Budgets and Balance Sheets: Financial Planning First Steps

By Jon L. Ten Haagen, CFP




Reader: My parents are always talking about money and how they are going to make ends meet. They both have good jobs, so I am not sure why they are always concerned they will not have enough at the end of the month. I am starting out in my adult life and do not want to be in a similar situation. How do properly prepare myself for moving forward and having a secure retirement down the road?

Financial planning has six points. If you want to be successful in managing your money and liabilities you must follow a form of planning. If you don’t, it is like running a boat on a dark night with no compass. How do you know where you are going and if you are making correct adjustments for where you are trying to go?

The six points of financial planning are emergency funds, educational funding, insurance needs, retirement planning, retirement funding and estate planning. Questions to ask include: Where am I now in terms of my finances? Where do I want to go? How am I going to get there?

There are four steps to answer these questions: Budgeting, goal setting, debt management and cash-flow management.

This week, we will talk about the budget and balance sheets, which are the basics of financial planning. Then we can get a real handle on your expenses. I am not going to sugar coat it. This is work. But it is worth it in the long run.

The best way to accomplish an accurate budget and balance sheet is to take your check book and credit card statements and start at the last entry. Break out each purchase and enter it into its category. Do this going back three months. Then multiply each category by four to get your yearly expenses. Then go through your checkbook and credit card statements for the year to catch any exceptional purchase/expenses. Large tax bills, insurance coverage which was not picked up in the first three month.

This should give you a pretty accurate showing of your income and outgo. From here, we can examine and massage the numbers to see if there is anything we can adjust or cut back on.

Congratulations. You have started on your way to a solid retirement plan. If you would like to expand on any of these areas please contact Ask the Expert and we will be glad to assist. In the coming weeks and months we will address the other areas of a solid financial plan.

Disclaimer: This column is intended for informational purposes only and is not a replacement for professional services. The author and this newspaper are not responsible for the outcome of following this advice.

Huntington’s Jon L. Ten Haagen, CFP*, runs Ten Haagen Financial Services, Inc., a full-service independent financial planning firm – and now, he is here to answer your questions!

In this bi-monthly column, Ten Haagen will answer your financial questions and help you with his expert financial advice. Don’t be shy – our expert is here for you, so feel free to ask away!

E-mail your questions to asktheexpert@longislandergroup.com today, and let our expert help you.

*Ten Haagen is an Investment Advisor Representative offering securities and advisory services offered through Royal Alliance Associates, Inc., member of FINRA/SIPC, and a registered investment advisor. He is also an active community member, serving on several nonprofit boards and as executive officer of the Greater Huntington Boating Council.

** NEW OFFICE LOCATION: Due to a fire in the office building, the offices of Ten Haagen Financial Services, Inc. are now at 12 Bayview Ave., Northport.