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Importance of creating & maintaining a spending plan

| January 02, 2019

What could be more important in establishing financial security than first establishing a spending plan?  Establishing a spending plan almost seems too elementary, but is often the most overlooked element in creating a strong financial foundation.  A spending plan helps you keep track of where your money is going and allows you to be more intentional with your spending.  It is a common misconception that spending plans are just for those getting out of debt.  However, having a better grasp on your money allows you more opportunity to spend money on your wants and not always on your needs.  It has been established that someone is much more likely to stick to a budget if they’re able to “bake in” the ability to occasionally spend on wants vs. only putting money towards the needs.  Because people enjoy rewards, allowing for occasional “want” items allows the person to stay on course. There are often overlooked expenses not budgeted for throughout the year that may increase your monthly living expenses like Christmas, holidays, anniversaries, and vacation. These events have the ability to creep up, causing stress and anxiety, but budgeting for these items ahead of time allows for you to be a step ahead financially. A spending plan gives you peace of mind and confidence in your financial decisions throughout the year. While many people want to talk about investments and how best to invest, I truly believe that the ability to operate with positive cash flow is more impactful for long-term success than picking the right investments.

 

Securities offered through LPL Financial, Member FINRA/SIPC.