Let me tell you a story...
A young high earning city gent, let's call him Steve, books a meeting with an Independent Financial Adviser. He had a 2 year old daughter, his priorities had changed and he felt that private education was the route to go for her future and wanted to start saving now.
"I've got a problem" said Steve "I want to save for my daughters future, but I've got an issue....I've no spare money at the end of the month". "That's fine" said the financial planner "We'll take a look at your income and outgoings as part of the work we do and we can see where you spend your salary."
Steve and his adviser got to the stage where they discussed his budget, completed a budget planner and it left both of them scratching their heads.
"Based on what you've told me" says the adviser "You should have £800 per month spare!!"
"Well, I haven't" Steve replies "Where does that money go??"
"Ok" says the adviser, "Tell me about your typical weekday?"
"Ok" says Steve, feeling confused about why the adviser asked
"I jump on the tube to work, before work I pop into Starbucks and buy myself a coffee and a Sandwich for breakfast. I then go to work, but, I love Starbucks!! So I pop out at about 10:30 and buy myself a coffee and a snack....."
The story continued and the adviser, and eventually Steve realised that he visited Starbucks 4 - 5 times a day. Then Steve with the help of the adviser calculated that he spends £320 per month in Starbucks!!
"I think we're getting closer to finding out where your spare money goes" says the adviser
"Yep" says Steve feeling slightly ashamed about his caffine and snack habits "I've never looked at it this way before."
"I understand" said the adviser "and it's not unusual if you've never had the chance to budget plan before. Also, I'm not suggesting you stop visiting starbucks...but what this information allows us to do is to prioritise realistically."
Then the meeting continued.......
Moral of the story:-
If you've never budget planned before, do so now!! Any professional adviser will be prepared to do this as part of the financial planning process, but you can also do this yourself by downloading This Free Template from the office of fair trading. Also, if you're not sure where your money goes, dig deeper, think about what and how much you spend on a regular day.
Once you understand where your money gets spent, you have the power to change your spending habits (if you want to).....and the budget planning exercise will be time well spent.
