The second step towards financial health begins with a word that can make the staunchest of us cringe: Budget. Very few financially healthy people do not have to follow a budget; for you, it’s mandatory.
During retirement, a budget will also be mandatory, so get used to it—even if you’re decades away from retirement. There are stories aplenty about retirees having to choose between taking a full dosage of a prescription drug or buying food. Either budget now when you have greater flexibility and can positively impact the amount of income you have during retirement (which we’ll talk about later) – or live on a restricted budget during retirement. You choose. It’s your life.
Budgeting is all about differentiating the essential expenses of your household from “discretionary” spending. (Discretionary expenditures are ones you don’t really have to make.) Examples of essential expenses are rent, mortgage, utilities, food, and insurance. Examples of discretionary spending are the daily non-fat mocha with a shot of vanilla, eating out several times at your favorite restaurant, buying the latest fashion, the 60” flat-screen TV, all the purchases you couldn’t account for when analyzing your checking account statements, and other things that define a lifestyle you can’t afford.
Certainly, your budget needs to pay for the essential expenses of life. Just as important, there needs to be room in your budget to “pay yourself first”. From each paycheck, set aside a specific dollar amount that will allow you to:
Build an emergency fund;
Make extra payments on your debts that are greater than the monthly account minimum; and
Start making minimum contributions to your 401(k).
How can you set aside money in your budget to do all we listed in the paragraph above? Reduce your discretionary spending! Yes, you will need to make some sacrifices. It’s not much different than being on a diet and not having a second helping of dessert. It won’t be easy. We’ll explore in greater detail these three additional budget goals so that you can understand their importance—and thus have the motivation to fine-tune your budget (and later stick with it.)
Click on this link to access a worksheet that will help you set up a budget.
http://nwcm.com/wp-content/uploads/2016/09/New-Logo-for-Header.jpg00Fred Paynehttp://nwcm.com/wp-content/uploads/2016/09/New-Logo-for-Header.jpgFred Payne2017-07-14 08:43:372017-08-02 14:16:14The Dreaded B Word
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