Do You Need a Budget AND a Financial Plan?

I’ve spoke to a lot of people through the years and read quite a few articles that assume this point:  you only need a budget AND a financial plan if you’re wealthy.  Nothing could be further from the truth.  Practically everyone would benefit financially from having both of these helpful road maps in place.

No matter your age, income, tax bracket, debt load, etc., having a budget forces you to pay attention to your cash flow – which helps avoid problems like bouncing checks, running out of money every month to pay bills, etc.  If you’re winging it instead of writing out your monthly budget or putting it into a spreadsheet, you’re just flirting with disaster.  Do yourself a favor and create a budget ASAP (or ask your qualified financial advisor to help you do it; if this “advisor” scoffs at the idea, you probably need a new financial advisor – one who is a fiduciary, not a product-pushing salesperson).

I’m serious – if you’ve not made a budget for yourself yet, do it right now and then you may continue reading this article.

Since you should have a budget in place now, creating a financial plan sounds a bit more complex than making a budget.  In reality, it doesn’t need to be any more difficult than this:

  • Set your goals – short-term savings for emergencies should come first, along with basic insurance coverage; saving for large purchases, saving for kids (college), saving for retirement, etc. (Remember this point:  people actually spend more time planning vacations than planning for retirement!)
  • The financial goal should have a dollar amount and a specific time frame attached to it so you can see what steps you need to take to realistically achieve the goal
  • Since your budget is in place, you know how you can either reduce spending or allocate extra $ towards the goals
  • You can now measure your progress towards your goals over time, which will help you make smarter financial decisions
  • If you can make smarter financial decisions, you will be in a better financial position for the REST OF YOUR LIFE

Since there may be some financial considerations you’re not thinking of, partnering with a qualified financial advisor (a fiduciary) to craft your financial plan (make sure it’s thorough) makes sense.  If your financial advisor scoffs at helping you create your financial plan, fire him/her immediately and find one who cares enough to do this for you.  Your budget AND financial plan deserve quality construction from someone who cares about your situation almost as much as you do…never forget that.

Write your financial plan and put it in place now – it won’t be easy…but then again, things that are extremely worthwhile are usually difficult (no pain, no gain).  If you’ve done these, you’re on your way!

Find an experienced financial advisor who helps clients create budgets AND financial plans on a regular basis, works for an RIA firm, is a fiduciary for clients, earns his/her money from fees (NOT commissions), believes in having an abundance of investment choices for clients, and has the heart & demeanor of a teacher, NOT a salesman, and chances are you’ve found the right financial advisor to help you prepare and plan for your future.

To learn more about Martin Federici, view his Paladin Registry profile.  

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