Financial skills are learned, not inherited. The key is visibility, not complexity.

1. Mark all things you HAVE to pay for or you’ll live miserably without i.e. rent / mortgage, food 🥘, health, taxes, clothes, diapers, internet, phone, water, power, trash, etc. include the dates payments are due

How do you know if you’ll be miserable without paying? Imagine what happens to your quality of life when you don’t pay those things. Envision vividly the domino trail of bad that ensues.

2. Mark all things that you’d LIKE to pay for or you’ll get sad without i.e. choice brand kibbles, 🥃 Breckenridge bourbon, dine-in 🍿 🎥 movies, travel 🧳 , 📚 books, holiday gifts 🎁 , 🚲, furniture, etc.

3. Normalize everything into monthly cash flows either as expenses leaving your pot or as incomes entering your pot

Yes, even weird things like commission-based income or yearly expenses that we tend to forget about after it’s too late. Break those things that don’t fit nicely into monthly numbers so we can track them.

We’ll call these delayed transactions, since we are not actually receiving / sending funds until the actual date they hit. We are saving the money in the meantime so we’re not surprised by any unexpected expenses or income that don’t have a purpose.

4. Group your expenses and incomes into different buckets, this usually is not an easy thing to do and requires working at, a reasonable set of buckets to start from is below and is based off of economic data from most middle income families in the USA 2020, the practice is both an art and a science, so don’t beat yourself up when things don’t match up in the groups you originally setup. The point of grouping allows us to categorize our transactions easily and see the big picture of the “areas” where our money flows in and out of. You can be as specific or general as you’d like, but we recommend a base set of buckets as below.

Housing – rent / mortgage, utilities, insurance deductibles, insurance premiums, landscaping

Auto – insurance deductible, insurance premiums, registration, gas, maintenance

School – tuition, 📚🎒📝

Pets – 🥘👩‍⚕️ 🦴

Health – insurance deductible, insurance premiums, fitness memberships / classes, super food

Travel – gas, food, 🚞 🛫 🚎 ⛵️

Backcountry – 🎒 💧 🥘 🏕 🎣 🥾 permits / licenses

Where things get tricky is when things overlap, school could sponsor an outdoor trip into the backcountry and you need to pay a lump sum that covers the whole trip. You could ask for a breakdown of the trip costs so you can divide items into each bucket Travel & Backcountry. Or see which budget has more room to fit the large one-off expense. This is where the allocation of specific funds play well by accumulating dollars over time for a specific event, purchase, or obligation. Budgets only inform and limit recurring expenses, funds are purpose-built to serve a particular planned item.

Backcountry is an example bucket that is for outdoor enthusiasts who engage in backpacking / hiking in their lifestyle

An example not included could be Skiing ⛷ which could be for those who are avid slope shredders who have specialized costs associated with that hobby.

This is where our individual lifestyles play into our finances. Although Health is a universal bucket, there are buckets that are unique to the family unit and will have a unique bucket. Taking time to reflect on the things we spend time and money on, helps us group transactions into overarching buckets that are meaningful to us and our finances.