Castles & Moats

Insurance and Investment Planning...Simply Explained

Nothing Happens Without A Budget2018-07-05T21:24:30+00:00

Chapter 11

Nothing Happens Without A Budget

How are you going to build wealth if you don’t know where your monthly income is going? No, I’m not talking about your online banking. I’m talking about where your money is going. I see a small fortune leaving peoples life in their lifestyles
“Americans are addicted to lifestyle!” Joe Pombriant, Financial Advisor, New York City

There are two types of financial learning experiences I’ve found:

  1. LIFE TUITION…where I learned something
  2. STUPID TAX…where I didn’t

Most of the stupid tax I’ve paid over my lifetime revolved around lifestyle choices. Buying cars when I couldn’t afford them…clothes when I didn’t need them…bar tabs and restaurant bills when I was probably overdrawn in my checking account…minimum payments to credit cards when I got too far behind in paying them off every month, etc. Yes, the list goes on and on.

I have a rule with my friends that I am not allowed to comment on any issues in their lives unless I’ve lived through it personally. Divorce? Got that. Bad relationship decisions? Got that. Addiction & alcoholism? Nope…can’t discuss that. Children? Nope. I can have lots of empathy…but no advice is offered. All this to say I’m more than qualified as an advisor, and as an expert on mis-management of personal finances.

For the last 20 years, I’ve been a huge advocate of Quicken software. It’s kept me logical through a lot of financial decisions. I always know where every dollar that comes into my checking account comes from and where it goes. It remembers if I’ve been at a Starbucks, and automatically codes it as a business expense, because I’m always meeting people there for morning coffees.

Back in 1959 when Vince Lombardi took over the fledgling Green Bay Packers as head coach, they were so bad that he finally threw up his hands, sat his team down and said the following: “Gentlemen, today we are going back to the basics of this game. This is a football!” …and the rest is history.

Today, I write on a lot of things…family, finances, observations, etc. However, I am continually amazed that when I ask simple questions to a prospective client, or even a friend who wants some simple advice, how consistent their answers have become.

The first question is “What system do you use to track your spending, saving, and monthly outflows?” I usually get “I have online banking….” which means you have no system.

When I compound the question by asking “If I asked you to tell me…within reason…what you spent last year on ___________ (fill in the blank), could you tell me?” Most of the time, I get a blank stare. So, help me here…and I’m generalizing of course…if I’m wrong, someone please tell me!

On the next page is a sample budget to use as a starting point. Until you complete this, we’re not going forward on anything else regarding Castles.

You cannot build a castle without a foundation, and your Cash Flow Management is the foundation of any solid financial plan.

As you can see it’s not complicated. It’s a great starting point, and once you get this in place, then you can move up to a system like Quicken, or mint.com. Whatever works. especially if you’re married.

Bringing two lives together is one thing, but bringing two incomes together is challenging. If you married “for better or worse”, it’s probably best to combine your incomes into one budget. Separate allowances and accounts are perfectly fine, but everything needs to flow through one household budget first. Besides, it’s all going to filter over to your 1040 tax returns anyway!

“Get ‘er done” – Larry the Cable Guy

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If you’re in need of auto, home, landlord, or life insurance, I look forward to getting to know you and becoming your partner in protection.

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