My wife and I and both our kids have all been diagnosed with ADHD. Imagine four people living together who struggle with goal setting, planning, organizing, and getting things done.
We’ve tried to set a budget a couple of times, but it just seemed like an overwhelming task; too many categories, too little planning, too many moving parts. We didn’t get through a week.
The most important aspect of creating wealth for a family is to be economically productive; i.e., live within their means and have an adequate level of savings. This generally means creating and living within a budget. But some families manage to save without setting a budget. These families build wealth by saving a certain percentage of every paycheck. Those who are “wealthy” save at least 15 percent.
My wife is a psychiatrist in private practice. Doctors as a group have a higher propensity to spend than nearly every other occupation. Suffice it to say that the propensity to spend combined with deferred expenses (like taxes, malpractice insurance, etc.) make saving a certain percentage of each “paycheck” more complicated, and for us, an inadequate means to accumulating wealth.
Like most people, what gets us into trouble are retail purchases made via a credit card. We have three cards: one for medical expenses (like a medical flex account), one for Costco (they only take American Express), and one for retail purchases in general.
The idea behind saving a percentage of each paycheck is to create an artificial sense of scarcity for the family. They put that percentage into something like a 401k right off the top, and have to live on what’s left. To create that sense of scarcity for us, I calculate the expected costs in certain broad relatively fixed categories like taxes, utilities, housing, saving, etc. I give what’s left to retail, and then calculate a per diem expense for retail by dividing by 365 days. I pay those cards off every week, calculate the per diem rate of retail spending for that week, and then my wife and I get together to discuss how we did, and whether we need to make adjustments in the following week. And thus our family is becoming more economically productive. What works for you?