No matter what your goals are, a key building block in every financial plan is figuring out how to save (pre-retirement) and manage expenses (pre and post-retirement). When it comes to saving and spending, almost everyone is faced with a constant battle between short-term satisfaction and long-term rewards. One of the most powerful steps you can take to face this dilemma is also one of the simplest…….develop a spending plan.
Back to Basics – Regular Expenses
The best place to begin your spending plan is by tracking expenses that can be easily quantified. This would include any recurring amounts such as debt repayment (mortgage, vehicle, etc.), bills/utilities or retirement savings (pay yourself first!). It’s also recommended to have a set budget for regular discretionary expenses (dining, shopping, travel).
Tracking these basic living expenses has become easier and more streamlined with the help of account aggregating software and mobile apps. These tools help simplify the process of tracking activity across multiple accounts and maintaining a household budget.
Life Happens – Irregular Expenses
A plan can be thrown off when expenses come up that are not known ahead of time. These “life happens” moments can and should be planned for. An emergency savings fund can ease the pain of these inevitable instances. Other longer-term expenses, such as a new vehicle purchase, college savings for a child or an annual family vacation, should be built into your monthly expenses as part of the spending plan. This, in most instances, will avoid unnecessary debt financing, which is of particular importance in your retirement years.
The most effective spending plans allow you to clearly identify opportunities to save more or spend less. Whether it be through retirement plan contributions, debt consolidation or setting a budget, spend some extra time this month focusing on your spending plan and see where you can make some positive changes. As always, we are here to help with this very fluid, ongoing process that will go a long way in helping achieve your financial goals.
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