We often do comprehensive plans for our clients. We emphasize to them that besides establishing meaningful objectives, the most important factor in creating a meaningful plan is to properly document how they are currently spending their money and then projecting what their expenses will be in retirement (in today’s dollars).

This sounds pretty straightforward, right? In turns out that this is the biggest problem we have in doing comprehensive plans. If we don’t have an accurate assessment of where a client’s money is going and what they will need in retirement, we can’t complete a meaningful plan.

The typical scenario we run into is this: After signing up for a plan, our clients fill out a detailed questionnaire that includes detailed spending information. Invariably it seems, when we enter the data into our software, we find that when we compare what the client says they are currently spending to their current income, our software indicates a surplus of hundreds or even a thousand dollars, or more. They just don’t know where their money is going.

We strongly believe that the vast majority of our readers also don’t really know how much they are spending on many of their budget items. Yet they worry constantly about their investment returns. If they have given serious thought to their financial objectives (and many have not), there is no way that they can be spending in an optimal way to achieve their goals, if they can’t even document where their money is going.

If you are like many out there, who have not made it a point to track where they are spending their money, we strongly suggest you make it a priority. Software packages such as Quicken® or the website mint.com can help you manage your money. If you don’t think you can do it yourself, seek professional help.