“We’ve given up on budgeting at least four times in the past two years.” That is how a listener opened a question this week. The family has a primary home in Nashville, a lake house, and a Park City condo the kids use over school breaks. The listener is a consulting firm partner paid quarterly. Every spreadsheet and app they tried fell apart within a quarter.
I’m not surprised, and I don’t think the problem is discipline. The problem is that a monthly budget is the wrong tool for this kind of household.
Why Monthly Budgets Break
A basic monthly budget works when your costs repeat. Electricity, water, a mortgage: add them up and you’re done. A single $12,000 vacation becomes $1,000 a month into a travel fund, and that sounds great when you have one of those.
Now multiply that by 50. You have vacations that change every year, carrying costs on three properties, and a year where you use the condo more than the lake house. Then someone buys a boat. As I told the listener, January may be five times what March is because of ski trips, and June may be ten times May because of the boat. No app handles that well.
Start With the Year, Not the Month
The good news is that you don’t need to leave the current year to get started. You haven’t had a working budget anyway, so waiting a few weeks to build a better one costs you nothing.
My suggestion was to step back and track everything annually. Look at the past five years of spending. If you’ve linked a credit card or bank account to a budgeting app, it can usually aggregate that history for you, and most banks will give you a printout of your expenses.
If you don’t want to go that granular, use your checking account. Export a year of transactions into Excel, sort high to low, add up everything that’s a plus and everything that’s a minus, and see how much actually left the account. Do it for each of the last few years. That is the most realistic number you will get, and it takes an afternoon rather than a quarter of fighting with an app. If you also pay for things out of a brokerage account, include those withdrawals too.
Not Knowing What You Spend Is Normal
Clients often tell me, “I don’t know what I spend,” and then feel bad about it. They figure they should know, since they’re doing well. It’s not crazy at all. When there’s plenty of money, it all mixes together: is that the vacation fund, the Park City fund, the lake house fund? Let it mix. Pull it into one annual figure and stop trying to separate it. The goal is a single answer to one question: how much do we spend in a year?
Pull Out the Lumps
Once you have several years side by side, the lumpiness starts to smooth out. A big year usually has an obvious cause, like a renovation or a real estate purchase. If you did a renovation in 2023, take it out and look at the line again. It will look much steadier.
That steadier number is your baseline: what it costs to live your normal life in a year. Then you add the true outliers on top, such as renovations, real estate purchases, and unexpected travel. Travel will always be there; the question is which trips are well outside normal. A recurring ski week is part of your baseline, while a one-off trip abroad belongs in the outlier column.
It also suits quarterly pay. An annual baseline lines up with income that arrives in lumps far better than a monthly target does.
The Big Decisions
I wouldn’t spend much energy on the electric bill versus restaurants versus fuel for the cars. If we sat down together and looked at your spending, I doubt the swing would come from how many times you stopped at Starbucks in a week. It would come from a decision like whether to do a $500,000 or million-dollar renovation. I’d rather have you looking at the big choices than trimming small ones. That one choice will move your annual total more than every dinner out combined.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on budgeting around homes and irregular income, watch the full podcast episode here.