In any review of a client’s circumstances and strategy, I as their adviser, am invariably going to ask the following question, ‘how much are you spending’? What I’m trying to confirm is whether a client has enough money coming in to pay for what they tell me is important to them, now and into the future.
You may find this strange, but most people don’t really know how much they are spending. Sure, most will have an idea (often the wrong idea), and some (the minority) will have detailed out on a spread-sheet.
However, an accurate and truthful answer to the question is critical. Without it we have no real way of knowing how successful, or otherwise, the strategies we’ve put in place are likely to be. We also have no real way of identifying additional resources that may be applied to help achieving outcomes we’re looking for.
So, what’s the best way of working it out? Well, as noted above, some people maintain detailed and meticulously spreadsheets. This is fine, but generally more than required. A simple review of monthly credit card and bank account statements (over say a 6 month period), will give most people a sense of where the money is going. Personally, I use Quicken software in which I record all credit cards and banking transactions to help me monitor the cash flows of my little household (my wife hates this!).
Knowing where the money’s going, may not sound particularly exciting; however, it’s absolutely a fundamental part of planning for your financial future.
Robert Syben is a Certified Financial Planner with over 15 years’ experience in solving financial problems for his clients. He is also Head of Financial Planning at the Pentad Group in Camberwell.