2 Types of Budgeters

2 Types of Budgeters

In my line of work, you get to see a lot of different types of people.  As a matter of fact, it is probably the most fun part of my job as no two snowflakes are alike.  That said I have noticed over the years there certainly are more or less, two camps people fall into when they are budgeting and running their finances.  Today I’ll break down the two types so you can figure out who you most identify with and what this might mean for you. 

Disclaimer:  There is a big spectrum generally here and I simply plan to overly generalize as I find most people fall closer to one side vs the other.

Type 1: Solid career, tight budgeted

There are certain jobs, people, and careers that lend themselves perfectly to this type of financial approach.  Generally, this type of person makes enough money to support their family.  They work hard, however, their chosen career may have more of a cost-of-living type of adjustment each year, or perhaps at the end of the day it only pays so much. 

This type of budgeter usually must keep a close watch on their inflows and outflows.  They have to be fairly exact and on top of their finances always.  They’ll need a nice emergency fund as well baked into their financial affairs to deal with any one-off surprises as there is not a lot of fluff in their expenses to handle an unforeseen large expense. 

I’ve found a few big truths about this type of budgeter.  First, they are best served by being on top of their expenditures.  They can’t afford to spend willy-nilly but generally live a great life, which leads to my second point.  Second, often times it may be an occupational hindrance that doesn’t afford massive pay increases.  However, many a times it is the individual and their priorities.  I’ve seen a lot, and I mean a lot, of people fall into this camp that certainly could double down and make substantially more income.  That said, often these individuals choose family, coaching, passions, lifestyle and the list goes on over a job. 

I find these people quite frankly impressive.  Many times, they simply are very comfortable in their skin and understand what makes them happy.  They value their time at a premium and arrange their lives accordingly. 

Type 2: Great career, loose budgeted

Now there are certain jobs, people, and careers that lend themselves perfectly to this type of financial approach as well.  These are people who typically never have had to budget seriously, or at least for a long time, as their careers outearn their spending.  They make gobs of money and simply put there is money left over each month after saving and spending.  This certainly is the less common individual, but there are plenty of them out there and at different extremes. 

This type of budgeter does not need to keep a “close” eye on their budget, or shall I say as close an eye.  They are saving at a nice clip and simply put out earn their lifestyle.  The key here is to have a general understanding of your expenses and make sure you are saving enough to sustain this looser lifestyle.  The other key is to make sure you don’t get overextended.  If you haven’t really had to budget, you might think you can spend with no limit and get yourself into a pickle. 

The concern is you commit to too many expenses (homes, cars, country clubs, etc) and find yourself overextended.  As long as you stay financially aware and don’t amount debts, this type of person is generally fine. I find these people also impressive in their own right.  They are very career-driven and know what they want professionally and/or financially.  Many times, they are type A personalities and either business owners, executives, or professionals (doctors or lawyers).  They knew exactly what this career would lead to and by golly, it is doing as stated.  There are sacrifices to this type of person as more of their time can typically be sopped up professionally.

Who is right?

I think this is the perfect example of two things.  First, each group could learn something from the other.  Second, the right decision is like the right way to drink bourbon, whatever works for you.  I love seeing how different people approach their finances.  It is like a personal trainer in the sense that you have to work with people’s body type.  Part of the fun for me is doing just that, making every situation work for that specific family.

As always stay wealthy, healthy, and happy.