Budget to Invest

I can imagine during this period of inflation, many have asked “why budget”. With ridiculous prices on just about everything, many folks monthly budget may be designed just to meet basic needs. As inflation seems to be taking baby steps towards improving, I think it is important to revisit the “why” behind creating a personal budget. Although budgets are required to ensure basic needs are met, that is not the primary purpose. A personal budget must be created in order to have enough left over each month to save for the future.

Simply put, for the average worker to build wealth, or more accurately, establish any hope for retirement, they must invest as much as possible regularly. Even if it’s just a dollar a day, this is the whole “why” we must establish budgets. The worker can never stop investing and increasing the recurring amount invested over time! Fortunately, most employers have a readily available means to help workers do this. The Thrift Savings Plan is the particular investing opportunity for government workers.

Bottom line, establish a budget that provides an acceptable standard of living with regards to the basic needs, then invest every penny that is remaining above that standard. As wages increase, do not increase standard of living but rather put the extra into investments.  

This is the essence of living frugally, one of what I believe are five financial truths for a worker to build wealth. In other terms, this budgeting tactic can simply be called living below ones means in order to save for the future. It takes some measure of sacrifice and depriving oneself of wants in the here and now for a later reward. It may cause one to feel “poor”, but in reality, they will be building a nest egg for the future!

This budgeting strategy comes down to comfort level. What does it mean to be “comfortable” in terms of personal finance and budgeting? Comfortable is different for everyone, but essentially is when we achieve that right balance of securing basic needs but with extra left over at the end of the month.  

Reaching the “comfortable” milestone comes with risk! There will always be a temptation to spend the “extra” on a want. Fight the temptation to increase spending on frivolous wants or worse, living above means! To guarantee financial security, whenever we reach a “comfortable” financial period, we have to double down on the investing.  

Important to note, the “comfortable” milestone can come or go at multiple touchpoints in life. For the single person, who may be sharing expenses with roommates and has very few needs, a $30000 per year income may be very comfortable. But then, love happens and life with a partner begins. Suddenly that $30000 per year is stretched pretty thin and not so comfortable anymore! It is ok to throttle back monthly automatic investments.

BUT as time passes and “comfortable” is achieved once again, it’s time to double down on the investing. Above all, never take that “extra” and live above means! So many have and I am a firm believer that is one reason there are so many folks over seventy in the workforce today.  

Living frugally and budgeting to invest has put our family on track for debt free college for the kids and a good shot at me retiring before age 60. This simple truth is easy to forget when prices are outrageous and just getting by is hard. But when times improve as they inevitably do, and hopefully they are doing now, develop a budget to put that “extra” into an investment.

Looking for a good how-to on wealth building? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truth’s to Build Wealth on sale now at Amazon!

Interested in rental property investing? Look for Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing on Amazon to learn how our family turned rental property investing into a successful side hustle!

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