DAY 2 – Financial Planning Week 2012

Budgeting.
Amazing how many people don’t have a budget. I didn’t until last year. I’m going to try to impress on you the importance of a budget using a number of sketches from Carl Richards (author of The Behavior Gap http://www.behaviorgap.com ).

That’s right. Your entire financial goals rest on your budget.

Your budget will tell you what you can spend money on (and how much) each month. Your financial goals will tell you why it’s essential you have a budget. If you don’t stick to your budget then perhaps achieving your financial goals are not as important as you thought.

In this case you should review your financial goals. This sketch might help you decide whether your financial goals are important (think “money can’t buy you happiness”).

So having established that creating a budget is essential for you to achieve YOUR financial goals you need to know how to do it. Simple. Make sure what comes in (income) is greater than (or equal to) what goes out (expenses)…

This will create a surplus. At the end of the month you’ll have money left over and you’ll have actually done the deferred part of deferred spending. All that’s left is the fun part (spending).

Tomorrow I’ll look at the four simple rules to help you create, manage and review a budget that will keep you on track to achieve your financial goals.

Day 1: I’m going to start by challenging your view of money (if you have one).
Day 3: I’ll give you four simple rules to follow to create spare money in your life.
Day 4: I’ll explain the difference between savings and investments and what they’re for.
Day 5: I’ll explain how using a financial planner can help you.