Spring into Action and Get in the Know!
As a financial planner, one of the biggest opportunities I see for individuals and families is that they do not know what they actually have available monthly to spend (in other words, the net amount that lands in their bank account). There is often even less awareness of where they are spending their money. Knowledge is an important first step and can be an eye opener and a game changer.
Get in the know and create a budget!
The goal of a budget is to keep track of your money, and make sure you don’t spend more than you earn. Although it may not be a thrilling exercise to dig deeper into the money you have coming in and going out, it is truly exhilarating when you have an important goal. By understanding how to get to your goal you actually set in motion a plan to achieve it. The day-to-day ability to keep your eye on the prize is also rewarding and can help you resist spontaneous purchases or money decisions that may get in the way of achieving what matters most to you. By tracking expenses and following a plan, a budget makes it easier to pay bills on time, build an emergency fund, and save for major expenses such as a car or home. Overall, a budget puts a person on stronger financial footing for both the day-to-day and the long term.
The nitty gritty of budgeting
You’ll need to record all of your expenses over at least a month (note that some expenses are annual in nature and we forget about them – divide the annual expense and capture it monthly). It’s important to be realistic and account for everything. Once you have done this, you’ll be able to see the difference between the money coming in, and what’s going out. If you are spending more than what’s coming in, you’ll need to prioritize your expenses and spending decisions. If there is money left over, a surplus, it’s a good practice to start putting some of it aside in savings.
There are some terrific tools to assist you with budgeting and your financial advisor can also help you with this important element of owning your financial future.
Jennifer Taylor, CFP®, PFP, Financial Planner, RBC Royal Bank
