While financial experts often recommend tracking expenses to rein in unbridled spending, it is possible to build a nest egg without detailing every penny spent.
“Most wealth accumulators do not budget, me included, at least in the traditional sense,” says Kahler Financial Group President Rick Kahler. “Here is what they do: Out of every dollar, they take out their taxes, then they take out 10 to 20 percent for investing, then 10 to 20 percent for emergency savings, and finally 5 to 10 percent [to give away] and they live on the rest.”
“You can see that most successful wealth builders learn to live on one-third to one-half of what they make, but they don’t have a ‘budget.’ Doing this type of ‘budgeting’ you get to spend everything in the checkbook. There are no envelopes or categorical constraints, as everything that’s important was taken off the top,” adds Kahler.
The simple strategy, he says, is to remove everything of importance — taxes, insurance, car and house payments, vacation and emergency savings, retirement funds — from the paycheck before it hits the bank.
One way to accomplish this is to have the paycheck deposited into a master account where all payments are automatically debited. One of those payments can be a “what’s left” amount that goes into a second checking account for lifestyle expenses, Kahler says.
Source: Dinah Wisenberg Brin, Special to CNBC.com
