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Amir Noor

Industry Spotlight > Advisors

The ‘Phantom’ Force Derailing Your Clients’ Budgets

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Amir Noor is the director of financial planning for United Financial Planning Group, having joined the firm in 2021 after leaving his prior role with Park Avenue Securities.

Noor has a passion for working with clients to develop holistic financial plans through a fee-based approach that allows him to keep the focus on client needs and outcomes. A key part of the planning process, Noor tells ThinkAdvisor, is the development of an accurate and actionable budget that guides and contextualizes clients’ spending behaviors.

As recounted in the Q&A dialog presented below, Noor is an advocate for the development and maintenance of more granular budgets that zoom in beyond the annual or monthly spending figure in order to give a truly accurate picture of a client’s balance sheet.

In Noor’s experience, in fact, many clients tend to substantially underestimate their spending if asked to make projections on a monthly or annual basis. He contends that refocusing clients on their weekly budget can be an incredibly powerful planning tool, one which other advisors should consider adopting.

THINKADVISOR: Why is budgeting such an important part of the financial planning process? What impact can a well-crafted and accurate budget have on a client over the long term?

Amir Noor: One of the most significant benefits I see with monthly budgeting is the effect it can have on saving and investing.

Part of the budgeting process I go through with clients is setting up their weekly savings goals. Once we have determined their income and expenses, everything leftover is used for saving, investing or paying off debt.

There are a few benefits here.

First, my clients are much more likely to hit their savings goals by saving weekly. Instead of accidentally over-spending each month and kicking the savings can down the road, my clients accurately predict their weekly spending and nail their weekly savings.

Furthermore, for clients that are investing, many choose to round up their weekly deposits. So, for example, we might calculate that they need to save $130 per week to hit their investing goals. But, most of my clients will round up to $150 per week, saving an additional $1,040 per year.

And while that may not seem like much, the effects of that extra $1,000 per year can be very significant over decades of compounding.

You have spoken about the “phantom month” that can come along with a more traditional monthly or annual budgeting process. Can you explain what the phantom month is?

A fairly standard approach to budgeting is to take the obvious monthly expenses — rent, mortgage, loan payments, etc. — and then figure out how much you spend each week on each item. Then, you multiply it all by four to calculate your monthly spending.

For example, if you spend $120 per week on groceries, you would multiply that by four to get $480 per month. If you wanted to estimate your annual grocery costs, you would multiply again by 12 to get $5,760 per year.

This is where the issue lies. Using the example above, you’ve only budgeted 48 weeks per year, leaving four full weeks unaccounted for. This means you’ve under-budgeted by $480 for groceries for the year.

While that $480 may seem insignificant, consider that this is just one category of many in the overall budget. Those four missing weeks are the “phantom month,” and when you multiply it across every area of your clients’ budget, it’s no surprise that so many Americans are coming up short.

How do you go about crafting a weekly budget?

As a basis of my approach, I’ve built a spreadsheet that allows clients to track their expenses. With each expense, my clients can tag the frequency as either daily, weekly, monthly or other. This helps them get a much more granular view of their spending and increases their accuracy.

In the beginning, many of my clients who’ve never budgeted will come to me with estimates. For example, when I first sit down with a client, they might say they think they spend about $50 per month at coffee shops, or roughly $12 to $13 per week.

As we begin our work together, we find they are hitting the coffee shop four days a week, spending about $6 per day. So that means they’re spending $24 per week—roughly twice what they initially thought.

Importantly, the point isn’t to decrease their spending at coffee shops. If this is something my client enjoys spending money on, then I encourage them to do that.

Instead, the point is to be more accurate with their budget. It is to avoid a situation where they are left with an extra $400 per month of unexpected or unaccounted-for expenses simply because of their budgeting tactics.

Another benefit to weekly budgeting is that it is more manageable. When you look at an entire month of transactions, it can feel overwhelming.

You have found that a weekly budgeting approach is superior for outcomes?

My clients have seen tremendous success budgeting weekly. Not only does this help them avoid getting hit by the phantom month, but it also has several additional benefits.

A weekly approach, as opposed to monthly, increases the budget’s accuracy. As we have seen, monthly or annual budgeting is simply inaccurate, often leaving an entire month’s worth of expenses unaccounted for. Weekly budgeting allows you to zoom in and create a budget that works.

Honestly, I would budget daily if I could, but I know the anxiety it could create would drive most people crazy. Daily budgeting can be like a restrictive diet — forcing you to count calories at every meal.

Ultimately, most people would get fed up and wind up having a “cheat” day or throwing the whole plan out the window.


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