Let’s be real for a second: making six (or seven) figures doesn’t guarantee financial peace of mind. If you’re nodding along, you’re not alone. Many high-income earners find themselves struggling to save money, watching their paychecks disappear faster than a plate of hors d’oeuvres at a networking event.
But here’s the good news: with a bit of planning and a pinch of discipline, you can whip your finances into shape without sacrificing the joys of your hard-earned lifestyle. Let’s dive into how.
1. End the Struggle to Save Money: Pay Yourself First
This is the golden rule of budgeting, and it’s first on the list for a reason. Paying yourself first means prioritizing savings and investments before you even think about spending. If you do nothing else with a budget, this one step can set you up for success. By paying yourself first, you ensure your savings goals are met every month. And it doesn’t take much effort to get started!
- Decide your savings goal: A good starting point is to save 20%-30% of your income. Whether it’s for retirement, an emergency fund, or that beachfront villa you’ve been dreaming about, commit to the number. (Pro tip: Treat savings like a non-negotiable expense. If it helps, pretend your future self is a demanding landlord.)
- Automate it: Set up automatic transfers to your savings or investment accounts as soon as your paycheck hits. Out of sight, out of mind (and into your growing nest egg).
- Max out retirement accounts: Maximize your contributions to 401(k)s, IRAs, or other retirement accounts. Free money via employer matches? Yes, please.
- Invest smartly: Consider taxable brokerage accounts or even real estate investments beyond retirement. Let your money work harder than you do. Don’t be afraid to consult experts if you aren’t sure whether or not your investments are right for you.
2. Cover the Basics (a.k.a. Adulting 101)
After savings, it’s time to handle the essentials. Think of these as the building blocks of your budget—the things you need to survive and thrive.
- Housing: Stick to the 30% rule (no more than 30% of your gross income). If you’re over this, it might be time to reevaluate your living situation. Penthouse views are spectacular, but so is financial peace.
- Food: Dining out can add up fast, so strike a balance. (Yes, you can enjoy Michelin stars, but maybe not every week.)
- Insurance: Health, life, disability—make sure you’re covered. Insurance is one of those “boring but vital” line items.
- Education: Whether it’s paying for your kid’s school or your own professional development, budget accordingly.
(Quick check: Are you overspending on any of these? If yes, a little tweaking can go a long way.)
3. Allocate for Lifestyle and Fun
This is where budgeting gets a bad rap. People think it’s all about saying no to fun, but the truth is, a good budget gives you guilt-free permission to enjoy your life. Once you’ve covered your savings and essentials, the rest is gravy!
A good goal is to allocate 10%-20% of your income for hobbies, travel, dining out, or whatever brings you joy. If you enjoy planning and details, you can map out different buckets of fun money for your different passions—but you don’t have to.
For some, having a concrete experience or purchase to look forward to provides the most pleasure. Still, others enjoy the freedom of spending money on impulse or when an opportunity presents itself. When you’ve already taken care of all your needs, you get to decide how to allocate what’s left over—just be careful not to impulse spend more than you’ve allotted! (Remember, you earned this money. It’s okay to enjoy it responsibly.)
4. Track and Reflect
Creating a budget is great, but sticking to it? That’s the real challenge. Luckily, there are tools to help you stay on track.
- Use apps: Mint, YNAB, or even a trusty Excel sheet can make tracking a breeze. Automating your savings and payments can also help because many of these costs are stable from month to month.
- Do a monthly review: Look at where your money went last month. Any surprises? Adjust as needed. When starting, it’s normal not to have considered everything (especially when items are seasonal or periodic).
- Set milestones: Celebrate hitting financial goals (a bottle of nice wine counts as a celebration, right?). Even if you don’t have a particular number in mind, you can celebrate consistency in meeting your goals over time.
5. Watch Out for Common Pitfalls
Even the best earners can fall into these traps. Avoiding them can make all the difference. Stay aware of the potential for lifestyle creep as the years fly by. As your income grows, it’s tempting to upgrade everything. Instead, consciously decide what’s worth the splurge and what’s not.
Some common temptations that can derail savings plans are big-ticket impulse purchases or committing to fixed costs too quickly. It’s easy to want to reward yourself when you receive a bonus, but if you slow down to ask whether or not you really want to spend $30,000 on a watch, you may find that you actually get more joy out of putting that money aside.
The same goes for locking yourself into pricey long-term obligations (like vacation homes or luxury car leases). It’s entirely possible to enjoy a vacation in a rental home or luxury hotel without a long-term commitment. Every time you’re about to spend big, sleep on it. If you’re still excited the next day and cannot think of a shorter-term way to experience what you’d like, it might be worth it.
6. Customize Your Budget
Finally, let’s talk about tailoring your budget to fit your goals and values. Because let’s face it—no two people want the same things out of life.
- Define your priorities: Is it early retirement? Generational wealth? Giving back? Make sure your budget reflects what matters most to you.
- Plan for big goals: If you’re aiming to buy a house, start a business, or travel the world, build those milestones into your budget.
- Stay flexible: Life happens. Budgets aren’t written in stone, so adjust as your circumstances change.
Budget for High-Income Earners with Legacy Planning
Here’s the bottom line: Earning a high income is an incredible opportunity, but what you do with that income really counts. By paying yourself first, covering the basics, and setting aside money for the good stuff, you can enjoy your life now while setting yourself up for an even brighter future.
At Legacy Planning, we know the peace that comes from creating a financial plan. To see if we can help you set up a budget aligned with your goals and values, click here to schedule a conversation. Your bank account—and your future self—will thank you.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual. Legacy Planning does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
