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Staying Financially Fit | The Power of Budgeting at Any Life Stage

| JUL 12, 2019

Budgets get a bad rap. In reality, they give people power over their finances, and when managed well, can put a person in a position to decide if they want to seize an opportunity or not – while those who have not managed their money wisely often have no such option.


Instead of thinking of a budget as a restriction which is eventually outgrown, people should consider it a powerful tool that adapts to their life stage. As your life gets more complex, so should your budget, so it can provide you with an accurate view of what path will help you achieve your next goal.

  • BUDGETING BASICS: PRACTICE FINANCIAL MINDFULNESS
    While budgets serve different goals for different life stages, the foundation is the same. Any budget is based on a realistic, objective view of cash flow. It should also account for what changes you foresee. A financial advisor can be helpful in both areas – they may see trends in your expenses you haven’t and can guide you in thinking about what’s next in life.
        
  • BUDGETS FOR PEOPLE STARTING FRESH: MEET EXPENSES
    Whether new to the workforce or making major life changes, short term stability is key. These budgets are relatively simple: Income and expenses, managing debt, doing what you can to build a safety net and retirement savings. Following this budget will help keep you from overextending in the near-term and build a financial foundation to do more in the mid-term future.
     
  • BUDGETS FOR ESTABLISHED FAMILIES AND INDIVIDUALS: PLAN FOR GOALS
    Once near-term needs are easier to meet, the goal of the budget changes. Monthly expenses matter, but important items now address mid- and longer-term goals – saving for college, ramping up retirement, leaving a legacy, achieving personal dreams. Balancing these takes self-reflection, and often involves the input of others. Taxes and charitable giving become more significant.
     
  • BUDGETS FOR THOSE NEARING RETIREMENT: PREPARE FOR CHANGE
    People think of retirement as a calm time, but the transition can be complex. The golden years often involve big lifestyle changes, such as downsizing a home, moving to a new city, adapting to health needs, or new goals that emerge late in life and may not have been in the original plan. A budget can help you build in extra flexibility for these changes.
     
  • TOOLS AND TIPS TO HELP MANAGE A BUDGET
    Many financial tools are really budgeting tools. Tax-advantaged accounts like 401ks and IRAs for retirement, 529s for education, and Health Savings Accounts for medical expenses exist to help your budget work harder. They help keep you on track. Insurance is another budgeting tool – it offers budgeting certainty when the unexpected happens.

Budgets need to be tailored to each person’s lifestyle, goals and stage. With the many tools available, crafting the right mix of accounts and financial products takes expertise and a personal connection like the one you will make working with an Alerus advisor. We get to know you personally, and we can help you think about the future and possibilities you might want to pursue so we can help create a budget that empowers you without limiting you.

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