One of the biggest challenges to managing your money is the act of budgeting. I firmly believe if you are not managing your money, it is managing you. There is no better time than now to make that change. One of the benefits of budgeting is to determine where you are currently spending your money. When I take clients through this process, they are often surprised at how much money they spend on items such as coffee, or going out to eat on a regular basis. It adds up quickly!
For example, let’s say you spend $4 on your morning latte, and you do that every morning on your way to work. That’s $80 a month, which is $960 a year! Instead of spending that $80 a month on coffee, let’s say you open a retirement account and invest the money. If you started at age thirty, and you did this until age sixty-five, and averaged returns of 10% per year, your account could be worth $304,000! To take this a couple steps further, if your account averages 11% it could be worth $395,000. If the account averages 12% per year, then it could be worth a whopping $514,500! That’s not bad for a total investment of $33,600 ($80 a month X twelve months, X thirty-five years), and all because you decided to forego one cup of coffee a day. It doesn’t take a huge sacrifice to make big changes. Even a change as small as a cup of coffee could have a huge impact on your retirement assets and the ability to retire comfortably.
In the same manner as our coffee example, from a budgeting standpoint, money is simply a tool we use to express what is important to us. Clothing, food, transportation and housing are all necessities, and generally require a fixed amount of our income. Where I see folks get into trouble is their discretionary spending. For me, it’s going out to eat, either at work or with friends and family and hobbies. Oh, how I love my hobbies, but they can be budget killers! I’ve found I’m able to enjoy the hobbies more when I budget for them and it doesn’t impact my family in a negative way monetarily. Not sure where your priorities lie with your money? Look at your checkbook register or your bank statement and see what you purchased – that’s what you value. You spend your hard-earned dollars on what you value most. Once you know that, it’s easy to start managing your money by forming a budget.
If this sounds familiar, feel free to give our Gallatin office a call at 615-461-8653, or check us out at paulwinkler.com. We can set up a free initial consultation to determine if our office can help you with your current situation. I’ll keep the coffee ready for you!
Advisory services offered through Paul Winkler, Inc. (“PWI”), a Registered Investment Advisor. PWI does not provide tax or legal advice; please consult your tax or legal advisor regarding your particular situation. This information is provided for informational purposes only and should not be construed to be a solicitation for the purchase or sale of any securities.