There’s a certain word that’s extremely important in the world of personal financial planning, whether it’s an individual looking over their own finances or it’s working with financial professionals like us. It’s a word we use from the very start when we begin working with someone. It’s a word we use often and that we will bring up periodically as the years go by.
It’s also a word that makes almost everyone we say it to cringe. What is it? Budget!
The goal of this brief article is to turn that negative into a positive. We’re going to give you three rock-solid reasons why a budget is your retirement plan’s secret weapon.
Budgets Organize Your Finances
A well-designed budget is like the well-organized filing cabinet of your financial plan. It allows you the ability to determine and organize where every dollar should go. By having a budget, you then have the ability to determine if too much or too little of your money is going in one “folder” of this filing cabinet. You can then make the necessary changes, reallocating how much goes where.
The more order in your finances, the greater ability you’ll have to know and control where your money can or can’t go, where your money should or shouldn’t go. No more surprises–only intentional, informed financial choices.
Budgets Build Financial Stability
Planning and preparation is key to being able to experience financial stability and security. This, of course, is far from only in the financial world. To illustrate, imagine in one week you have to give a presentation in front of a hundred people about a subject you know little about. If over the course of the week you put little time and effort into planning and preparation, how will you feel when the day for your presentation comes? Far from stable and secure. Even worse if the unexpected happens and your attendees begin raising their hands and asking you questions!
In a similar vein, having a budget is a key part of the financial planning process. By putting forth a bit of time and effort into this aspect of planning and preparation, you’ll be one step closer to achieving the goal of financial stability. Then, when the unexpected happens, as it inevitably will in our financial lives, you’ll be equipped to weather those unexpected expenses.
Rather than a free fall, budgeting allows you to plan for these and create a safety net.
Budgets Turn Dreams into Goals
Have you ever dreamt of a vacation to an exotic locale, buying a lake cottage, or opening a bed and breakfast for alpacas? If you don’t have a well-designed budget, the only way your dream will ever enter the realm of reality is if you experience an unexpected windfall of money.
For most people, however, the way to make this happen is through a plan, or blueprint. A budget acts as your dream architect. Create a budget that allows you to build those dreams into real, attainable goals. Then begin living life according to that blueprint your budget has created. As you save more money and make positive financial changes, you’ll begin to see the framework of your dreams materialize. If you continue living according to this budget, you’ll see more and more added onto this framework so that what you once only thought of as a distant dream has become a viable goal.
Yes, budgeting allows you control over the way you live now so you can live the way you want tomorrow.
It’s our hope you’ve taken a few minutes to read this article on the importance of generating, reviewing, and modifying your budget according to your unique retirement plan goals. By taking a bit of time and putting forth a bit of effort, you can entirely change your feelings toward this financial b word.
When you hear the word “budget”, do you get a sinking feeling in your chest? How would you like to replace that feeling with one of confidence, stemming from knowing what your budget is and how it should be organized? Unsure where to start? We use a simple budget document for every one of our clients we serve. Would you like a free copy of this document to use yourself? If so, click the button below to send us a quick email request for that document and we’ll send you a copy!
