A Family That Earns $300,000 Per Year Asks For Some Budgeting Advice: 'Our Spending Has Always Been The Killer'

Earning a high income makes it easier to save money. However, if you have bad financial habits, that same income can dig you into a deeper hole. 

A couple in the HENRY finance subreddit shared that they earn up to $300,000 in annual household income and have two kids in a relatively affordable area. The couple does a bunch of things right, such as maxing out their retirement accounts and limiting debt to their mortgage and car payments. 

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However, they're still looking to improve and identified a weakness that they want to address.

"Our spending has always been the killer," one of the spouses explained.

The post generated plenty of traction, with fellow Redditors sharing their thoughts.

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Spend What's Left Over After You Invest

High earners are in a better position to hit their monthly investing goals before thinking about how they will cover their bills. For this couple, minimizing runaway spending can come down to setting more ambitious monthly investment goals. 

If the couple only maxes out their retirement accounts, they may want to set aside an extra $1,000 per month for a brokerage account. If the couple already puts some money into a brokerage account, they should increase their monthly contribution. The couple said that spending has been the killer, so they have more money to invest than what they're actually investing.

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This approach reduces how much cash you have available, especially if you have this process happen automatically. If you never see the money, you won't feel bad about not spending it.

Track Your Spending

If you want to improve any metric, you have to track it. Reviewing previous credit card and bank statements can help you see where most of your money is going. Take-out, streaming subscriptions, and entertainment are some of the areas where your money may be going.

It's impossible to know for sure unless you track your expenses. The moment you start, you will discover opportunities to reduce your costs. Then, you can put more money into your investments and build up your nest egg.

Tracking your spending is a great start, but if you have a strong motivation, such as financial independence or providing a large inheritance for your children, it's easier to cut down on expenses. 

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Conduct An Item Level Cost-Benefit

One commenter suggested that your financial needs and mentality toward money change as you get wealthier. This individual suggested that high earners conduct an item level cost-benefit each time they are about to make a purchase.

For instance, a Starbucks coffee habit will cost a lot of money in the long run. It's easy to think about how much that money could have compounded in a stock portfolio, but high earners can ask themselves if Starbucks coffee makes them happy each day. They can afford it, but by purchasing that coffee, they are saying no to other expenses or their portfolios.

High earners don't have to operate under shoestring budgets. However, some items are more valuable than others, and any big purchases will slow down your path to financial independence. 

While a Starbucks coffee habit is a classic example, high earners may also consider luxury cars and other expensive items. Just because you can afford something doesn't mean you can buy it. Knowing an item's utility and how it will make you feel can help you decide if it's worth the purchase or if it makes more sense to move closer to financial independence with good investments.

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