I was fortunate enough to have a budgeting mentality from a young age. My dad has been with Prudential for almost 30 years and it is all that I’ve ever known regarding finance and money. When meeting with new and even existing clients of my generation, my first step is to discuss their budget to help them craft a plan:
- We break down their monthly budget, so they can see their monthly inflows and outflows.
- Going through their budget provides the necessary information needed to see exactly how they are doing financially.
- Often when going through this exercise, it will show that they may have more room to spare than they had originally thought to start a monthly savings plan (outside of any work-related plan) and begin to invest and save towards their future.
A great and simple example I always use and recently did with one of my friends is the following: if a 30-year-old can save $100 a month, that would be $1,200 a year. Now let’s say they do this for the next 30 years until age 60; that basic total of savings would be $36,000. Not even factoring in what investment the money is put into, or compounding interest, they can illustrate that if their budget allows $100 a month, for a long period of time, a very nice sum of money can be saved for later in life all by managing their budget.
My dad will often use one line that resonates particularly well when thinking about budgeting. “If you don’t have shade from a tree, the best time to plant that tree for shade in the future is today.” How does this correlate to an investor from my generation? Well, it is truly a simple, yet extremely powerful message. Even though beginning your budget can seem overwhelming, with longevity and compounding interest on your side, you can show how something as large as your financial future and retirement can be broken down and accomplished one step at a time.
It is often discussed that there are things we wished we knew sooner in life. Sometimes just starting out by looking at a budget and coming up with a plan is the most challenging step. But once you do, the journey towards retirement becomes a smoother path than what was originally thought.
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