I read a great article recently about the St. Louis Rams
football team. Before they allow any of their new draft picks to sign contracts
(many containing huge signing bonuses) they have to attend a mandatory
“Financial Planning 101” class. If the
story is true, one of the coaches walked into the room with a briefcase and
dumped out one million dollars in cash onto the table. Hopefully that got their
attention [it would have gotten mine!]; because the next thing he did was
physically remove a third of the pile…for taxes.
He then took away several other stacks representing the player’s management fee
and declared what was left was theirs to keep… BUT they had to make it last for
the rest of the year.
Not all of our employers are able to put our entire
annual salary on the table in front of us in cash and challenge us to be good
stewards of money, but what if they could? Would it change how you manage your
money right now?
Our coach in this story is teaching his players a very
valuable life skill and lesson on the importance of wisely controlling how you
spend money. In the financial world we call this a “Spending Plan” or a
“Budget”; a great tool that when used properly can help prevent you from
overspending on your lifestyle and falling into debt.
If you’re new to budgeting and making a spending plan,
regardless of your age, don’t sweat it. No one gets their budget perfect the
first, or even after several tries. What
is crucial during this timeframe is that you compare the projections you made
to what you actually spent that month.
If you need a place to start
or a format to follow; email us today at info@paragon-adv.com to request a free copy of our Household Budget Template.
The key to budgeting is to plan for your expenses ahead
of time. By knowing your spending habits and accounting for your wants and
needs it’s possible to take out the guesswork and quit wondering where all your
money went. If you’re married, being
able to sit down and discuss your budget with your spouse will allow you to be
on the same page and prevent future money disagreements; which can be a huge
stress reliever.
What if I have a
surplus or a deficit?
If you find yourself having too much month left at the
end of your money then it’s time to be honest with yourself. If you have a
deficit by spending too much or your expenses are greater than your income, one
of two things should happen 1) Decrease your Expenses and/or 2) Increase your
Income. If you’ve dug yourself into a hole the best thing to do is stop digging!
Put a plan in place to alter your habits so that destructive financial behavior
will not create further problems. In the
words of Ben Franklin: “Beware of little expenses; a small leak will sink a
great ship.”
What if you review your budget and make more money than
your expenses? Congratulations, that is a great problem to have! When you reach
the point where your expenses are under control is a perfect time to maximize
your contributions to retirement accounts, children’s college funds, as well as
save and invest for major purchases and financial goals.
We, at Paragon Financial Advisors, assist our clients in
identifying their cash flow needs in order to maximize their savings and
lifestyle. We offer Financial Planning and Investment Management. Paragon
Financial Advisors is a fee-only registered investment advisor located in
College Station, Texas.
