The Most Important Financial Tool
During my 22-year career as a financial advisor, I found that one of the most important financial tools was a simple monthly budget. Sadly, almost no one uses it, even though it's one of the most effortless financial tools to set-up, and among the easiest to implement.
A monthly budget is the list of expenditures that you make each month. You can go to our site:
http://mysite.verizon.net/vzer1vjr/blankstartfromscratch/index.html to download a sample budget. When using a budget, the expenditures listed are FIRM. That is, if you allocate $200 per month for entertainment, you are only permitted to spend $200 for that category. If you spend the entire amount on the first Friday of the month, you'll have to stay at home and watch TV for the rest of the month.
A budget is an important tool to assist you in saving money for retirement. However, it is an absolute necessity as you get closer to your retirement date. After all, how can you determine whether or not you can afford to retire if you don't have a good idea of what your monthly expenses are? By setting up a monthly budget, you control your expenses and increase the amount you can put away for retirement.
Still not convinced? Let's assume that you buy a $2.50 Latte every day (an item that is not in your monthly budget). It's just $12.50 per week, not a significant amount. Right? WRONG! If you put that $2.50 per day into an investment paying 8% per year, and allow it to grow for 30 years (your working career), it would grow to a sum of $68,417.16. Now that's real money! The value of a budget is that it keeps you focused on your expenses. If your budget allocates $200 per month for entertainment and you spend the entire amount in one week, you've got to go three weeks with no further entertainment. Without a budget, you would just go to the bank and withdraw another $200 from savings. Granted, it's a little painful now, but it will pay big dividends at retirement. (I'm 55 and I retired some months ago. Excuse me now while I freshen my drink.)
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About the Author
I spent over 20 years as an Investment Advisor for a major brokerage firm. In addition, I invested professionally for 8 years and served on a number of corporate and non-profit boards. Visit our site for financial tips and downloads http://mysite.verizon.net/vzer1vjr/blankstartfromscratch/index.html
