By Pop quiz: How much do you spend at the grocery monthly?
I’m serious — I want you to take a guess, and then I want you to look at your credit card statement and see how close you were to the right answer.
If you’re like most people, I’m willing to bet your guess was lower than your actual grocery spending. It’s not your fault; humans are notoriously bad at estimating their expenses.
That’s exactly why we talk so often about budgeting and how it’s one of the most important things you can do to stay out of debt and maximize your savings.
Everybody budgets differently. There’s not one strict method to follow. But at the end of the day, everybody needs to have a pulse on their monthly income and expenses. They need to have a good understanding of their cash flow.
Every time I get paid, I look at my fixed expenses and get those knocked out before moving on to anything discretionary. Paying your bills first can help curb bad habits and keep you out of credit card debt.
And this principle applies no matter your income level. After your mortgage, car payment, utilities, retirement contributions, childcare, etc., there may be money left over. Maybe it’s $500 a month, maybe it’s $5,000. Here’s what’s great about that leftover money — I don’t care what you spend it on! Buy clothes, go to a concert, take a weekend trip. You get to use it however you’d like — as long as you’re not overspending it.
This is where a budgeting tool can really come in handy. At Family Financial Partners, our clients have access to our eMoney budgeting system, which is great for people who want to see visually where their money is flowing. You can link your credit card and bank accounts to it, and it will learn what categories your purchases fall into. It will build charts to show you your inflows and outflows and help you see exactly where you are spending more or less than what your budget allows so that you have an accurate picture of your spending.
Maybe you budget $600/month for groceries, but you’re really spending $900. You can see that discrepancy without having to crunch all the numbers yourself. Then you can go back to the drawing board and make adjustments from there. Do you need to save on grocery costs, or should you update that budget line?
Working with a financial advisor is like hiring a personal trainer. We help you build the plan and keep you accountable — eMoney acts as the scale where you check your progress.
If this sounds like something that you could use to improve your budgeting situation, reach out to us today. We’ll help get you on track with a sustainable plan to spend your money efficiently.
Article by Jacob Buckley, CFDA, MBA, Wealth Advisor at Family Financial Partners — a financial services firm in Lexington, Kentucky.