The beginning of a new year presents an optimal time to set goals for yourself. Last week, Tom discussed financial New Year’s resolutions on the weekly video. I recently read an excellent post from Kris Venne of Ritholtz Wealth Management regarding knowing your monthly number that I thought went well with that video’s message.
In his post Kris shares the first question he always asks when creating a financial plan for clients:
“Putting discretionary extras aside, what does your month to month lifestyle cost you?”
He goes on to explain how very few people are able to answer that question. Kris is spot on with this and I highly recommend reading his post, which I’ll link to below.
You absolutely must know your monthly number. The importance of knowing it cannot be stressed enough. How can you invest for the future when you aren’t aware of how much you can afford to put away each month? You really can’t. Knowing your monthly number is also important because it gives you a ballpark idea of what your expenses will be like when you retire. Kris’s recommendation to begin the year by sitting down (by yourself or with your spouse) to figure out your monthly number is an excellent one.
Once you have your monthly number, you can move forward with the three steps we discussed on the weekly video: creating an emergency fund, rounding up your “sleep easy” money, and investing the rest in a way that suits your individual needs. Financial planning doesn’t have to be super complicated. As we discussed here on the site before, our financial planning sessions begin with a simple conversation and a yellow pad.
Source:
http://krisvenne.tumblr.com/post/106645348700/whats-your-number
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