When people think of “budgeting” they don’t typically think of something enjoyable or worthwhile. Many high earners don’t budget at all – and with good reason. 

Managing line items in your family budget may be time consuming and frustrating. It can also be completely unnecessary if you have the cash flow available to live comfortably, and always spend less than you make. 

Penny pinching isn’t the way to make empowered decisions about your money. However, just because you don’t use a budgeting program like YNAB or Mint to track your spending doesn’t mean you shouldn’t have a general sense of your cash flow. 

We recommend doing an annual audit of your expenses to gain a deeper understanding of where your money is going – and whether that aligns with your values. 

Annual Audit of Expenses

Let’s walk through what an annual audit of expenses looks like, and what you should get out of the process. 

Check your credit card or bank statement. 

Your first step is to check your credit card or bank statement. Look over the past 12 months, and get a general idea of what you’re spending (on average) in a given month. Of course, some months will contain annual expenses (holiday spending, travel, etc.). 

Take note of all recurring expenses.

This doesn’t include the big, one-off purchases that likely won’t happen again (emergencies, new furniture or appliances, etc.). Those expenses are bound to come up, but if you’re in a comfortable position financially, you likely don’t need to overworry them. Instead, focus on the expenses that repeat themselves monthly or annually. These could be:

1. Insurance premiums. 
2. Memberships or subscriptions. 
3. Holiday shopping.
4. Childcare costs.
5. Utilities.
6. Annual or seasonal travel.
7. Mortgage payments.
8. Transportation costs.

Evaluate expense categories.

This is a time to be curious (not judgemental) about your spending habits. When looking at the list of your recurring expenses, start assigning them to high level categories. You don’t have to be too specific when going through this process, it shouldn’t take more than a few minutes of your time. A few sample categories might be:

1. Travel.
2. Home expenses – groceries, utilities, etc.
3. Subscription services.
4. Child care or family-related expenses. 

Eliminate what isn’t necessary.

Inevitably, there will be a few recurring expenses that you don’t need to continue into next year. Subscription services tend to accrue, or you may find you’re paying for a service you haven’t used for a while. Take this opportunity to trim these out of your cash flow plan for next year. 

If you find that you genuinely use or feel comfortable with all of your expenses – great! No further action is needed during this step of your cash flow audit.

Aligning Your Spending With Your Values

Here’s where the more thoughtful part of your cash flow audit begins: determining whether or not the way you’re spending aligns with your values. At the end of the day, your wealth is a tool to help you reach your goals. Unfortunately, when you’re a high earner who has already achieved many of your financial goals, it can be tough to know “what’s next” beyond just retiring comfortably. 

This is where getting clear on your own personal values system can help you determine how you want to spend your resources. Jot down a handful of things that matter most to you and your family. These might include:

1. Family.
2. Education.
3. Community.
4. Travel.

When you have clarity about what’s important to you, you can decide whether or not the way you’re currently spending lines up with what you want to focus on in your life. For example, let’s say that during your cash flow audit, you find that the amount you’re spending on subscription services you rarely use outweighs the amount you spend on travel. 

Consider ditching a few of the memberships or subscription services you shell out for each year and refocus on how you want to allocate those funds toward traveling to new destinations as a family, or spending an extended period of time working remote in an interesting location for a change in scenery. 

Understanding Your Cash Flow Will Always Be Key – Even Without a Budget

Remember – you don’t have to make dramatic changes during your annual cash flow audit. If nothing else, it’s useful to have a deeper understanding of how you spend your wealth. This is the key distinction between cash flow planning and budgeting. 

Budgeting is often perceived as a way to nickel-and-dime yourself to the point of getting exasperated. Cash flow planning, on the other hand, is a way to lay the foundation for making intentional decisions about how your wealth and time are directed in the future. 

If a cash flow audit sounds overwhelming, or determining a path forward toward values-based spending feels stressful, speaking with your advisor may help. Use your financial advice team as a sounding board. By partnering with them, you’ll be able to explore options for allocating your resources, evaluate whether or not you’re spending in a way that brings you fulfillment, and determine whether bigger decisions need to be made about your financial plan and spending based on your values.