Subscribe: RSS
This week on the Mullooly Asset Management podcast, Tom and Brendan talk about why knowing what you spend is vital to investing. This is something Tom discusses with clients in financial planning meetings all the time. Tom normally asks them what their monthly number is. Over 75% of clients don’t know what they spend each month. Tom believes this is because many people view having a budget like going on a diet. A budget represents limiting spending, just as a diet represents limiting how much you eat.
In reality, Tom isn’t asking clients about their monthly number to tell them to cut back. You need to know how much money it costs to live your life on a monthly basis because it is the first step in constructing a financial plan. This is why knowing what you spend is vital to investing. Most people have no idea what their monthly number is, and that makes it difficult to plan ahead.
The good thing that most investors do know is what they want to start saving for. Whether it’s college, a down payment on a car or home, or retirement, people have a vision for their future. What they lack is the knowledge of how much money they need to survive on a month to month basis. So most people end up trying to juggle student loans, car payments, and credit card debt along with other monthly expenses. Trying to pay for all of those things while saving money is a struggle.
Tom’s advice to investors is to focus on one thing at a time. The most important thing you can do for yourself is to create an emergency fund. An emergency fund needs to have at least three months of living expenses saved in it. This is why knowing what you spend is vital to investing. You need to know your monthly number to create an emergency fund. After you have created your financial safety net, then you can start to reduce and eliminate debts that you have. Only after you have done these two steps can you really begin investing.
To end the podcast, Tom shares a story that shows why knowing what you spend is vital to investing. In the example, clients followed the three steps outlined in the podcast. They saw great success and are well on their way to achieving their financial goals now. Make sure to tune into this week’s Mullooly Asset Management podcast to learn why knowing what you spend is vital to investing.
Never miss a post...and we deliver!
Get our updates delivered right to your inbox. Sign up today!
