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Retirement Planning > Saving for Retirement

Beyond the B Word

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Soaring gasoline prices have been a wake up call to many people. Watching pump dials spin like some out-of-control slot machine that ends with a never-before-imagined dollar total has caused many to rethink the cost of their daily driving and vacation plans. The good news is that cost increases in this single area have convinced many clients that they need to rein in spending in all areas of their lives.

It has been estimated that fewer than 35 percent of Americans utilize any form of personal budgeting. As a nation, we are experiencing the lowest savings rate in decades. The first wave of boomers is turning 60, with many financially unprepared for retirement. Personal debt is at an all-time high. As a trusted financial advisor, you may find the word “budget” increasingly enters into the conversation.

Budgeting itself is a simple concept. Track expenses, place limits on each item (where possible), compare the expense total to available income, make adjustments and live within one’s means. The act of budgeting in the real world is, however, much more complex. Many clients have tried and failed to stay on budget in the past — it’s a discipline they just don’t seem to want to master.

Creating a process that will lead them to success is never simple, but it can be done if you persevere. Much good financial planning starts with a clear statement of the problem. But when the problem is so common and apparent (at least to us), financial advisors may jump right over the problem-statement step and present a solution: “You need a budget!” The client may not see it so quickly — or as cut-and-dried.

A first step is to come to consensus about the characterization of the concern. For example, are the clients carrying too much debt, spending too much each month, not actively saving in a consistent way, adjusting their lifestyle higher with each new salary increase, or some combination of these? What problems will occur as a result of these continued behaviors? Get specific about the reasons you feel a budget is necessary.

Make the numbers personal through a goal-setting process. What is it that your clients want? What can money do for them? Both material goals (meeting everyday expenses, purchasing a new car, saving for a cruise, retiring in Tahiti, affording trips to visit grandchildren, remodeling the house, etc.) and emotional goals (feeling secure, finding peace of mind, the freedom to choose) need to be discussed and identified. Once their goals have clarified, clients can understand and commit to the dollars and numbers.

Getting to Yes

Even with a clearly identified problem and well-articulated goals, you may experience continued resistance from clients when the discussion about formulating a personal budget starts.

You must work to change client attitudes about budgeting from being a money-watching, self-sacrificing chore to becoming a pathway for achieving a number of passion-producing goals.

To overcome the negative aspects that clients may have with the word “budget,” try changing its name to “Spending and Saving Plan.” Where a budget prompts negative feelings to many, spending is usually a joy.

Once clients are on board with the reasons for and positive feelings about their Spending and Saving Plan, it is time to get on with designing a customized personal plan. Concepts common to every successful plan include:

o Tracking spending;

o Prioritizing needs and wants;

o Setting specific dollar amounts for each spending item;

o Setting specific dollar amounts for each savings target; and

o Reconciliation on a weekly or monthly basis

You’ll want a few spreadsheet and software resources available for clients to use. To see a sample Money Management Planner, visit www.balancepro. net/pdf/mmp.pdf, where you can download a budgeting tool for your clients. However you do it, create the most simple but effective process that meets the clients’ needs.

Reality Check

In the past, when an envelope contained your weekly or monthly paycheck, that is what you used to save or make purchases. The connection was real and immediate. As the money was spent, either as cash or in the form of checks, you watched it dwindle down and disappear. Today, our world consists of automatic deposits and payments, debit and credit cards, paper and electronic checks. It is possible to go many days without the need to use so much as an actual penny. Because of this, clients lose track of what they receive, what they spend and how much is left over.

A useful tool to reestablishing the connection is for clients to pay a number of expenses with cash for a period of a couple of months. You might even create a “Fritter Finder” that clients can carry in their wallets. For at least one week, have your clients track every cent they spend. At the end of the week, they’ll see just where those extra dollars could be hiding. In the future, they can use funds they currently fritter away to increase savings, pay off bills or buy something special. Consumer debt counseling agencies have used these small, fold-out forms for a number of years. Take a look at this example online: pdf/fritterfinder.pdf.

To make an even stronger point, utilize the “envelope system” at the same time. Mark envelopes with budget or spending plan categories and its dollar amount. Next, place the amount of cash budgeted to each category in the corresponding envelope. For example if the grocery budget category is $500.00 per month, $500.00 cash goes into the envelope. The total amount in all the envelopes represents the total amount that can be spent for that month. If any envelope is emptied before the end of the month, the only way to purchase more within that category, such as groceries, is to take money from another envelope. It forces clients to stay within their budget while making tough decisions based on needs and wants.

A more contemporary form of the envelope system is Mvelopes (www. Some clients will resist keeping lots of cash around the house. Mvelopes lets them set up an online system. The service links up with their bank and uses envelope icons to apportion their paycheck and keep track of spending. When they’re over-budget, the line item turns red.

Finally, success requires monitoring progress, providing encouragement and establishing accountability methods. Repetition and time are needed to make budgeting a way of life and to change years of lifestyle habits. This may include regular money meetings or sending monthly Spending and Savings Plan reconciliation reports to you.


MARIE SWIFT is president of Impact Communications,, a marketing and communications firm for independent advisors.

MARY LACEY GIBSON, CFP, is a business coach who specializes in helping independent financial advisors meet their own planning and development needs; she is also a fee-only financial planner and has been serving clients in Central California for 15 years (