Applied Financial Planning
Why budget is not a dirty word
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A fellow advice professional I met recently said he avoids the term 'budget' when meeting with clients as they see it as a dirty word. He went on to explain that if you ask clients to complete a budget, they will think that they are going to have to give up the things they love or their lifestyle will suffer. For instance, they will not be able to buy the kids the Christmas presents they want or have their annual family holiday, and baked beans will be a regular event at mealtime.

I was shocked. How could anyone possibly think that budget is a dirty word? It may sound a little nerdy, but I believe that budget is a beautiful word, and I often discuss the importance of budgeting and cash flow management with clients and colleagues.

Creating balance and opportunity

Many clients believe that budgeting is all about sacrifice. In other words, they will have to cut back and forgo the lifestyle they enjoy now so that they can have the lifestyle they want in retirement, or some other future date.

I would argue that effective budgeting is actually about balance and opportunity.

First, it is about finding that balance between the lifestyle that clients want now versus the lifestyle they aspire to have in the future. By knowing how much to budget for their current living expenses, we can start planning and setting aside funds for their goals or other things they tell us are important to them. These could be short term—like having the Christmas they want for their family, or the annual holiday—as well as longer-term goals like paying off the home loan, buying an investment property, or enjoying a comfortable retirement.

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