A Diva’s Budget

  • NEW Everyday Diva Logo PNGPutting together a budget is an extremely helpful tool for someone trying to get their financial house in order. During the process, they can find out what expenses are necessary, what expenses aren’t and what expenses they should start to incur.

Prepare the Budget with an Advisor

I recently sat down with an opera singer who is a friend of mine to go over her budget. For some time she’s had the feeling that she was making a pretty penny but didn’t have anything to show for it.

During the review we were able to determine that certain bills had to be paid. They included rent, car, power, medical insurance, student loans, retirement savings and a number of other necessary bills.

Know the Goals and Outcome of a Budget Review

Now part of the reason that she wanted to go through the exercise was to determine how she could set aside money for simple savings for a rainy day but also carve out a portion of her income for continuing her opera lessons.

With this review we also came across expenses that where secretly and subtly draining her pocket book. Namely food. This included not only the food that she bought for the home but also what she spent every day for breakfast, lunch and dinner. It was adding up.

On top of those expenses she noticed that going out with her friends was hurting her finances. She realized that she was spending too much going to dinners, movies, and generally hanging out with her friends.

Do What the Budget Plan Recommends

Now to be fair, the review was not designed to say that she should stop doing what she was doing all together. It was however designed to let her know where the challenges where and how to fix them. Namely watching what she buys outside the home for lifestyle.

This part of the review is critical. Once we identified what needed to be done she needed to do it. This is not to say that she won’t spend a little extra here and there but she needed to follow the plan to make it work. That way she can achieve a healthy financial balance in her life.

Putting together a budget with a financial advisor can go a long way in getting ones financial house in order. They provide independent, expert eyes that can look at the finances of their clients and determine what the best use of money is and where they can make improvements.

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Buy the Car, Don’t Lease It

2010-Dodge-Charger-Sedan-Image-03-1024Should you buy a car or lease it? The debate for the average family is not even close.  Buy the car. Preferably two or three years old, certified pre-owned and the buyer should work to keep it running for ten to twenty years. Why? The money that the average family can save once the car is paid off far outweighs the cost of continuing to keep a monthly car payment with every new car leased.

Money Saved Buying a Car

For instance, let’s say a driver purchases a new car or a certified pre-owned car. With that purchase, let’s say they spend $350 per month for five years on the car. After five years, the buyer no longer has to make a car loan payment. They have completely paid off the car loan and they own the car without any debt on it.

Now let’s say they keep the car for another ten years or so.  Because the owner paid off the car loan that allowed for the purchase and no longer have a monthly payment, they now get to keep $4,200 per year. Over the course of ten years that’s a savings of $42,000. Real savings for a family over time.

The Problem with Leasing

If the driver leases the car however, after the three years of the lease agreement, the driver has to give the car back to the car dealer. They now have to get another car and the payments on the new car start all over again. What that means is that there is no extra $4,200 per year in savings.

Car Maintenance is Key

The key to making this buy over lease strategy work is maintaining the car. That means the buyer should keep up with the periodic maintenance of the car every three months or three thousand miles.

It means they need to get the oil changed, the tires rotated, brakes fixed or changed when needed and most importantly not driving the car to hard. When a driver does all of this, they have a better chance of the car lasting a very long time and saving a lot of money over that time period.

Forgetting the Joneses

One of the downsides to keeping a car for a long period of time is that drivers will not be able to keep up with the Joneses in the best car category. Year in and year out new and more stylish cars come out and having a car that is twelve or thirteen years old doesn’t make the driver the cool kid on the block. But it does mean that the driver will have the chance to save more for retirement, education, a rainy day and family vacations.

So if you are looking to get a new car but you also want to keep your financial security and financial freedom, buy the car and keep if for years instead of leasing it. You’ll thank yourself in the future.

 

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Do a Quarterly Financial Review

470480e1gdwufwtHave you met with a professional and done a financial review lately? Every quarter I like to meet with my clients and go over any changes that have occurred in their lives. In many cases, the meetings give me the opportunity to find out what adjustments need to be made in their financial lives.

Life Happens

If there’s been a promotion, we may be able to increase the amount that is set aside for a rainy day or retirement. If there’s been a marriage or new birth, we need to make sure that family members have the right protection. If clients are no longer happy with their job, we need to map out a plan to find a new job or start a new business. Whatever the changes are, there’s a very good chance that my client’s financial life has been affected. I need to know that so we can tweak our prior plan.

Benefits of a Review

One of the major benefits that results from this quarterly review is that it helps my client feel comfortable letting me know what new things are going on in their lives. How? Some people may feel that they’re interrupting advisors. Scheduling a quarterly review sends a clear message that the changing circumstances are important. It also keeps the lines of communication open for events that happen between meetings.

One of the other benefits resulting from the meetings is referrals. Meaning, I get referrals for my business and my clients help those close to them. How? My clients have family, friends, associates and co-workers that need financial advice. Keeping the lines of communication open lets them know that they have a go to person in their financial life. Why not help others have that same peace of mind?

So if you’re working with an advisor, try to meet with them on a quarterly basis to go over what changes have occurred in your life and see how that can impact your financial life. Remember, the meeting may last a few minutes or hours but the impact can last a lifetime.

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