June 20, 2019

Wealth Matters: ‘Deciding How to Decide’: Even the Rich Need Advice on Budgeting

It starts by defining spending. It includes lifestyle expenditures like travel, cars and wine; financial gifts to friends and family; charitable contributions; and even taxes. It looks at not only impulse buys but all the stuff in our lives that we spend money on, voluntarily or involuntarily: the big expenses like the mortgage on the house or homes and insurance, and the smaller, not-so-regular costs like maintenance, repairs and occasional remodeling of those homes.

It’s the art but also the security system. It’s what people want to give to charity or have pledged to donate to organizations. It’s taxes.

Coming to terms with all that spending can be time-consuming. Before I heard about the Merrill guide, my wife and I created a list of everything we spent money on last year, divided by vendors. We discovered that the expenses were not at all what we had thought. We spent way more on food and children’s activities and less on technology than I had expected. I also didn’t buy as much golf-related apparel as I had thought, though my wife interpreted that number differently.

It wasn’t easy to get it all down on paper, but it did form a basis for discussion.

“When we’re looking at it in the broader context, it’s about balancing the different spending priorities,” Ms. Allred said. “Then, what you see is families get more comfortable with their expenditures and spend more on experiences instead of stuff.”

In some ways, the spending plans described in the Merrill guide could be likened to a diet. They lay out a more attainable fitness plan, with the consequences of late-night snacking explained. (In addressing spending with clients, Merrill is not alone. All of the big wire house firms, like J.P. Morgan and Morgan Stanley, ask clients about their spending, as would many registered investment advisers. Knowing how much is going out is key to making retirement projections for the assets that are being managed.)

Article source: https://www.nytimes.com/2019/01/11/your-money/budgeting-for-wealthy-rich.html?partner=rss&emc=rss

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