A Weekly Budget

While playing football, my coaches corrected my behavior If I made a mistake. They’d stop me in my tracks to point out what I did wrong. The feedback was instantaneous. If they had waited months or years to highlight my error, it wouldn’t have been useful. Because of their enthusiastic shouting, I usually didn’t make the same mistake twice. Correcting behavior needs to be consistent and immediate.

You may need help in correcting a bad habit, like poor budgeting. If you’re like most people, you might check your balance once or twice per year – if at all. As a result, you probably don’t have a good idea of how you’re spending your money.

To improve your cash flow and spending patterns, consider reviewing your budget weekly. This small change in behavior will help you identify spending issues sooner rather than later. It will allow you to make changes to your spending patterns.

To simplify your budgeting process, consider automating it with an app like Every Dollar from Dave Ramsey: https://www.daveramsey.com/everydollar. Another great resource is Mint from Intuit: https://www.mint.com/. These apps will make it easier for you to reign in your finances. And, if it’s easy, you’re more likely to stay with it.

Consumers must get a handle on their spending because debt is spiraling out of control. Mortgage debt is $9.4 trillion, student loan debt is $1.5 trillion, and auto debt is $1.3 trillion.[1] Unfortunately, our government is not good at budgeting either. The budget deficit recently surpassed $1 trillion, and our national debt is north of $22 trillion.

How much debt is appropriate? Your total debt should be less than 38% of your total monthly gross income. If your gross income is $10,000, then your debt should be less than $3,800.

What about spending? According to the Bureau of Labor Statistics[2], here’s how much people are spending on certain items as a percentage of their gross income. How do you compare?

Food = 12.9%

Housing = 32.9%

Transportation = 16%

Healthcare = 8.1%

Utilities = 6.5%

Entertainment = 5.6%

Cell Phones = 1.9%

Pets = 1.1%

Are you ready to start working on your weekly budget review? Here are a few steps to help you get started.

  • Gather your bank and credit card statements from the past six months.
  • Input the data to Excel to Identify amounts and patterns. Most financial institutions will allow you to import the data directly to Excel, saving you a few hours of number crunching.
  • Automate your bill-paying to avoid late payment fees.
  • If you’re no longer using a service, turn off the automatic payment.
  • Download an app to track your spending.
  • Review your budget weekly.
  • Eliminate or reduce unnecessary expenses.
  • Use the extra savings to reduce your debt.
  • If your debt level is low, then set up an automatic investment plan.

A Certified Financial Planner™ can help you with your budgeting and planning needs. They’ll review your spending to help you develop a budget. They can also meet with you quarterly to evaluate your progress and hold you accountable, like a coach – without yelling!

A budget will bring you financial peace, and you can spend your money without guilt or worry.

For where your treasure is, there your heart will be also. ~ Matthew 6:21

September 14, 2019

Bill Parrott, CFP®, CKA® is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

 

 

 

[1] YCharts

[2] https://www.bls.gov/home.htm

Construction Project

My neighborhood is in the middle of an enormous construction project. It’s chaos. Dump trucks and bulldozers are moving massive amounts of dirt to expand our roads and intersections to handle more traffic. A new retail shopping center and access road are also under construction. Commuters are challenged with lane closures, lane shifts, and traffic jams.

Our neighborhood is cluttered with barricades and orange pylons. It doesn’t look good. It may be this way for another year or two, but when it’s finished, it will look amazing.

Projects of this size require years of planning, vision, persistence, and grit. Developing a financial plan and building an investment portfolio also requires imagination and perseverance.  Initially, your plan is a dream, and it will only take shape after you commit your goals to paper. The foundation for a successful investment experience is a financial plan. Your plan is your blueprint. Can you imagine construction workers working without a plan? I can’t.

A plan can take years, sometimes decades, to see it come to fruition. It’s challenging to plan for a retirement that’s more than 45 years away. Likewise, retirees might find it hard to rely on investments to generate a steady stream of lifetime income.

The construction projects succeed because electricians, plumbers, and masons have different specialties. Similarly, a successful investment portfolio requires investments scattered around the globe. Large, small, and international stocks deliver long-term growth. Bonds provide income and safety. Cash offers liquidity.

A general contractor coordinates and oversees the project and workers to keep it moving forward. A Certified Financial Planner® is your general contractor. He guides your steps to keep you focused on your goals and make appropriate adjustments.

Regular maintenance on buildings, lights, and sprinklers will keep the area looking good and functioning correctly for generations.  Your portfolio will also need regular maintenance to weather market and economic cycles. Rebalancing your portfolio will keep your asset allocation and risk tolerance in check. Your financial plan needs reviewing annually to keep you focused on your goals. A monthly savings program should help your account grow.

A good plan doesn’t matter if you don’t implement it and follow the instructions. It’s imperative to put your plan into action so you can enjoy the fruits of your labor.

“Plans are worthless. Planning is essential.” ~ Dwight D. Eisenhower 

September 9, 2019

Bill Parrott, CFP®, CKA® is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.