Personal Finance

If you fail to plan, you plan to fail

The central element of personal finance is budgeting.

Without a budget, you don’t know where you stand financially, nor do you have a means of measuring where you are going or if you are getting there.

So, you need a budget. But balanced budgets don’t just happen! They require planning.

“Fail to plan” = “Plan to fail”

Behind your budget stand your goals. What are your goals? Do they include:

  • Savings goals for retirement?
  • Giving goals for charities?
  • Inheritance for your children?
  • Goals for your business?

In regard to retirement, there are several things worth noting.  First is we are living longer.  Second, is that most of us have no idea at all about what we need in retirement.  Third is that the younger you are, the less probability there is that Social Security will help you in any meaningful fashion.  Don’t listen to the politicians – Social Security is already bust, with its surpluses long spent by the government, which it awash with red ink.

Your benefits WILL be cut and the younger you are, the more dramatic those cuts will be.

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Many people also believe in paying it forward or in assisting charities.  It is your responsibility to investigate the charities you support.  I suggest using Charity Navigator to find out how efficient your charity is in disbursing received funds and how much they pay themselves to do so.

Most people also want to leave assets behind for their children, spouses, relatives etc.  Without a budget, you have no idea what you are leaving them (hopefully, it is not debt!)  Without a will, you set the stage for confusion and perhaps acrimony.

Of course, you may also have a business, which I trust, you keep separate from your personal finances.  Now, not only do you have to budget for home, but for your business also.