The business of earning and planning where and how you spend that hard-earned income is critical to controlling outcomes that affect your emotional, psychological and financial well-being.
There is no way you can see into the future with certainty, but that does not mean we should stumble through life responding to all circumstances that emerge. To gain some level of control and predictability, there are certain assumptions that you will have to make and, based on these, execute a plan.
Income
Income is the result of all our earnings achieved/sourced during a month and, as such, a year. I say earnings as some people have multiple sources of income, sometimes referred to as “side hustles”. For the most part, though, it amounts to our wages and salaries, including pensions.
Expenditure
Spending and expenditure is generally the area where most of the discipline is required, hence our general challenge. For this reason, budgeting is a tool and, more importantly, a process that involves focus and discipline if we are to ensure that our income and expenditure leave us emotionally, spiritually and financially in a positive place.
Budgeting
Let me say upfront that the mere mention hereof to many is similar to a physician saying you need to be more active and please watch your sugar intake. Well, as harsh as that sometimes sounds, the promised outcomes are always attractive, yet many of us experience tremendous or some difficulty complying.
Budgeting, or as I call it, managing your money, is a process that must be done and is best embarked on with assistance and coaching. Coaching in this context involves honest measurement and review with improvements and adjustments.
I have found that clients from all walks of life experience challenges with budgeting and, more importantly, sticking to and reviewing their money-generating and spending plans. For this reason, financial planners should play an active coaching and mentoring role with quarterly or biannual reviews.
While the processes may seem generic – monthly income and expenses that add up to annual outcomes – the key variable is that of personalization. For this reason, having an engaging trusted financial planner is priceless.
Expected Outcomes
Proactivity: based on your earnings and income generation, you can know what resources you have jointly (partners/spouses) or individually to allocate to intended expenses.
Improved Response Time: This is one of the most empowering outcomes when budgeting is done diligently. You can, in advance, examine your planned expenses (those that are must-spend and those that are variable). Then, with improved response time, adjustments to expenditure, particularly those of varying nature, can be timeously brought about to ensure positive outcomes.
We must remember that we are budgeting to get a mental and financial handle on the next month, quarter or year. The empowering aspect to remember is that by doing so, you remain in control of the choices that are presented.
Alignment: The process of budgeting, as explained above, does require that you are continuously trying to achieve alignment between
- Life expectations and goals accomplishments
- Levels and ongoing Improvement of Financial wellness
- Mental and spiritual well-being (family and self)
In conclusion, I am reminded of the following, “Rome was not built in a year”, but it took a disciplined and committed person/ family to push through even when it got tough(sic).
DISCLAIMER
This blog does not constitute financial advice. The content is intended to provide information for educational purposes. We recommend that interested parties contact Phoenix at the contact details listed or their financial advisors for a comprehensive review and needs analysis followed by the required record of advice.
Author: Reynold Patrick King
Managing Director
Phoenix Employee Benefits
