The word budgeting often gets a bad rap. In many instances, the way we hear budgeting discussed positions it as an activity that limits us – when in reality it is meant to liberate us. Money is a tool that is designed to help us live life the way we want to and on our own terms. In order to achieve financial independence, we have to begin with financial literacy. At any age, we can decide to take control of our financial health by gaining the knowledge we need to make informed financial decisions.
When I began my financial independence journey, one of the first things I did was compile a budget. According to a recent study, about 51% of Americans who make $100,000 a year are living paycheck to paycheck. While this may partially be due to inflation, it also has to do with a lack of financial awareness when it comes to spending, saving, and investing. Over the years, whether creating my personal budget or helping my clients create their own financial plans, I have seen how powerful a budget can be. Having a budget in place allows you to spend on the things are compelled to, while saving for long-term plans like vacations, house purchases, and college tuition. It also helps you attain a clear picture of your debt so that you don’t get in over your head and end up paying extensive interest rates on things like credit cards.
When I think about budgeting, I prefer to replace the term budget with the term asset allocation. Your finances are an asset and you as the director of the asset have the power to choose where you are going to allocate your funds. It is such a rewarding feeling to have a financial plan in place – that is tailored to your life, wants, needs, and goals – and be able to enjoy the way it creates the opportunity for you to live your life, by design. I’m a big believer that having more money does not create more happiness or a better life. Rather, having a plan in place for the monetary means you have in the here and now allows you to create an abundant life that can grow effectively financially – and especially as your finances elevate. From individuals and families who are just beginning their wealth creation journey, to tenured individuals and families who are navigating complex and diverse financial matters, proper asset allocation is key – at any stage.