How should we prioritize our spending? When tackling this question with clients, I often start with a budget. This may come across as strange given that most of our clients fall into the high net worth or ultra high net worth category. A budget may seem superfluous given that spending needs are currently being met. However, without some thought as to what your current spending needs look like, and more importantly, as to what your spending needs could look like in the future, it’s difficult to prioritize how much we spend versus save. This makes it hard to ultimately plan for that time when we may not necessarily have as high of an income.
I think that for many of us, our top priority is in making sure our day to day needs and obligations are fulfilled. At the top of the list would be things such as housing costs, car insurance, groceries, etc. Next up might be putting money towards retirement savings or a ‘rainy day fund.’ Beyond that, we might look towards charitable causes. We often find that prioritizing giving can be a struggle, and understandably so. With a proper financial plan in place, one of the things we are able to do is work with clients to make sure that their giving objectives are met, so that they are giving back from the first fruits rather than with their ‘leftovers,’ without sacrificing any of their other spending preferences.
Managing the day to day finances is not a science, it is an artform, as it has many changing variables. This lack of straight forwardness is one of the reasons why establishing a budget, first off, followed by determining where you want to prioritize your spending takes time and conscious effort. However, when all is said and done, with proper planning in place, your finances can be set up for success not only in the now, but in the future as well.
Janet Kim Sing, Portfolio Manager
Capstone Private Wealth