“Simplicity is the ultimate sophistication.” This statement by Leonardo da Vinci regarding simplicity has been tested and tried in the financial industry. Tracking expenses and making sure they’re not exceeding income is a foundational component of building wealth.
In the book titled “The Millionaire Next Door,” two professors studied millionaires in the United States. They studied what kind of car they drove, how they made their money, and even their family structure. They concluded that “millionaires became millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.”
What you should remember when creating a spending plan is that it will not be perfect. There might be an emergency that comes up, or you may spend more in one area than initially planned. However, what matters is that your expenses are being tracked. You can build your wealth by creating a spending plan and make saving your first expense.
The easiest way to save is to set up an automatic transfer from your checking account to your investment account. Saving at least 15-20% of your gross income–including retirement contributions–is a good starting point. The next step is to look for ways to add additional savings, such as when you get a bonus or a tax return. If you follow these basic principles, you will reach your personal and financial goals.
Trent H. Colledge is an Intern at Sparrow Wealth Management. He is pursuing an undergraduate degree in Utah Valley University’s Personal Financial Planning Program. He will take the Certified Financial Planner exam in March 2018, and will graduate in April 2018. He enjoys playing basketball, spending time with his family, and helping others learn about finance.