Budgeting for Wealth Building

What does it cost us to live? We need to know our cost of living to work with investment professionals, and create an estate plan.

When I was married, my husband controlled everything: how much we spent, what we spent it on, and how we invested. When we divorced, I received a settlement which I placed in the hands of a financial advisor, so I could focus on my children and rebuild my life. I have never actively managed my finances because, until recently, the financial markets cooperated and the income from my nest egg easily supported our lifestyle. But now I worry that the income from my investments will not be sufficient for my lifetime. My future suddenly feels uncertain. I need to get a handle on my cost of living and find ways to reduce my spending so I can be a better partner with my financial advisor in building my wealth.

The Dilemma

  • Client received large divorce settlement
  • Had never managed the household finances or investments
  • Wanted a plan to build wealth, create an estate plan and work with investment professionals, but had no idea how to go about it
  • Client needed to track certain expenses for reimbursement by the ex- spouse
  • Had no concept of what it cost to maintain current lifestyle
  • Spending was routinely outpacing portfolio income, requiring random liquidation of assets for cash affecting portfolio performance
  • Spending continued despite rapid decrease in portfolio values in radically altered financial markets
  • Client felt vulnerable and ill-equipped to manage the changes being requested of her by her financial advisor

The OSI Solution

  • Created a custom QuickBooks file to track expenses and amounts “drawn down” from investments in a style that was meaningful to the client.
  • Implemented quarterly and year-to-year spending comparisons to give client benchmarks and ways to compare the costs of various spending choices
  • Developed a custom budget comparing current spending to budgeted spending quarterly and annually
  • Provided a framework for interviewing, evaluating, and hiring a wealth advisor
  • Created an “asset snapshot” format for monitoring asset values over time
  • Client has embraced the budget process, plans in advance for large expenditures and has reduced overall personal spending by 35%
  • OSI provides client with a quarterly one page summary of asset values compared to prior periods so that she can speak knowledgably with her advisors about results
  • Client is monitoring advising fees
  • Client feels knowledgeable, capable and empowered

OSI Budgeting for Wealth Building Services can also include:

  • Periodic net worth “snapshots”
  • Organization of investment records and statements
  • Cash Flow monitoring and budgeting to meet financial planning and “draw down” goals
  • Streamlining and consolidating bill payment; cash flow forecasting
  • Keeping records of capital improvements and basis in primary residence and additional homes
  • Gathering and summarizing asset basis data
  • Providing information to and coordinating with wealth managers, financial planners, and estate planning counsel
  • Scheduling and planning for property tax and personal estimated tax payments
  • Vital records organization