Budgeting like a stoic

Updated: Aug 28

Considerations for budgeting and managing your financial life.


This article is part of our "Your Personal Finance Tour Guide!" series. This series will empower your Personal Finance success.

Personal Finance and general financial literacy are critical for making the most of your financial resources. It is very doable!


One of my favorite stoic-like Warren Buffett quotes is:

“Price is what you pay. Value is what you get.” [i]

We will discuss a stoic-like approach to budgeting and driving wealth that focuses first on attitudes and discipline. Do not be fooled. There is no secret formula to budgeting. It is more of a discipline and an attitude than some special formula or spreadsheet. The spreadsheet tools will come in handy as a starting point, to get you on the wealth-building trajectory. You will find, once you get in the budgeting habit and mindset, a spreadsheet will not always be necessary.

So let's start with attitudes and behaviors. Here is the "short version" of my approach to wealth building. [ii] If you can implement these, you will build wealth.

#1 - Being content with yourselves and NOT spending money you don't have, NOT buying things you don't need, and NOT impressing people.

#2 - Having a long-term focus (and long-term is NOT two or three years). Wealth and security are built over decades, not months.

#3 - Very simply: Save --> Invest --> Evaluate --> Re-balance --> Repeat.

You may be thinking, "This does not have anything to do with budgeting!" It actually has everything to do with the proper budgeting mindset. A budget is a waste of time if you do not have the staying power to stick with it. Think of points 1 and 2 as the necessary budgeting mindset, with point 3 as the wealth-building outcome from a proper budgeting mindset.


Allow me to illustrate point 1 with a stoic-like example. This coffee example could be any "want" or "non-need" product you regularly purchase. [iii] The point is to understand and manage the impact of small purchases over a long period of time.

Let's say you have a habit of buying coffee every day. You go to Starbucks and get a "Venti, Mocha, Frappe, Latte, Crappe" that costs $4 per day. Thus, this costs $20 per week. You think to yourself "I can afford this, I'm worth it!" So first of all, you should be questioning why you derive self-worth from a coffee drink. Also, as a stoic-in-training, you should compare this action to the first 2 points of our wealth-building approach. Are you sure you need a Starbucks coffee drink? Or perhaps you are trying to impress someone? Are you sure this action is consistent with a long-term focus? So let's take a closer look at the long-term impact. My approach is to compare our financial decisions to retirement, usually considered the longest-term focus of our life. So, how bad could $4 / day be?! As illustrated in the following chart [iv], for a 22-year-old, if you spent this every day, 5 days a week, you would forgo almost $400,000 at retirement throughout your working life!

A stoic would get the free coffee at the office instead.

Pay Yourself First

Another stoic budgeting attitude and behavior is "Pay yourself first." There is a bit of psychology to this aphorism. Here is the thing, typically, your monthly income is fixed. Most of your bills are fixed. (needs) Next comes your fun money and your savings. If your savings are last, like a leftover, you may never save anything. In fact, most Americans save very little, as this Federal Reserve graphic shows.

Why? Because most Americans do NOT pay themselves first. Pay yourself first by setting up auto savings and investment transfers from your paycheck. Next, your bills are the priority, with fun money being the leftover. [v] Just changing payment priorities and attitudes can make a HUGE difference in your savings and long-term wealth. By the way, the little psychology trick is the auto transfer. If you never see the money in the first place, it is harder to spend. Richard Thaler, the Nobel Prize-awarded Behavioral Economist, made his career on a similar concept for 401(k) retirement savings. It works!

Now that you are paying yourself first, how much should you pay yourself? Start with maximizing your company match for the 401(k). Many companies will match up to 5 or 10%. This is free, pre-tax money! Do as much of this as you can! After that, build after-tax savings. Your savings should generally be geared toward an investment fund like a robo-advisor. There are many good robo-advisors, please see the notes section at the end of this article for some suggestions. [vi] Choose a robo-advisor with the auto transfer. I would save and invest 10-20% after tax (or more if you can). By the way, I'm not a huge fan of the large “6-month” emergency funds that many advisors suggest. I'd rather get a higher investment yield than a low-yielding savings account. You can always use your after-tax investments in a pinch. I’d say, keep no more than 1-2 months of salary to manage your liquidity needs in a checking account. Also, when you get an annual salary raise, take it off the table. In other words, increase your retirement and after-tax savings by an amount similar to your raise. Why? Your expenses are generally fixed, so you should not need any more income to keep paying your existing bills. This is a cornerstone activity for "Pay Yourself First!"

Consumer Finance

As I wrote in The Stoic's Arbitrage (1), Consumer Finance products may lead to significant long-term wealth destruction. Other than mortgage products, do your best to avoid or minimize high-interest exposure to consumer finance products like student loans, auto finance, and credit cards. To be clear, I’m not saying not to use credit cards as a cash transaction substitute. There is a difference. The following graphic shows the potential value of a stoic budgeting and investment approach.

I invite you to check out the article for tips on managing consumer finance products like a pro!

If you have already gotten yourself into a high-interest rate consumer finance products pickle, I suggest:

  1. Inspect and adjust the cause - if you are spending too much on your wants, stop doing that. Use our wealth-building approach as a filter. Re-prioritize your payment hierarchy.

  2. You may need to use your after-tax savings to quickly extinguish your high-rate debt. No sense in investing funds at 7% if you have debt at 15%.

Budgeting tools

There are many budgeting tools, please see the notes section at the end of this article for some suggestions. [vii] Consider using a simple budgeting model. Something you can keep up with and that makes sense to you. Also, consider making your own budget spreadsheet in excel or google sheets. This is a great way to learn spreadsheet mechanics and create more personal investment in your budget. If you have trouble consistently going over budget, I suggest examining the budget gap from the perspective of the wealth-building approach points presented earlier. (Are you spending money you do not have? Are you trying to impress someone? Are you taking a long-term view?) Be honest and take action! Especially, if those overages are in the low priority wants category. Remember, we re-prioritized our wants (“fun money”) to the bottom of the payment hierarchy.


Most importantly, once you get in the habit of thinking like a stoic, budgeting will come naturally. Spending properly will become automatic. Spending any other way will feel strange.

You still may be wondering “why?”….what is the purpose of building long-term value, budgeting, and thinking like stoic? This is where the stoic’s kindness to others principle comes into focus. We have many alternatives for how we define our utility. Sometimes, our utility, or "what is important to us" will change throughout our lives. I provide the stoic's perspective as a suggested utility alternative. Naturally, it is up to you to define and actively pursue your utility. A stoic believes kindness to others is central to life. Building value and living in a modest, utilitarian manner will build your wealth capacity for kindness to others. While there are certainly other means to provide kindness, wealth will likely give you more options to deliver kindness to family, friends, and/or community. One of my favorite related bible verses is from 1 Peter 4: “Each of you should use whatever gift you have received to serve others, as faithful stewards of God’s grace…”


[i] Jeffrey Hulett, The Stoic’s Arbitrage: A survival guide for modern consumer finance products

[ii] Jeffrey Hulett, Investment thoughts for my children

[iii] Full disclosure: Not long after I published this article, my youngest son reminded me that I regularly drink beer. Usually a drink or 2 a night. Yes, this is hypocrisy! Even your intrepid author can fall victim to this wealth-reducing trap. I immediately started buying less expensive beer. Perhaps someday I will stop altogether....maybe....

Bottom line: This "coffee-nomics" discipline is harder than it looks. Think of it in terms of process, not perfection!

[iv] Jeffrey Hulett, The Time Value of Money Values the Young

Chart assumptions:

  • 7% long-term tax-adjusted rate of return

  • $80 monthly coffee spending / reduced savings

  • 2% Annual coffee price increase

  • Retire at 67

[v] Do not confuse higher-priority bills with fun money. Just because a credit card statement comes, it does not mean all the transactions should be part of a higher priority bill. Check out the transactions. If they are more in the "fun money" category, be sure to treat them as such and adjust future spending. Do your best to pay off your credit card bill every month. If you are having trouble doing that, reduce the credit limit on the card and pay cash for your wants.

[vi] I am a big fan of robo-advisors. They generally have very low minimums. Almost anyone can start building wealth. Setting one’s risk profile is an important part of setting up a robo-advisor account. Investment risk management is a function of time. I.e., the longer the time period, the higher the properly managed risk may be realized to maximize return. A 7-plus year timeframe should be invested in higher risk profile equity portfolios. (This time period is roughly equivalent to the typical business cycle) Shorter-term time horizons should be in cash or appropriate bond and/or bank-like investments. When in doubt, choose a longer time frame. Timing needs for money are almost always further in the future than you think.

The great thing about robo-advisor’s is the automation of regular rebalancing and tax efficiency strategies (e.g., tax-loss harvesting). The setup is straightforward, with the risk profile handled by answering a brief set of yes/no questions. Finally, as interested, robo-advisors generally have a rich set of educational resources and helpful tools.

Robo-advisors I am currently active:



In the past, I have used:


I have considered but did not use:

Schwab Intelligent Portfolios **

JPMorgan Auto Investing ***

in terms of robo-advisor costs, there are 2 main costs to consider.

1). AUM fee - most robo-advisors charge a fee as a percentage of your assets they manage. Currently, the market is around .25% annually. (Or, $2.50 for every $1,000 they manage.)

2). The loads of the underlying funds the robo-advisor manages - Most robo-advisors use ETFs, which generally have very low loads (< .1%). In the case of FidelityGo, as of this writing, they charge .35%. However, they only use Fidelity funds and they do not charge fund management fees. So, the FidelityGo fee is on par with a robo that passes through ETF fees. (.25% + ~.1% = .35%)

**The Schwab approach lacks transparency, at least at the time of article writing. In my understanding, Schwab does not charge any stated AUM fees. Yea! Great news. So you may ask, how do they make money?

This is the part with a transparency challenge. Based on their example, Schwab sweeps about 8% of client AUM into a low-interest-bearing bank account. Schwab uses this very cheap money to make loans and other investments for itself. In today's world, the bank account rate they pay customers is extremely low, less than .5%. If the long-term yield on the other ETFs is 10%, that means the effective AUM fee is .76%. [(long-term yield – deposit yield)*cash sweep %] Also, this AUM fee opportunity cost money is not available for the long-term time value of money customer benefit. Other robo advisors invest 100% of client funds in the investment strategy. This lacks transparency because:

1) the effective AUM fee is hidden in the cash account and is 3x other robo-advisors.

2) From a liquidity standpoint, you would never use a robo-advisor to hold cash because the account, by definition, is illiquid in the short term.

It would be the worst of both worlds of getting a super low yield and not having direct access to the cash.

*** The JP Morgan approach lacks transparency as they 1) charge a higher .35% AUM fee but do NOT disclose which funds will not have the backend fees rebated. 2) They sweep 2% of AUM into their own checking accounts. While less than Schwab, it is still consequential.

The challenge with Robo advisors associated with larger broker-dealers that manage their own funds and have a bank appears to be they have more tools to potentially reduce transparency. This may be a good reason to utilize monoline robo advisors. Also, at some point, I’m hopeful a law similar to the Truth In Lending Act / Reg Z for lending will make it unlawful for broker-dealers not to disclose “effective” AUM fees and to help make robo advisor fees comparable. Until then, caveat emptor!

We provide a slightly different example with additional context in our article Is it time for “Truth In Investing?” – The next Robo-advisor evolution

[vii] Here are some budgeting tool suggestions:

Clever Girl Finance

Nerd Wallet

The Balance


The Stoic's Arbitrage: Your Personal Finance Journey Guide

Core Concepts

1. Our Brain Model

2. Curiosity Exploration - An evolutionary approach to lifelong learning

3. Changing Our Mind

4. Information curation in a world drowning in data noise

Making the money!

5. Career choices - They kept asking about what I wanted to do with my life, but what if I don't know? - Part 1

6. Career choices - They kept asking about what I wanted to do with my life, but what if I don't know? - Part 2

7. Career success - Success Pillars - A Life Journey Foundation

8. Career choices - Do I need to be a Data Scientist in an AI-enabled world?

9. Career choices - Diamonds In The Rough - A perspective on making high impact college hires

Spending the money!

10. Budgeting - Budgeting like a stoic

11. Home Buying - Homeownership is an important wealth-building platform

12. Car Buying - Cutting through complexity: A car buying approach

13. College choice - The College Decision - Framework and tools for investing in your future

14. College choice - College Success!

15. College choice - How to make money in Student Lending

16. Event spending - Wedding and event planning guiding principle

Investing the money!

17. Investment thoughts for my children

18. Our Investment Barbell Strategy

19. Using the Stoic's Arbitrage to choose a great investment advisor

10. Anatomy of a "pump and dump" scheme

21. The Time Value of Money Benefits the Young

22. How Would You Short The Internet?

Pulling it together!

23. Capstone - The Stoic’s Arbitrage: A survival guide for modern consumer finance products

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