As I was working on a client’s financial plan today, I thought one of the recommendations might be helpful for others. Here is the redacted text that made up one recommendation in the cash flow and budgeting section of a client’s financial plan:

Our final recommendation vis-à-vis your cash flow and budget is the hardest to implement and the hardest for us to recommend. Successful financial planning ultimately comes down to cash flow planning. Over the years, our most successful clients have developed financial habits that allow them to live below their means. Living below one’s means can mean different things to different people, but it essentially comes down to a lifestyle decision whereby one embraces frugality and eschews the temptation to spend at one’s income level. Given various societal pressures, such habits are incredibly difficult to adopt. Some best practices to aid you in developing these habits are as follows:


  • Live on a set salary. For example, you could consider setting up your household budget so that you only live on your base salary, and you work toward saving all of your additional household income. 
  • As income increases, avoid the temptation to commensurately increase your standard of living.
  • Save heavily and regularly. One strategy here is to save raises and salary adjustments, and to continue living at your previous income level.
  • Save 20% of gross income, and maintain this savings rate as your income increases over time. One mistake people make is that they often max out retirement plans and think they’re saving enough. However, if maxing out a retirement plan only results in a 10% savings rate, then this is likely not enough.