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Budgeting your money is a subject we’ve tackled before, but it’s important enough to revisit. If you just haven’t been able to put aside some savings, you need to put yourself in the driver’s seat with your own financial plan.
Following a budget is not a matter of depriving yourself of the enjoyment of spending money. It’s about taking control of your financial future, no matter your income level. If you keep kicking that can down the road, you could end up without enough money to live comfortably in retirement. You can control your financial destiny by following some basics of financial planning and retirement planning:
Get a Handle on Your Expenses. Your first step is to gain an overview of your current income and spending. This includes not only your mortgage and other bills such as groceries and cable TV, but also clothing, entertainment, dining out (including that morning coffee), subscriptions, medical out-of-pocket, and charitable contributions. Break down annual expenses such as auto insurance, home insurance and taxes into monthly amounts, until you have a solid sense of what you are spending your money on every month. This is not a one-time thing: You should continue to track all expenses to help you maintain fiscal resolve.
Create Your Own Financial Plan. Write down a plan of action, either on your own or with the help of a Certified Financial Planner (CFP) or other financial advisor. First define your short-term and long-term goals, and be specific. Then place savings at the top of your priority list. Consider strategies to make saving money easier, such as enrolling in automatic savings programs at work and contributing all you can to a 401(k) retirement plan. Your financial plan should include courses of action on your investment portfolio, insurance planning and tax planning, and other items related to your life goals such as education funding, vacation planning, charitable giving and estate planning.
Follow Through. Staying motivated can be tricky. You will likely be tempted now and again to blow your budget, whether on a new tech toy, a new vehicle or a trip to the Caribbean. A financial planner can help you stay on track. And you can look at how much money you’ve saved each month and give yourself a small reward, or at least think about how those savings are working for your future.
Don’t Drive Yourself Crazy. A budget is a daily and monthly guideline to behavior, not a straitjacket. If a friend’s wedding pops up and you want to buy a generous wedding gift, go ahead. Hopefully you’ll find another area to make up the deficit. As long as you don’t “go over” too often, it should be OK in the long run, especially if you are regularly investing some of your money for the long term. In short, do your best to control your spending but be sure to enjoy your life as well!
Eric Tashlein is a Certified Financial Planner professional and founding Principal of Connecticut Capital Management Group LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Registered Representative, Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Inc., A Registered Investment Advisor. Cambridge Investment Research Inc., and Connecticut Capital Management Group LLC are not affiliated.