Macro Minute: Week of June 16, 2025
In our ongoing series about financial literacy, lets cover budgeting. I’ve got to be honest with you all, this is not my jam. I am the Chief Investment Officer and am focused on how to invest money. Detailed budgeting is much more related to accounting, and I did not enjoy those classes in college. But, good news! For a basic understanding of budgeting for financial literacy we don’t have to be experts on budgeting.
At a high level, we just need to think about budgeting like this, we need to bring in more than goes out. That’s it, we can move on if that is all that you need on this subject, but I imagine you will want some more details than that. I tend to think in visuals, and this is a scenario where I think one is helpful. When my oldest kid was little, there was this tablet game called Osmosis. In it you are this sphere surrounded by other spheres of differing sizes. The goal is to absorb smaller spheres while avoiding larger spheres. The trick is that to move you must expel a small orb out of your sphere in the opposite direction as you intend to move. Here is a link to the trailer. I think budgeting is like this game. We must try and bring in (absorb smaller orbs) more than goes out (expel orbs to move), while avoiding a large expense that ends the journey (a larger orb). This may be silly to some, but it helps create a mental model to think about budgeting.
If you are like a lot of people, we start out our adulting journey incurring lots of expenses. If you attend college, you may have debts before you graduate, even though the hope is to get a higher paying job to pay those debts off quickly. I mentioned last time about some of the programs I saw at Gadsden State Community College. One of the more interesting programs there was the FAME program. FAME stands for Federation for Advanced Manufacturing Education. I mention this specifically here because it allows students to gain an education while being placed in a job. This is an example of gaining a 2-year education while making as much as $33,500 and enter a career starting at $60,000 plus. I don’t know how your early careers started, but I know I did not begin in a career that quickly let me earn more than my expenses. There are options like this available now and we should not overlook these opportunities.
Back to budgeting. It is important to account for all the expenditures that come our way. You can be as broad or as specific when you think of these. There really is no right or wrong way to do this if you are keeping that first rule of budgeting, bring in more than goes out. I work with several financial planners, and they are much more detailed in how they work with individuals on their budgets while I like to keep it high level. Find whatever works best for you. If it stresses you out to have it all itemized, then consider grouping into larger categories. You can do it however works best for you but remember my first tip from last time and that is starting now. You don’t have to have it all figured out but working through the exercise will guide you to at least live within your means. List your income and then list your necessities of expense. Make sure that you have income to cover them. If not, you must either increase the income or decrease the expense. I know society does not like to think about budgeting but remember it doesn’t have to be in-depth and complicated unless you want it to be. We will cover compounding later, but just know this, if our expenses are larger than our income we will accrue debt. Debt has a way of growing faster than our income because of interest. This is easiest to stop at the budgeting phase where we can control our expenses and not let them turn into debts. This is my tip from the budgeting topic: Don’t let your expenses turn into debts.
DISCLOSURES:
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.