For more than ten years, I’ve been guiding individuals on the ins and outs of budgeting, which means I’ve encountered a lot of recurring questions. Your Fresno financial advisor will discuss how many of these inquiries revolve around how to begin budgeting or what steps to take when facing an unexpected financial crisis. The key to addressing both of these situations lies in understanding the concept of the Four Pillars.
So, what exactly are the Four Pillars?
The Four Pillars are the essential expenses that are necessary to sustain a family, including food, utilities, shelter, and transportation.
Food is a fundamental pillar, and it is important to prioritize groceries over eating out. While dining at restaurants can be enjoyable, it is considered a luxury and should only be included in the budget if there is room after accounting for necessary expenses.
Utilities, such as electricity and water, are crucial for maintaining a household and should be budgeted for on the higher side to account for fluctuations in monthly bills.
Shelter, which includes rent or mortgage payments, insurance, property taxes, and HOA fees, should not exceed 25% of a person’s take-home pay.
Lastly, transportation costs, such as gas and public transportation, should be included in the budget as necessary expenses. However, extravagant trips like going to Disney should be saved for and paid for in cash, rather than being considered a necessity.
The Four Pillars should be considered in all budgeting scenarios, especially in times of financial emergencies or when creating a monthly budget.
In emergency situations, it is important to prioritize the Four Pillars, focusing on providing food, maintaining utilities, paying for shelter, and ensuring transportation needs are met.
When creating a budget, the Four Pillars should be the first expenses to be accounted for, followed by other necessary expenses like insurance and debt payments, and then discretionary spending on personal items, entertainment, and dining out. This approach helps individuals to distinguish between needs and wants and prioritize their budget accordingly.
Determining whether you can truly afford a particular purchase is a critical step in making wise financial decisions. Your financial advisor Fresno, Ca understands that by understanding your financial situation, assessing your income and expenses, considering your financial goals, and creating a budget, you can confidently evaluate whether a purchase aligns with your overall financial well-being.
We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial to get your retirement plans on track for success!
Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser. The commentary on this website reflects the personal opinions, viewpoints, and analyses of the author, Soutas Financial, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security, or any security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Foundations deems reliable any statistical data or information obtained from or prepared by third party sources that is included in any commentary, but in no way guarantees its accuracy or completeness.
