Many people think that becoming wealthy means that they no longer have to budget. The logic goes that if you have enough money, it’s no longer important how much is spent on various categories. When you have extra money, you don’t have to track where it all goes, right? Wrong.
Those who want to remain wealthy and grow even more wealth continue to budget. Sure, it gets easier when there’s a lot more money. The very wealthy don’t necessarily have to stay within the grocery budget, for example, or else risk not being able to pay the mortgage. They can go over their projected amounts from time to time with no detrimental effects. However, too much of that can slowly erode even the greatest wealth.
Money is best managed when every dollar has a purpose. This is true whether you are just getting by or your last name is Trump. Unless you allocate your money to specific categories it’s just too easy to blow it. Granted, the very wealthy have a much bigger “blow money” category than the rest of us. They can buy a lot more things just for the heck of it. But even they need to stay within that budgeted amount. Too much blown money eventually means that money will have to be pulled from other areas to cover the fun stuff and that can spiral out of control. Even the wealthy need to set up categories to make certain that all the bills are paid and that the blow money isn’t encroaching into needed funds.
The wealthy also need to budget their savings. The wealthy have no trouble (or shouldn’t have trouble) meeting their bills and other obligations with a lot left over. That leaves a lot that can be saved and turned into greater wealth. A budget tells the wealthy how much they have to save and where those savings should go. They can track how much can go into tax advantaged accounts, how much can go into a standard savings account, and how much can go into other investments. Budgeting for savings means that the wealthy will continue to grow their wealth
The wealthy need to budget for other ventures, as well. Many wealthy people donate significantly to charities. Without a budget as a guide those donations can eat into other funds. Giving is great, but not when it compromises your security. Many wealthy people also like to invest in things like businesses, real estate, speculative investments, and other unconventional investments that may or may not pay off. Without a budget that tells them exactly how much they can afford to spend and lose in such ventures, these unconventional investments can quickly sink a portfolio if too many things go wrong at once.
How many times have you heard a story about a lottery winner who ended up broke within five years? It’s because the winner failed to budget his money. He thought that wealth meant he no longer had to budget. But without direction, the money just somehow slipped through his fingers. The wealthy may be different, but as far as budgeting goes, they’re just like the rest of us. They need a budget that covers their necessary expenses, fun money, savings, donations, and investments. Without it, the money can go quickly. Wealth just means your budget is bigger, not that you no longer need one.