Automate It!

The idea of budgeting is scary to most people.  It’s charged with trepidation and misconception.  Most think it’s time-consuming and complicated.  I liken it to dieting, no one really wants to admit they have to and the few who do really don’t want to.

In personal financial planning, the concept of budgeting is important because it has to do with goal setting.  And in personal financial planning, goals are king.

Let’s use the most common goal in financial planning, financial independence.  My client, Jane,  says “I want to be financially independent at 67 so I no longer need to work.”   I work the math converting her goal to dollars.  In order to be “financially independent at 67” Jane’s will have to put away $5,200 a year or $100 per week for the rest of her working life.  She presently spends everything she earns so some help to get the $100 to put away is needed.  I review Jane’s tax returns and basic expenses and figure she can easily put away a $100 a week.

I give her two choices:

1) I can create a detailed budget, counsel her on savings discipline and show her how to track expenses so she can cut her entertainment budget to get the $100.

2)  I can help Jane set up a savings/investment account linked to her checking account, which will automatically transfer $100 per week from checking to savings.

I know from experience that option 2 wins every time, it’s easier and people stick to it.

So automate your way to meeting your goals.

If you want more like this, you should sign up for my updates.  If you know someone who would like this, share it with them.

About jaysanderscpa

Jay Sanders, CPA/PFS, CFP® "There's lots and lots of Numbers in business and your personal life but only some are relevant. The key is to know which one's matter, worry about them and forget the rest."
This entry was posted in Financial Literacy Basics, General #s, Personal #s, Planning Tools and tagged , , , , . Bookmark the permalink.

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