If you’ve ever said to your spouse, “We make good money… so why do we still feel broke?” — you don’t need a stricter budget.
You need ONE number:
Your cash flow baseline.
Because once you know that number, you can tell if your household is winning (surplus), treading water (thin surplus), or quietly sinking (deficit).
And more importantly, you can answer the question every financial decision creates: “Where’s the money coming from?”
Budgeting is what you do after you know your baseline. It's where you decide how and what to allocate your cash flow to, hopefully, in a way that best reflects what's important to you — your values.
Your cash flow baseline measures what’s left over after the bills are paid.
If you think of your household like a business, your baseline tells you whether you’re operating with a healthy margin… or whether you’re running a deficit and borrowing from your future.
Some people want to live ultra-lean and invest aggressively. Those who ascribe to Lean FIRE are willing to live off of only 30% of their income and invest the rest, so that they can retire early. That can be an awesome goal.
And then there’s the internet’s favorite villain: the latte factor — the idea that small daily purchases quietly ruin your financial life.
Here’s my take: small expenses absolutely add up… but you don’t need to optimize every $6.25 latte to build wealth. You need to know whether your lifestyle fits your margin.
If your baseline is strong, you can enjoy a few “nice-to-haves” on purpose. If your baseline is thin or negative, even small leaks matter — not because lattes are evil, but because your margin is tight.
That’s why I like starting with baseline. It’s the adult version of “can we afford this?” It replaces guilt with math.
Personally, I’m not trying to eliminate joy from the budget. Life is short. After reading "Die with Zero" and watching the health of one of my parents decline, I’m more convinced than ever: your money plan should fund a future you’re not scared of — and a present you actually enjoy.
We’re going to do three things:
Find your real monthly net income (what actually hits your account).
List expenses in three buckets: fixed, variable, and non-monthly.
Calculate the baseline and choose your next move.
Open your bank app and add up deposits for the last 30 days: paychecks, side income, reimbursements — anything recurring. Include your spouse’s income if you combine finances.
If income varies, take the last 3 months and average it. I’d rather be conservative than optimistic.
Write it down: Monthly Net Income = $_____
Quick note on bonuses and tax refunds: I usually exclude refunds, and if you include a bonus, include the floor — not the best-case scenario. (You can always allocate upside later.)
This is often the first “aha” moment. Gross income can sound massive — but net income is what actually funds your life.
A household can have $300,000 of gross income and still feel tight if they’re only clearing $8,000 (or less) per pay period after federal/state taxes, 401(k) contributions, and health insurance.
PERSONAL INSERT: Share a quick example of a time you were surprised by the gap between gross and net—and what you adjusted afterward.
Most people do fixed and variable. That’s where budgets go to die — because they forget the third bucket.
Mortgage/rent
Childcare
Car payments
Insurance
Minimum debt payments
Subscriptions you “can’t live without”
Groceries
Restaurants/take-out
Shopping
Entertainment
Gas
Utilities
Car repairs
Holidays + gifts
Travel
Medical deductibles
Home maintenance
Kids activities/camps
Annual subscriptions
If you don’t include non-monthly expenses, you’ll “pass” your budget on paper — and still get wrecked in real life.
Shortcut: take last year’s total for irregular-but-real expenses and smooth it out. Divide by 12 for a monthly number (or by 26 for biweekly paychecks).
Personal story: My son made it to nationals in Florida for the Great History Challenge. With about a month’s notice, we had to book our flight and hotel. It wasn't a monthly bill, but it was something we could budget for.
With a healthy baseline you don't have to make the difficult tradeoff of choosing between a planned Disney trip… and replacing four tires on your BMW X3.
Same year. Same money. Different priorities.
Baseline = Monthly Net Income − (Fixed + Variable + Non-monthly)
Write it down and circle it: Baseline = $_____ per month
What your baseline means (and what to do next)
If your baseline is negative, budgeting isn’t optional — it’s triage:
Stop the bleeding (cut the fastest, plug the easiest leaks).
Renegotiate big fixed costs if possible.
Increase income (career leverage, side income, etc.).
If it’s positive but small, you’re not bad with money. You’re operating with a tight margin. Your best play is to:
Automate essentials first (savings, debt payoff, retirement).
Keep spending simple and sustainable.
You don’t need 47 budget categories to manage to the last cent — you need a high-level system you’ll actually run.
If it’s strongly positive, congrats — you have real power. Now the question becomes: what are you funding on purpose?
Retirement
Private school
College
Experiences
Your baseline is what funds your various goals.
No baseline → goals become wishes.
Baseline with surplus → goals become a plan.
Quick checklist (copy/paste):
Calculate Monthly Net Income from deposits (last 30 days).
List fixed expenses.
Estimate variable expenses.
Add non-monthly expenses (last year total ÷ 12, or ÷ 26).
Calculate baseline = income − total expenses.
Choose your next move: deficit / thin surplus / strong surplus.
What’s next
In the next post and video, I’ll show you how to turn this baseline into a one-page budget that takes less time than waiting in a Starbucks drive-thru line on a Saturday morning.
Comment SURPLUS or DEFICIT below and tell me what surprised you most: income, fixed costs, or non-monthly expenses.
Quick note: This is educational content, not personalized financial or tax advice. If you want help building a plan that fits your specific situation, reach out.