Your Financial House: A New Way to Look at Your Budget

Your Financial House: A New Way to Look at Your Budget

I had the immense pleasure of leading a personal finance workshop with Designers Assembly this past weekend. They are a collective of young architects and designers who have built a tight-knit community and put together events and workshops to help designers gain financial and business literacy.

And they know where to get the good bagels for brunch 🙂

In putting together the workshop, I was talking to my boyfriend about how to structure it (no pun intended!), and I wish I could take the credit, but he was definitely the one who said, “how about using a house metaphor?” And thus, the financial house was built.

After presenting it to a willing group of unbeknownst guinea pigs (you guys were great, especially for a Saturday morning!), I realized that everyone has a financial house they can put in order. It’s a whole new way to think of where your money goes. Here’s the gist:


Just like any home, it starts from the bottom up, first with the foundation, then the first floor, where you spend most of your time, then the second floor where all your hopes, dreams, and financial laundry are hung, and finally, the attic, where cobwebs are collecting from all the random crap you’ve acquired throughout the years (maybe literally!).

Your financial house is a catch-all for all your spending and saving. There’s lots of bullet points below, some general, some more specific. I’ll be going into everything in more detail in future blog posts so stay tuned. For now, just read through the below to get your juices flowing:

(BONUS: If you want to get the accompanying worksheet that will help you figure out the numbers, email me at pam [at] and I’ll send it over! I’ll also sign you up for the newsletter!)


  • First take care of your foundation. Figure out what your total essential expenses are and subtract them from your income. If the numbers are close, you have two options – cut your essentials or increase your income. Remember that you always have options and your situation is never set in stone.
  • We spend a lot of time figuring out how to cut back because it’s easier and less scary than figuring out how to increase our income or ask for a much-deserved raise. Your income is a huge part of your foundation so it’s worth spending the time and energy to make it solid.
  • Make sure you are optimizing your tax situation. If you have freelance income over $5,000, you should consider seeing an accountant to do your taxes. For freelance income, you can write off a number of things, including: percentage of rent, utilities, and internet, cell phone, travel (transportation, mileage on car, hotels, food), business meals/entertainment, health insurance premiums, research and professional development (subscriptions, books, classes, events, etc.). A (good) accountant will ask you specific questions about work and advise you on what you can deduct from your income.


  • It may seem a little strange to take care of this before your debt or your savings, but even though all logic and reason say “pay down debt and save money,” our emotions will always win, especially on the day to day. So let’s take care of those emotions by acknowledging them and feeding them (maybe literally!). Think about the things you buy or want on a regular basis and fit the “can’t live without them” items into your budget.
  • Remember, how you spend your money is a representation of what you truly value. Also remember that it’s okay to spend money on things you love, as long you do it mindfully and purposefully.
  • Money also represents an exchange of energy. It’s hours of work you’re trading for things that make your life better. Choose these first floor items carefully and take time to consider where you really want your energy to go.


  • I highly recommend saving money at the same time that you pay down debt. While it may seem to make sense that you should pay down your debt as quickly as possible, having no savings leaves you incredibly vulnerable to going back into debt if an unexpected expense or emergency were to come up.
  • Once you’ve added up the items from your essential expenses and first floor spending and subtracted it from your income, you’re left with the amount you can put towards savings and debt.
  • We talked about the 40/40/20 ratio, where 40% of what’s left over goes to savings, 40% goes to debt, and 20% is a spillover amount to account for the fact that your budget in real life will never be as perfect as it looks on paper 🙂
  • IMPORTANT: If you are close to zero or in the negative at this point, don’t go to the second floor yet. Continue to make ONLY minimum payments on your credit cards and set up an automatic transfer from your checking account to your savings account of $10/week. My clients have always been able to find $10/week. Start to build the savings habit now even when it feels like you have nothing to save.
  • CREDIT CARDS: If you have multiple credit cards you need to pay down, remember to set up a debt snowball/debt avalanche system – instead of spreading your extra payments out over all your cards, put all your extra payments towards the credit card with the lowest balance until it’s paid off, then move on to the next one. More information here:
  • STUDENT LOAN DEBT: My recommendation on student loan debt is to make the payments as low as possible now (get on Income Based Repayment for federal loans!) until you can start to pay down huge chunks of the loan at once. As you make more money and you payments go up, the paydown of this debt with accelerate naturally. Reducing your student loan payments now will help tremendously, especially if you still need to build up a long term savings cushion.


  • This is where your 20% comes in. This is the money that just seems to disappear into Duane Reade, or the dollar store, or the bodega, or Seamless.
  • If you make these kinds of convenience/impulse/laziness purchases regularly, consider what triggers the habit, using the cue-routine-reward methodology from Charles Duhigg’s The Power of Habit:
    • What is your current ROUTINE? – buy Seamless for lunch almost every day
    • What is the REWARD? – Lunch in an instant, get to take my mind off work for a minute to choose meal, feeling of relief when it comes through the door
    • What is the CUE? – Didn’t bring lunch, deeper cue – didn’t make time for it last night or this morning, even deeper cue – i barely have time to cook dinner, when the hell am i going to make lunch?
    • Experiment with CHANGING THE ROUTINE – try bringing lunch for the week to work – loaf of bread, cold cuts, leafy greens, mustard. If this didn’t satisfy the the Reward (i.e. you still find yourself on Seamless every day), change the routine again. Maybe you’re looking for variety in your food or an excuse to take your mind off work. Maybe try allowing yourself a small treat to add to your lunch or getting up and taking a walk around lunchtime and see if it satisfies the Reward you’re looking for.


One thought on “Your Financial House: A New Way to Look at Your Budget

Leave a Reply