How To Budget When You Make a Lot of Money


March 5, 2024

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Budgeting Tips for Big Earners

Let’s talk about how to budget when you make a lot of money. As a high-income earner, you must be careful that your lifestyle doesn’t expand so much that you no longer save money.  Remember the golden rule: you must make more than you spend to have financial freedom. 

How To Budget When You Make a Lot of Money
I believe that everyone can learn to enjoy budgeting. It doesn’t have to be boring or complicated!

How should I budget if I make a lot of money?

When you make a lot of money, you may think, “I don’t need to budget; I make a lot of money!” 

This compounds when your friends also make a lot of money. Before you know it, your lavish lifestyle means you’re not achieving your financial goals. 

To combat this, you need to pause, get off the “treadmill,” and tackle the goal of understanding your financial situation. I’ve devised an easy 8-step process that I use for my own budgeting.

For example, I recently moved into my dream home on the water and have been renovating it.

However, I couldn’t just renovate the entire home from top to bottom all at once—I had to create a budget to ensure that I could do every space over the next 1-2 years and not overspend.

At this point, I’m used to creating a budget and sticking to it. But when I started budgeting (many years ago), I followed these steps.

My 8-Step Budgeting Process

  1. Track all your expenses every month.
  2. Look at all the money you have coming in every month. 
  3. Repeat this tracking for a couple of months to understand your spending.
  4. Determine your long-term goals, such as retiring at a certain age, providing a legacy, or funding education. 
  5. Decide on your short-term goals.
  6. Look at areas where you are currently spending that aren’t aligned with your goals.
  7. Remember, what each person views as expensive is personal, so be clear on what you value.
  8. Finally, determine how much you can comfortably spend each month and still be able to save for your long-term goals.  

What budgeting challenges do high-income earners face?

Some of the biggest budgeting challenges a high-income earner faces are as follows:

  • A significant blind spot in their mindset is thinking if you make a lot of money, you don’t need to budget or plan.  
  • Not sticking to a budget because it doesn’t feel strictly necessary.
  • You may be so focused on “the now” that you overlook the fact that you will want to slow down in the future and likely earn less.
  • You may not dedicate the time needed to understand financial and tax planning strategies and, therefore, spend more on taxes.
  • You may fall into lifestyle inflation. Lifestyle inflation happens because often, when we make a lot of money, we spend a lot of money. The idea of budgeting seems ridiculous.  It might even make you feel “poor,” which is not true, but it does tell you that you have some beliefs about money that aren’t serving you.  With lifestyle inflation, you’re on a treadmill, and the more you earn, the more you spend. Now, you work to pay for your lifestyle.  
You may fall into lifestyle inflation. With lifestyle inflation, you’re on a treadmill, and the more you earn, the more you spend. Now, you just work to pay for your lifestyle.
Lifestyle inflation can put you on a treadmill where all you’re doing is working to pay for your lifestyle and you have nothing extra to save or invest.

What percentage of my income should go to savings?

The rule is that 20% of your income should go towards savings.  

The 20% rule means the more you earn, the more you can set aside for savings.  It is part of the 50/30/20 rule. 

You can also use the ⅓ rule of budgeting. ​​The ⅓ rule of budgeting is a simple financial guideline that suggests allocating your after-tax income into three broad categories: necessities, wants, and savings.

What percentage of my income should go to investing?

The income you invest may be based on your savings following the 20% rule.  

The next thing to do is decide what buckets you will have for your investments.  Your short-term bucket could be invested in certificates of deposit, guaranteed investment certificates or bonds.  The medium and long-term bucket could be invested in the stock market in quality companies based on your risk profile and age. (+)

Should I hire a financial advisor?

Most people were never taught how to manage their money or about their limiting money beliefs and blocks.  

Both of these directly impact their ability to achieve financial freedom.  Working with a financial advisor can be like shining a light on your blind spots while lighting a path for you to follow. If you have a good financial advisor, they will provide strategies to reach your goals, tools to manage your finances, and insight into how your money mindset impacts your decisions. 

I like to use the analogy of hiring an electrician.

I can replace a light bulb, but that is where my experience ends.  When I hire an electrician, I am paying for their years of experience so I don’t make a mistake that costs me more in the future.  I don’t have the time or experience to do it well. As a high-income earner, having a financial advisor can be well worth it, particularly if financial freedom is a priority. 

Having a financial advisor by your side can help you identify your blind spots and illuminate a course of action.
Having a financial advisor by your side can help you identify your blind spots and illuminate a course of action.

Final Thoughts

Budgeting is essential regardless of how much money you earn.  

So, instead of thinking budgeting is for people who “don’t have enough,” think of it as a flashlight allowing you to control your financial situation. 

Quick Videos: Try Out Values-Based Budgeting!

Find out what value-based budgeting is and why it feels so much better than traditional budgeting. You need to feel good about your budget; values-based budgeting will help you with this.

What is values-based budgeting?

How can I start values-based budgeting?

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About the Author

TIFFANY WOODFIELD is a financial coach, cross-border expert, and entrepreneur based out of Kelowna, BC. As a TEP and associate portfolio manager, Tiffany has extensive experience working with successful professionals who want to leave a legacy and enjoy an adventurous, work-optional lifestyle. Tiffany combines extensive knowledge from her background as a financial professional with coaching and her passion for personal development to help her clients create a unique path that allows them to live their fullest potential. Tiffany has been a regular contributor to Bloomberg TV and has been interviewed by national and international publications, including the Globe and Mail and Barron’s.