A leader has to allocate time, money and resources. That’s true if you are running a company or running your family’s finances. Cash flow allocation is often glossed over, but it’s critical to your financial success. Holding yourself accountable to how you choose to spend your money takes time and effort. But the process can be very revealing.

Our clients sometimes ask for guidance about what’s “normal” for spending by category. That really varies by income level and personal preference. But I’ll try to give you some guidelines:

  • Save First. Start by looking at what is coming in every month. Take out what you’ll owe for taxes (net income). Try to save at least 10% of net income. If you’re not in your 20s anymore, that savings number will probably need to be upwards of 15%.
  • Company Match. If you have the opportunity to save through work, take advantage of it—especially if your company matches your savings. This money grows pre-tax and can make a huge difference over time. Your goal is to max out on what you’re allowed to save. But almost no one can start there. So do what you can when you start and vow to increase that percentage every time you get a raise or bonus.
  • Reasonable Debt. Don’t be “house poor.” Don’t take on more debt than you can comfortably afford if at all possible (Silicon Valley and San Francisco are exceptions). If you are paying down student loans, you may need to rent for a while to keep overall debt costs down.
  • Retirement Savings. If you are raising a family, don’t neglect your own retirement savings. Yes, you’ll feel better if you put away something for your kid kids’ education, but you still need to put something away for retirement so you get the time value of compounding on those dollars.
  • Prioritize. Separate out what are essential expenses and what are discretionary. Savings are essential or you’ll never build a solid foundation where you can cover unexpected bills. If you’ve accumulated too much debt, figure out which debts have the highest interest rates. Pay those down faster and make them a higher priority.
  • Kids. I know it sounds harsh, but watch how much you spend on your kids. Everything in balance. You may not need (or be able to afford) all their, or your, “wants.” Start with what you really need. Kids need time to play and there are plenty of things they can do that don’t cost a lot.
  • Essentialism. If you don’t use it, cut the cost.
  • Awakening Joy. Think about what really brings you joy, and make sure at least a portion of your money goes toward that.

There is freedom in defining where you want your money to go. If you notice frustration or depression around money issues, question your most basic assumptions. Maybe you don’t need to own a house. Maybe the kids don’t need quite as many after-school programs. Maybe you could live somewhere else with a lower cost of living.

If you find yourself almost “buzzing” with possibilities about what could change so you feel better about your financial life, you’re on to something. You can make changes in your life and find happiness. It may come with sacrifice and standing up for what you want, but it can happen. Working through your ideas with a trusted financial advisor can help you start to see the possibilities and help identify any pitfalls you may need to work through.

No matter how you choose to tackle your spending, what counts is what you do with that information. Using online tools is probably the easiest way to do this on an ongoing basis. Figure out how much you want to spend by category and then hold yourself accountable every month by reviewing what you’ve spent by category. If you can’t seem to do this monthly, put something in your calendar to look at it quarterly.

One of the best times to look at your spending is early in the year—perhaps while you’re preparing your tax return and you have papers out. Most people can find what they spend by looking at their bank statements and credit card statements. Group costs by category so you get a good idea of where your money is going.

Make sure you put savings goals at the top of the list of where your money goes. This is really the only way of getting ahead. You should aim to save at least 10% of net income (more if you can). Make an emergency fund a top goal. Once that’s in place, prioritize the rest of your goals and make steady progress toward them month-by-month, year-by-year.

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The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.