Financial security is built on saving and investing. But a household must have a solid basis in the form of a clear and realistic budget before you can develop any sustainable financial plan. Most advisors and advisory firms with any formal process should start the discussion with a conversation about goals, objectives, risk tolerance and a budget. The goals/objectives conversation is one that individuals enjoy having because it is about hopes, dreams, and wishes (the things we would like in a more stable financial situation). Very few want to get into any prolonged conversation about their budget. None of the goals and objectives matter until there is a substantial effort to understand each financial situation and that starts with a budget.
The great thing about starting the budget process is there are numerous free templates. Most are simple and require very little complex thought. One of the best sources for budget templates is Microsoft Excel and other variations can be found by searching the Internet. The Excel application has several budget templates that an individual can use with no prior experience for free. They are typically plug and play in terms for functionality. Many advisory firms have proprietary software or templates that they have created inhouse for this process. Regardless of where the budget comes from or what the nuances are, the concept of budgeting is of utmost importance to the planning process. Investing is about the appropriate and most efficient use of disposal income (disposable income is after tax pay minus monthly expenses) as it relates to creating wealth. Understanding spending habits and changing behaviors is the hardest part of the process. One of the benefits of using or consulting a financial advisor is the initial conversations about goals, objectives, risk tolerance and the budget are generally free!