In this segment we're going to continue our discussion about budgeting and cash flow management. And today I'm joined by Scott Cline. Scott is a Registered Investment Advisor in the state of Illinois. And for the past ten years he has owned his own business, Cline Financial Concepts, where he works as a fee-only financial planner with his clients. In terms of education, Scott does have a bachelor's degree in Agricultural Economics from the University of Illinois and then went to the University of Missouri at Columbia where he earned a master's degree in Financial Planning. So Scott has both excellent educational background as well as over ten years of experience now in terms of working with clients and individuals on financial planning topics. So Scott thank you for joining us. We're going to talk a little bit about budgeting and cash flow management, so again with your professional perspective when you're working with individuals, maybe talk a little bit about how much you stress or how important budgeting is in terms of maybe a starting point in that financial planning process. >> You know budgeting is very important because of the fact that when you have a client, perhaps, and you see a couple, right? A couple, there's a husband and a wife or two significant others, that sort of thing, it allows them really to get on the same page and that's really the whole goal of a budget itself. Get's them on the same page, they're looking at it in a way that is more of a third-party look versus now looking at themselves as internally like you spent too much here, you've done too much there. It really gets them on the same page from that aspect of it. >> Okay and budgeting when I talk about it with students, I just emphasize the fact that budgeting really lets you know where you stand, what your current cash needs are, maybe you start thinking about the future and what future cash needs might be and planning for those. So, in your experience in working with clients, how do you have them approach the budgeting process? I mean where do you even begin if you'd never formally developed a budget for yourself before? How do you get in individuals kind of thinking about that and working towards that? >> Well, typically before they come in what I'll do was awesome specifically to bring in like an Excel spreadsheet or something or write it out of all the things they've been spending on a monthly basis. Now many times clients will see this as a pain, right? It's a big pain that we've got to do this, it's time consuming, but at the end of the meeting they have a very good understanding of where they're at in the budget. They understand what they've been overspending on, what they've been not saving enough for like emergency funds and so forth. And it gives them a really good idea of where they're at from that standpoint of that budget. >> And then so in your experience as you work with people and get them started down that path towards putting a budget together do you find that people typically underestimate their cash flow needs or overestimate their cash flow needs or do people do a pretty good job of being accurate in their budgeting? >> Many times people are very inaccurate from a standpoint because they don't want to face the reality of what their budget really is. That's really what it comes down to. So, many times they'll come in and they'll give me a list of things, and I'll start asking them what about this, what about this, what? And I forgot that, or I forgot this. So it forces them to face reality with regards to their budget and really where they're at in the budget cycle, itself. I mean clients, if clients would just take, once a quarter even, and just take a litmus test and do their budget, they'd be much better off five years down the road, then if not doing a budget at all, and just trying to wing it most of the time. So that's the reason why it's very very important to have a budget. >> So Scott in this class we're really kind of focusing the content and the way we're presenting things towards financial planning for young adults specifically. And obviously, this is a topic that's important throughout your life but for young adults, we might think of that as someone being in their 20s, maybe, just graduating college, or coming out of a junior college, or high school, maybe, taking their first job. So, some pretty big financial life changes going on, at that point. Maybe more income than they had had in the past, but also some probably different and probably more expenses. There are obviously other life changes that happen throughout your life whether you're a young adult or not, having a child, as you near retirement age. So can you talk about how budgeting process changes or adapts throughout a person's life and how you work with individuals to address budgeting when there are major life changes like that? >> So if we take for example the question of the young adult just getting out of college and so forth. Their budget, back in college was, they get 50 bucks, they go out and just blow it, right? I mean, because that's all they had at that point. It was not a big expense for them so to speak. But now that they've gone to the next level to another step in their life, or evolution per se, they've gotta really be cautious and learn to get disciplined about what it is that they're going to do with their life and how they're going to save for the future. How they're going to pay for, maybe, student loans, any other types of debts that they may have incurred during that time in college, and so forth. So it's really important that they really establish a good budget and get those student loans paid off as soon as they possibly can. And then when you think about an individual that they go to the next level where they get married, and that's another life-changing event. People need a theory, you need to think about it in terms of, okay now we need to get on the same page. You know getting on the same page when you're 50 versus when you're 25, 28 years old when you first get married is much different. It's much better if you do it earlier rather than later. because what I find is when clients come in when they're getting ready to retire they really haven't done a budget for all of those years. Each spouse has spent whatever they want to spend. It's been nice and wonderful and so forth. But then they start to realize that that income is not going to be coming in as much as it used to be and then all of a sudden they panic. And that's what you want to try to prevent with regards to when you budget. And so if you can get that individual in their earlier years to budget, and to plan, and to develop those types of plans, and develop good habits, then in later years, you really reduce what we call those fire calls. Those places where they're panicking, they don't know if they're going to be able to retire. They may have to work another five to seven years because of it because they just didn't plan or really put a budget together and in that aspect. >> And so clear communication and starting earlier >> Are the keys. >> A big piece of advice from you as a Professional. >> Yeah. Yeah. >> All right, well, thank you very much, Scott. >> No problem. >> Again, we were here talking with Scott Cline, a registered investment advisor in the state of Illinois, about the importance of budgeting. Thank you again, Scott, for your time. [MUSIC] [SOUND]
