The Importance Of Budgeting

As a Financial Planner there is one thing I consider to be the most important starting point for anyone wishing to plan for their future. It sounds exciting, but I’m afraid it’s not. It’s actually pretty boring, and tedious; which is perhaps why so few people actually do it… budgeting.

Something most people would prefer they didn’t have to do, maybe because the results aren’t what we want them to be, or maybe because we think it will be too complicated, time consuming or just confusing. However in order to maximise your financial position it is essential. Personal finances need to be run like an efficient business; we need to know how much income and expenses are actually occurring in our lives. Budgeting will then allow us to identify which expenses, if any, can be cut back.

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What is Financial Planning?

I thought it wise to share with you what a financial planner actually does, because in my experience most people either have misconceptions or just don’t know.

I like to think of financial planning as the process where the client and planner get together to initially discuss the clients’ current situation. The financial planner and client then explore what’s important to the client and what their future goals, aspirations and objectives are. The planner then works out a strategy to meet these objectives and prepares a ‘blueprint’ known as a Statement of Advice or Financial Plan. Normally this covers retirement planning, eg. Informing a 40 year old of the steps required for him to retire at their preferred age of 60 with a retirement income of $75,000, in today’s dollars.

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