Your budget is really your life goal plan

Your budget is really your life goal plan
28 July 2013

The saying: "If you don't know where you're going, any road will take you there" is a paraphrase of an exchange between Alice and the Cheshire Cat in Chapter 6 of Lewis Carroll's Alice in Wonderland.

The journey took Alice to the depths of tears on many occasions. Tears we have probably all experienced without a route plan – especially a financial one.

I recently solicited feedback from some of my wealthier friends, and asked them what is the holy grail of money management, without hesitation they all said having a financial plan and sticking with it.

Money conscious

Most wealthy people not only live below their means but they also are very conscious of where they spend their money. In fact, during my talks I have found that about two thirds of my wealthy friends know exactly where they are spending their money, one friend could real off exactly what she had spent in the last seven days, including where, when and on what -- and yes that was down to the cost of a coffee.

It’s not about material possessions

One of my friends has over 300 million dollars in liquid assets, yet he currently drives a 3 year old Volvo his message to me several years ago when I was on a buying spree: “Buying a Porsche isn’t going to make you rich. Owning a million dollar home isn’t going to make you rich. Not spending all of your income each month will make you rich.”

Get clear on your goals

All of my wealthy friends are very clear about what they want in life. They have built their wealth by setting goals and sticking to them. Being goal-oriented, and having saving targets gives them something to aim for. As billionaire, Mishal Kanoo, told cashy -- you stick to your savings goal "with religious zeal."

In fact, research conducted recently by RBC Wealth Management found that the overwhelming majority of high-net-worth people who are self-made millionaires said their success resulted from a “diligent” focus on long-term financial security. In other words, they had a plan—something that every financial adviser tells their clients, regardless of their means. “It’s always about the plan,” says Anthony Maiorino, the head of RBC Wealth Management Services. “And the plan may not have been to get wealthy per se, but to run the best auto dealership, a great restaurant, or build a great consulting firm or legal practice, but all of those things eventually lead to wealth. 

If you want to become wealthy, you should get clear on your goals and develop a habit of tracking where you are spending your money on a weekly basis. Budgeting can be a very intimidating word but the fact remains, it is an essential habit for wealth accumulation.

Life planning and budgets are closely linked. How do you manage your money to live your life?

Comments

  • myke
    myke
    2013-09-24T10:56:52

    How do I manage my money to live my life?

    Budgeting is too taxing and to make it easier I just follow these basic steps every payday:

    1st - 10% - eternity investment

    2nd - 20% - savings (emergency fund) & investment (equities)

    3rd - 70% - expenses

  • Colin
    Colin
    2013-09-24T11:39:54

    Brilliant Myke, its so important to create a system that works for each person - looks like you have a good handle on money management and savings. Thanks for sharing

  • myke
    myke
    2013-09-24T13:19:41

    You're welcome Colin. This is a great site!

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Author
Head of Behavioral Finance
cashy
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