are ready to enter the fourth week of August.
Part II of keeping the budget alive is to incorporate changes as they occur. Failure to do Part II caused my lament the day in 2013, when I prepared my taxes and experienced the “exhaustion of regret.” Here are just a few examples (large and small) that should get incorporated into the budget as they occur:
A subscription service increases it’s price
Property tax assessment increases
Income increases but tax withholding stays the same
Utility and/or auto-gas costs have been trending higher than budget
A budget is a “living-document,” and if you don’t use it on a monthly basis for planning purposes, you’ve missed much of the purpose of its creation. Furthermore, if you don’t update it as things change, you’ve missed the benefit of being prepared when those changes actually impact your checking account.
Summary
Budgeting, when done properly and used effectively is a tool that brings great peace. The budget is a way of setting your money’s GPS and telling it where to go. To that point, let’s take a moment to briefly re-visit Step 1, the basics. The discretionary portion of the budget is likely, where we have an opportunity to express our values with our budget. I value travel and experiences, so it is important that my budget reflects that appropriately vs. “eating out,” which I value much less as I get older.
Step 2, which addresses “reserves” is the beginning of “boss-level budgeting.” When we put funds away for expenditures that will occur, we remove the element of surprise and in my case, this peace has given me the mental space to be a better-informed consumer.
Step 3 involves keeping the budget alive by using it every month to manage our finances. The budget is 100% a “tool.” If my hammer never leaves the tool box in the basement, it’s a wasted tool. Unlike a hammer, a budget should be used every single month. In my case, I actually use it every week, but you can read more about that here.
I’m hopeful that boss-level budgeting will boost your wellbeing,
wellbeingGrant