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Value Creation Blog

Are You Outspending Your Assets?

Posted by Josh Patrick

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This is a question I want you to ask yourself. Too often we spend money and we don’t pay attention to the future.

The best way to find this out is to create a financial plan that shows your spending patterns, your saving patterns and your investment returns.

Read on to find out how this might affect you.

You underestimate how much you spend.

I’ve not yet run across anybody including myself who can estimate accurately how much money they spend. Instead, what I find is that many people underestimate their spending by as much as 30 or 40%.

Here’s an easy way to find out how much you spend. Take out your checkbook and add up all the checks you wrote last year. That will tell you how much you spent.

I’m wondering if the number is surprising to you. I know the first time I did this I was surprised.

You underestimate how much you save.

You would think that it’s easy to figure out how much you save. Just like spending I’m going to bet that when you actually get the number you’ll be surprised that it’s lower than you thought.

I think the reason for this is because we think we save more than we do, we think we spend less than we do and we certainly think we make more than we earn.

You underestimate how much you earn

This is often a big problem. Too many times I find people base their spending on how much they think they earn. If that sounds like you I recommend that you again take out your checkbook add up all your deposits and see if the number you get is the number you expected.

Speaking of earning, I’m also going to bet that you underestimate the amount of return you get from your investments. There are times when the market performs extremely well and there are times it doesn’t do as well as we would like. You need to know what your real number is.

It might sound good when you talk to yourself.

I’m going to bet that you’re surprised what the real number is for how much you earn, how much you spend and how much you save. I’m also going to bet that you think you are on the right track.

Here’s what I want you to do:

I want you to find a financial planner and I want you to get a financial plan done. It’s really the only way you’re going to find out if you’re doing well or if you need to make changes to your plan.

If you just go off your gut feel, you could have a big problem.

I’m hoping that you’re getting a sense that if you’re working off your gut feel it might not be very accurate. Instead, why don’t you take out your checkbook, spend an hour or two and find out what the real number is.

One of the reasons I recommend financial plans is because you’re working with an outside advisor who has an independent stance that can help you look at your financial situation in an independent manner.

It’s better to be safe than sorry.

At the end of the day I want you to have a good life and I would like you to have one that has limited financial surprises. So why don’t you click here and let me know what you think about knowing where you stand on being able to retire with financial security and independence.

 

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Topics: retirement, financial planning, investment returns

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