I have read plenty of articles over the past year demonizing small luxuries. Is true that small purchases add up overtime, but let's be real. For high income earners, small purchases don't add up.

A $5 coffee every day of the year is $35 per week, $152 per month, and $1,825 per year. It’s a cost, but insignificant for a $200,000 annual income. A few blogs ago I found studies saying 57% of folks can't cover a $400 emergency expense. And worst of all, a bunch of high-income earners found themselves in the same paycheck-to-paycheck boat.

Winning with money is a long road. Sprint the first few laps to get ahead. Slow down to a maintainable and consistent pace to build wealth over a lifetime.

Life is short and you can't take money to the grave. Enjoy the small sparks of happiness that make life enjoyable, but do so mindfully.

Buy a morning coffee. Fine. Eat out twice per day, adding $25 or more. Okay. Don't forget the regular pampering at the salon. And all of those reoccurring subscription services that make life just a little brighter. Now we are at a significant figure.

From a weekly lens, $35 of coffee balloons to $200.00 when dining out. And $300 with a nail or hair appointment. And far beyond that when you figure in subscription services.

These purchases are neither good nor bad. We can all agree there are luxuries. There are more cost-effective methods of accomplishing the same objectives.

If you want these little luxuries to be part of your life. Completely guilt free. Here is a though. Manage the big expenses. The money gurus online say that $5 coffee is costing you an early retirement, or retirement at all. They overlook the major expenses such as housing, vehicles, and high-interest debt.

Let’s say the luxuries described above are all-or-nothing. Would you rather enjoy your morning Americano and spend less time making meals at home or cut down on your mortgage payment by $500?

Let’s be real, the high-income earners on this page don’t typically have $70,000 1 bed, 1 bath fix-er-uppers they call home. The houses are at least middle-class. In a middle-class neighborhood. Driving reliable vehicles.

Downsizing from a 3,000 sq.ft. house to a 2,500 sq.ft. house would probably make up the cost of the little luxuries. Driving a little bit less car or simply paying it off would be the difference of the little luxuries.

I would rather have a bunch of little conveniences instead of more square footage than I truly need. Maybe that’s just me.

Triggering Word Ahead!!!

This is where I throw out a word despised by many. Budgeting. The connotation is unbelievably negative. It's like your mom nitpicking your purchases despite you being an adult.

I hear that budgets are so restrictive and don't allow for anything fun. A bad budget is absolutely both of these. However, an effective budget is sustainable, and depending on the phase of the financial journey, slightly uncomfortable.

Budgeting tracks your dollars, not necessarily restrict where they go. Send “budgets” through a search engine and you'll have more choices than imaginable. At The Financial Cocktail, I simplify budgeting to make it flexible and tolerable.

How to make a budget

Don't overcomplicate things. Use your net (take-home) income because that's the controllable portion of earnings.

The first item of the budget is designated towards financial progress. Always. No exceptions. Debt pay-down, retirement, investments, savings, or an emergency fund. Everyone I know winning with money, especially with huge student loans, applies half of their net income towards financial progress.

Yep 50%. My blog, my unsolicited recommendation. Hard to overinflate your lifestyle and not win with money when you save half of your income.

If an average CRNA earns a $16,000 monthly gross income or $12,000 net income, apply $6,000 per month towards loans, retirement, or investments. Maybe a chunk goes towards your employer matched 401(k) and the rest goes towards Grad PLUS loans.

A 50% savings rate leaves $6,000 to live, eat, and play. The rest of the budget is pretty straightforward. The Mrs. and I categorize housing, home improvements, vehicles, food, date night, and discretionary.

Housing

Housing includes our mortgage, taxes, insurance, and PMI. Basically, our mortgage payment. We include utilities, but that could be a separate line item.

Your mortgage payment should be based off a 15-year fixed mortgage. Keep the total payment under 25% of net income. You can take a 30 year mortgage, just run the numbers with a 15-year term. This keeps you from being house poor.

Assuming 25% was spent on housing, this leaves +/- 25% of your take home pay for everything else.

Home Improvements

Very relevant when we were actively repairing major and minor aspects of the house. We included a roof, flooring, paint, fixtures, and a dining table in this category. Expect to budget about 1% of a houses value per year in capital expenditures and upkeep.

Vehicles

We both own vehicles outright. We just pay the taxes, insurance, fuel, and repairs.

Food

Groceries and dog food.

Date Night

This category stems from a personal philosophy and statistical backing for marital longevity. This is usually going out to eat. Sometimes an event, but new or unusual dining is where it's at.

Discretionary

Discretionary is important. This is where the coffees, nail appointments, and subscriptions land. Any lunches at work end up here because it means we were too lazy to meal prep. The avocado toast goes under food if you are wondering.

Our discretionary spending is pretty generous. It leaves plenty of room for guilt free spending. Perks of pinching pennies for so long, I guess.

Bottom line

Tailor the budget to what you are trying to accomplish. Want financial security? Budget for a large savings rate. Want to live in the moment? Drop the savings rate a bit. I'd be careful saving less than 25% of your income prior to reaching financial independence because it's tough to deflate a lifestyle.

That 5-15% average savings rate just doesn’t fit my methods. I’m big on financial independence, which comes down to accumulating 25x your cost of living. Save 50% and almost any CRNA can be debt free, live a quality life, and retire within 10 years of starting practice. No joke. Run the numbers.

If misery accompanies your budget, change it. Create one that empowers money habits. Having trouble? That’s what our coaching is for. Don't hate the budget.