Whether you’re retired or still working, do you really know where you spend your money? These are increasingly important questions as more people are looking to help not only their children, but also their grandchildren. These are worthwhile causes for many, but at the same time, you should be aware of the effects it may have on your own retirement or financial freedom. Having a investment plan can help guide your decisions by informing you of the impact your decisions have on your future plans.
For those who maybe feel that they don’t have their finances under control, you likely dread the advice to track your monthly expenses. You’re not alone. It can be extremely uncomfortable to face the music when you’re not doing something you should be. But trust me when I say, it can be the most empowering decision you make. From my experience working with clients, the process very often alleviates much of the guilt surrounding spending. The more we consciously focus on our spending, the more likely we are to not overspend. The more likely we are to not overspend, the better we’ll likely feel about our money. At the same time, being conscious of your spending can help you find those extra dollars monthly, that if saved can really add up over 20 years.
Many people who are asked to track all their expenses discover their estimate of money left over for saving or investing is frequently off because they often exclude unusual expenditures and average the balance. Today, a growing number of largely free online tools are available to help you track your expenses. Companies such as Mint.comcan import and aggregate data from your credit card, bank, and brokerage accounts. They break down your spending into categories, such as dining and vacation. However, these online tools only provide a fraction of the guidance an advisor can give you. So, incorporating both into your overall investment plan may be the most beneficial. Once you know where your money is going, you’re better able to make decisions to allocate money to the areas that truly make you feel happier.
Not all people have the personalities or the presence of mind to keep tabs on their daily or weekly spending. Personally, I’m not one of them. However, I don’t use this as an excuse of why I don’t save enough. The approach I personally use for myself, and for many of my client’s, looks to reverse engineer your savings. By creating a plan, you ultimately put a figure on what needs to be saved in order to live the life you want down the road. Just like how certain key expenses are automated and come out every month (mortgage, utilities, etc.), savings can become one of those important automated “expenses.” Instead of saving what is “left over” each month, with technology it’s easy enough for you to set up automatic contributions for when money enters your account. After that you have the freedom to spend what it is left without having to worry about your monthly spending. With this approach the budgeting usually falls in line accordingly. Most people have a good gauge of how much money is in their bank account and are unlikely to draw their bank accounts down to $0.
For couples you may want to strongly consider having a monthly meeting with your significant other. This meeting should include reviewing where you have been spending money and anticipated expenditures, both short- and long-term. It could lead to some very interesting conversations. Having both parties involved, discussing goals and objectives, where you are today and where you want to be in the future is very helpful process when taking control of your finances.
One of the most important things you can do with your money is to save money consistently. A key to success is understanding where your money is going each month in hopes of identifying opportunities to save more. It’s a crucial component for anyone who wants to acquire and compound their wealth over time in hopes of living the life they want to live.
- Brandt Butt, Investment Advisor
Brandt Butt is an Investment Advisor at award winning firm Endeavour Wealth Management with Industrial Alliance Securities Inc. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Brandt Butt who is an Investment Advisor for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.