The Importance of Budgeting for Financial Planning.
As a Financial Advisor, budgeting is the foundation of financial planning. It is difficult to plan for the future if you don't have a good handle on what is happening with your money on a monthly basis. Understanding how much is coming in versus how much is going out will allow you to start the planning process for things like retirement, paying off debt, or saving for a new car/house/vacation. Once you get an idea as to what your discretionary income (income that is not immediately going to bills) looks like, then you can start working towards the goals that are most important to you. My advice is to sit down with three months worth of bank statements and start categorizing all of your expenses. Things like housing, food, insurance, and other monthly expenses. Start thinking in terms of needs and wants. There are certain expenditures that we need to spend money on, and others that we just want to purchase. Once you have categorized your expenses, look for things on the bank statements that you could live without. The reality is that if we are making impulsive purchases, or being more focused on the wants and not the needs, we are prioritizing things that are not likely helping us on our financial journey. The more focus and attention you put on your budget, the more likely you are to achieve your financial goals!