Speaker 1: Episode two oh eight, Budgeting Basics. Welcome to the Frugal
Speaker 1: Friends podcast, where you'll learn to save money, embrace simplicity, rights,
Speaker 1: and live with your life. Here your host Jen and Jill.
Speaker 1: Welcome to the Frugal Friends podcast. My name is Jen,
Speaker 1: my name is Jill, and today we are heading back
Speaker 1: to square one, back to basics of budgeting. You guys
Speaker 1: have asked for this episode for a while, and so
Speaker 1: we're going to cover it. We like talking I like
Speaker 1: talking about but I'll speak for myself. I do like
Speaker 1: talking about budgeting. I think it's so important. I don't
Speaker 1: think that there's one way to budget. I think there's
Speaker 1: a lot of ways that we can go about this.
Speaker 1: But I do think we need to be aware of
Speaker 1: the money coming in and the money going out, and
Speaker 1: we're going to get good with money, live this frugal lifestyle. Yeah,
Speaker 1: And frugality allows you to have that flexibility with budgeting
Speaker 1: because the more intentional you are about your purchases, the
Speaker 1: less you have to worry about sticking to the budget, breaking,
Speaker 1: busting whatever you call it budget. And there are different
Speaker 1: budgets for different seasons of your life as well, and
Speaker 1: so there's not one budget that works best for one
Speaker 1: person all the time, or any person in general. We
Speaker 1: do have our favorites for certain seasons. But once you
Speaker 1: get really good at mindful spending, conscious consumerism, all of
Speaker 1: that simple living, it takes the need for budgeting away
Speaker 1: so much, which is is why we don't harp on it,
Speaker 1: because we feel like frugal living is a alternative to
Speaker 1: a strictly budgeted life. But it bears repeating that when
Speaker 1: you are trying, when you are starting, this is a necessity.
Speaker 1: No matter who you are, you can't get around it. Yes,
Speaker 1: I don't even care if you a multimillionaire. You got
Speaker 1: to know the money coming in the money going out.
Speaker 1: So we're gonna go through some basic methods trium on
Speaker 1: for size. We're gonna talk about some basics of how
Speaker 1: to and that will be that. But first sponsors oil
Speaker 1: and vinegar, two things that seem to not go together,
Speaker 1: have paired up to sponsor this episode. Like Sweet and Salty,
Speaker 1: Chilian macaroni, Fear and Joy, they're all here to announce
Speaker 1: the frugal friends for your anniversary party. Who it's gonna
Speaker 1: be the best fancy frugaltle fiesta with all the money
Speaker 1: saving party hacks paired with all the luxury one can
Speaker 1: expect from us. Think hot dogs and charcouterie. If you're
Speaker 1: Frugal Friends listener, you can celebrate our accomplishment with us
Speaker 1: on April in St. Petersburg, Florida at our four year
Speaker 1: anniversary party. If you'd like to join us, head to
Speaker 1: Frugal Friends podcast dot com slash party for more info. Yes,
Speaker 1: we would love to see you at the fiesta. It's
Speaker 1: gonna be so smart. Actually gonna be hot dogs and sharguttery.
Speaker 1: But I liked the sound of the pairing of those
Speaker 1: who really likes hot dogs, f y I sharcoan, Well,
Speaker 1: we all love charcuterie. I like hot dogs too. I'm
Speaker 1: not gonna lie. I do love a good hot dog.
Speaker 1: Oh they're so tasty. I could practically always go for
Speaker 1: a hot and they're always in the budget because they
Speaker 1: are so affordable. So if you love budgeting, or maybe
Speaker 1: you don't love budgeting, here are some episodes to queue
Speaker 1: up for after this episode. So the first would be
Speaker 1: episode one seventy seven. That's where we talk about a
Speaker 1: values based budgeting systems. So it's more of we go
Speaker 1: through the values based spending philosophy, philosophy that we follow
Speaker 1: and how to tie that into a values based budget.
Speaker 1: So that's kind of like a higher level sort of
Speaker 1: like one oh two and then episode Onete minimalist budgeting,
Speaker 1: that's where I fall more into. I am definitely less
Speaker 1: budget conscious than Jill is. Jill loves to make the
Speaker 1: budget and I just love too, but I still would
Speaker 1: I would qualify myself as like the nerd of the family,
Speaker 1: Like I am definitely more administrative and organized, but I
Speaker 1: just don't. I like to be just a little more free,
Speaker 1: just lay in my life, chilling the spreadsheets. Yeah, and
Speaker 1: so that's not as me runch in the numbers. So
Speaker 1: that just goes to show that you literally can be
Speaker 1: anybody you want to be and still have a budgeting practice.
Speaker 1: So today is very much one oh one basics. So
Speaker 1: if you feel like you've got a good budget, you
Speaker 1: can skip this one. But if you're like people and
Speaker 1: feel like you don't, it's for you. But if you
Speaker 1: also just want to hear me talk more about hot dogs,
Speaker 1: stick around. Awesome. So let's get into our first article
Speaker 1: on the four basic budgeting methods, and this is from
Speaker 1: nwc U dot com Credit Union if you don't have
Speaker 1: a credit union, check out your local one. Jill, what
Speaker 1: did you think of this one? It's excellent. I think
Speaker 1: it gives a really great summary of some classic budgeting styles.
Speaker 1: So feel free to think about what might fit best
Speaker 1: for your lifestyle, what you know of yourself, your earnings,
Speaker 1: and the way that you spend, to figure out which
Speaker 1: budgeting style is gonna be best for you at this time.
Speaker 1: And like you said, Jen, it might shift. We might
Speaker 1: come into a different season of life and we choose
Speaker 1: a different budgeting style. So the first one, and we'll
Speaker 1: just go through all four, is the basic budgeting method.
Speaker 1: They just call it. Yes for us, it's the classic
Speaker 1: budget where you just list out your expenses line by line,
Speaker 1: but within columns. So they talk about having two columns,
Speaker 1: one being an estimated spending column and the second column
Speaker 1: being the actual spending column. I believe then that you'd
Speaker 1: have rows that go across and coincide that you can
Speaker 1: picture a spreadsheet and you have the different categories of items.
Speaker 1: So I think with this budget, I mean, certainly you
Speaker 1: could get really nitty gritty and just list out every
Speaker 1: single thing that you might spend on, or you could
Speaker 1: categorize like groceries, entertainment, utility and electric miscellaneous, and then
Speaker 1: you right out what do you think you're going to
Speaker 1: spend in each of those? Of course, if you know
Speaker 1: what your fixed bills are, then that should be pretty
Speaker 1: self explanatory. And then think about what's a reasonable amount
Speaker 1: to spend. If you're doing it in a month monthly
Speaker 1: basis that you're going to spend that month, then it
Speaker 1: does require going back through and comparing what you actually
Speaker 1: spent to what the estimated spending was going to be.
Speaker 1: Of course, hopefully keeping a pulse on it, not just
Speaker 1: making this forgetting about it spending and then going back
Speaker 1: and saying oops. But it can help us to identify
Speaker 1: where was I realistic with this budget? What was true?
Speaker 1: Where did I spend less? Where did I spend more?
Speaker 1: What kind of adjustments do I need to make next month?
Speaker 1: And the idea with budgeting, at least in the beginning,
Speaker 1: is that you are doing a month to month basis
Speaker 1: because expensive shift month to month. Some months you have
Speaker 1: your car insurance that's due if you pay it bi annually,
Speaker 1: and other months you have but a ton of birthday
Speaker 1: parties to go to who knows, but it's worth looking
Speaker 1: at it each month and adjusting where the numbers are
Speaker 1: going to go. But that's the basics of a classic budget,
Speaker 1: the two columns, what do I think I'm going to spend,
Speaker 1: what I actually spend, and then keeping a pulse on that. Yeah,
Speaker 1: and most budgeting apps are going to follow this style.
Speaker 1: It's gonna be totally free form. You put in whatever
Speaker 1: you think and then you add whatever you have spent,
Speaker 1: so your y naps, your every dollars, your mint. This
Speaker 1: is this is what they follow, and this is what
Speaker 1: you can use. If you want to use a zero
Speaker 1: based budget, then this is kind of the one we use.
Speaker 1: We also use the second method in a zero based budget,
Speaker 1: you can use either, and that is the cash only budget.
Speaker 1: So this one also can you know cash envelope system
Speaker 1: they can be synonymous, but this method allows you to
Speaker 1: literally only spend the cash that you have. Uh And
Speaker 1: so I've never been a huge fan of cash envelopes,
Speaker 1: but there are people who, because of their spending habits
Speaker 1: like swore by it and really really needed it to
Speaker 1: kind of hone in and dial down some of those
Speaker 1: impulse categories. It really can help you get a handle
Speaker 1: on your spending and connect you more with the action
Speaker 1: of spending when you're pulling out real cash receiving change back.
Speaker 1: I did this method when I first started out with
Speaker 1: budgeting and trying to get a handle on my finances,
Speaker 1: and I do think it helped. But about nine to
Speaker 1: twelve months in I recognized all right, I got it,
Speaker 1: and I made my switch to a different methods. So
Speaker 1: it's it's worth considering, especially if, like you said, Jen,
Speaker 1: you are the person who's just starting out or really
Speaker 1: needs to get a handle on where your money goes.
Speaker 1: This could be worth considering. I think it would be
Speaker 1: fun to do. Will not fun, but like good to do,
Speaker 1: like a thirty day cash only challenge. So if you're
Speaker 1: trying to figure out is this for me, or you're
Speaker 1: trying to hone in on something, try it for a
Speaker 1: month and see what happens. It will not be convenient,
Speaker 1: you will probably not love it, but it will probably
Speaker 1: be good for your spending. Will probably be good for
Speaker 1: your budget. But so we our favorite type of budget
Speaker 1: is the zero based budget. We think it helps you
Speaker 1: reach your financial goals faster than any other of the
Speaker 1: other types of budgets. We're gonna talk about so the
Speaker 1: cash only and the classic budgeting methods are the ones
Speaker 1: that meld best into there. And I would say I've
Speaker 1: always said a cash envelope is more of a method
Speaker 1: to stick to your budget than it is an actual
Speaker 1: budgeting method. But since it's included here, we'll just parse
Speaker 1: it out from the classic budget and say that, but
Speaker 1: you can use the classic budget and still just pay
Speaker 1: for things in cash. So I don't love it when
Speaker 1: people separate them, but here we are, so yeah, zero
Speaker 1: based budget using the classic or cash only methods. The
Speaker 1: third budgeting method is the percentage budget. Some also call
Speaker 1: it the proportional budgeting method. This sounds maybe a little
Speaker 1: bit like where You're at gen or maybe this is
Speaker 1: even more I have strong opinions on. So, well, here's
Speaker 1: what it is. It is parsing out your budget into
Speaker 1: different percentages, so setting aside a percentage for spending versus saving.
Speaker 1: You can set aside a certain percentage for needs, a
Speaker 1: certain percentage for wants, a certain percentage for savings. So
Speaker 1: some people might put let's say eight of their income
Speaker 1: towards expenses. That might encompass both wants and needs and
Speaker 1: then save. And so if you are doing the proportional
Speaker 1: budgeting method. You don't have to be too much into
Speaker 1: the weeds on where all of that eight percent goes
Speaker 1: if you're sticking within that eight percent and putting to savings.
Speaker 1: Another type is the where you budget of your income
Speaker 1: towards needs, towards want, towards savings. Obviously you decide the percentages.
Speaker 1: I think these are examples of how someone might go
Speaker 1: about this, but that's the overview of the percentage budget.
Speaker 1: All right, give us your hot take, Jen, I hate
Speaker 1: the percentage budget, So it's okay. It's actually not that
Speaker 1: I hate the concept of using percentages, but I really
Speaker 1: just do, truly hate how much the budget is promoted,
Speaker 1: because who are you to tell me the percentage of
Speaker 1: my income that should go to what I want to
Speaker 1: spend on. You don't know my income. Income is very
Speaker 1: important when you're deciding percentages, because sometimes you're in a
Speaker 1: low income in a high cost of living area, you're
Speaker 1: going to spend more than of your income. Then sometimes
Speaker 1: you're trying to maybe catch up with retirement and you
Speaker 1: want to save more than or you're trying to pay
Speaker 1: off debt, then you're not gonna want to put towards once,
Speaker 1: So it's just it is so subjective, that is very arbitrary.
Speaker 1: So that's why we love the zero based budget more
Speaker 1: because you can't decide your core values and decide the
Speaker 1: expenses that you want to make based on those core
Speaker 1: values and and budget there. And once you have done
Speaker 1: that and you have gotten comfortable with that, then you
Speaker 1: can calculate your own percentages, and yeah, this can be
Speaker 1: a more freeing budget. Like that's that's not a bad.
Speaker 1: Like saving is definitely is where I like to stick to.
Speaker 1: It's where I recommend people go when they're starting out.
Speaker 1: So it's it's you have to be aware of your
Speaker 1: your values, you're spending. You have to be kind of
Speaker 1: trained in intentional spending before you can create a percentage budget.
Speaker 1: So it's not bad. But I just think the like
Speaker 1: budget model is so arbitrary. It's so outdated, and I
Speaker 1: don't I don't recommend it for anyone. And maybe you
Speaker 1: do end up being fifty because your income is right
Speaker 1: at that sweet spot and your cost of living is
Speaker 1: at that sweet spot. That's awesome, but it's so our
Speaker 1: income and expenses are so diverse and varied, Like I
Speaker 1: just don't I don't find it practical anymore. I appreciate
Speaker 1: those caveats, especially saying probably is not the budgeting method
Speaker 1: to start with. Absolutely got a really good handle on it.
Speaker 1: I think as I'm even reading this article, seeing the
Speaker 1: and you don't even need to track your expenses, that
Speaker 1: does go a little bit against the grain of some
Speaker 1: of our ethos related to frugal living and intentional spending.
Speaker 1: That it's not just about oh who cares. We do
Speaker 1: want to be spending around our values and not be
Speaker 1: so disconnected with the decisions that we're making, even if
Speaker 1: we're making those decisions within an eight percent amount of
Speaker 1: spending a lotment, and then you know, we pick our percentages.
Speaker 1: If this is what we move towards once we have
Speaker 1: a good handle on our incomes, expenses and spending, yeah,
Speaker 1: I would say I fall into this fourth and final
Speaker 1: budgeting method is the pay yourself first budget. So we've
Speaker 1: gotten really good with our our monthly bills are you know,
Speaker 1: as low as we can get them. We have of
Speaker 1: our recurring expenses and so really our only discretionary expenses
Speaker 1: our food. You know, we're very consistent everywhere else, and
Speaker 1: so we have our our investments set up to be
Speaker 1: auto debited and and we are essentially kind of just
Speaker 1: float through that. I don't want to say you always
Speaker 1: want to be improving and becoming more intentional and connected
Speaker 1: with your spending, but you can get to a point.
Speaker 1: I mean, we've been hosting this podcast for over four years.
Speaker 1: So if we've been talking about intentional spending for so long,
Speaker 1: and we were doing it before we even started, we
Speaker 1: don't have a problem just paying ourselves first and moving
Speaker 1: forward with the freedom to spend how we want. Because
Speaker 1: we do spend with intention and we are, like Travis
Speaker 1: and I are aligned in our you know, each other's
Speaker 1: core values, and so we give each other this freedom
Speaker 1: to spend on that. And so it is the frugality
Speaker 1: allows us to do the pay yourself first budget. I'm sorry,
Speaker 1: I probably forgot to like say what it is. It's
Speaker 1: essentially just putting your money towards saving and goals first
Speaker 1: as soon as you get paid, and then you can
Speaker 1: spend whatever else you want. And this again is an
Speaker 1: advanced budgeting method because I used to do this before
Speaker 1: I was paying off my debt and it never worked
Speaker 1: as well as I wanted it to. Well, I think
Speaker 1: the difference is the pay yourself first, meaning pay your
Speaker 1: future self first. You had the pay my presence self first, No,
Speaker 1: I would pay I would pay my future self like
Speaker 1: I would save money, and then I would run out
Speaker 1: of money. I would always overestimate the amount I thought
Speaker 1: I was capable of saving because and I would make
Speaker 1: the budget and the budget would say I'm capable of
Speaker 1: saving this amount, so I would save it, and then
Speaker 1: by the end I was out of money, and I'm like,
Speaker 1: I wasn't trained in like paying attention to my spending,
Speaker 1: and so that was where the disconnect was. And so
Speaker 1: I needed to get on that really really like what's
Speaker 1: what's the word like detailed really detailed zero based budget
Speaker 1: where I had a lot of categories. Basically every transaction
Speaker 1: was a category so I can see it, you know,
Speaker 1: Like I had to get really really detailed at first
Speaker 1: so I could find those patterns so that I can
Speaker 1: work on those things. And as I worked on them,
Speaker 1: then I was able to go back to this pay
Speaker 1: yourself first budget and actually we do have money left
Speaker 1: over after you know every month, um that we've been
Speaker 1: able to save like additionally, so that's excellent. And I
Speaker 1: can vouch because I'm an actual friend of yours advisors
Speaker 1: that I see you living very simply and intentionally and
Speaker 1: finding ways to not spend money where it's not necessary,
Speaker 1: and having found yourself in a content place where you're
Speaker 1: just you're not constantly buying or redecorating or filling your
Speaker 1: home with stuff. Oh yeah, definitely not. And also I
Speaker 1: think part of it comes with age two. I, as
Speaker 1: I get older, UH don't care as much about things
Speaker 1: that I used to care about, and I feel confident
Speaker 1: in not caring. So those are those are things you
Speaker 1: will learn as you budget as well and just from life.
Speaker 1: So let's talk about how to make a personal budget.
Speaker 1: Any in this will work with any of these a little.
Speaker 1: I mean even with the last one, which is literally
Speaker 1: just a kind of an A D twenty. But we
Speaker 1: I don't even know what our percentages are at this
Speaker 1: point because our income barries every month. So even with
Speaker 1: a pay yourself VERST budget or an E D twenty,
Speaker 1: you can still use um this step by step guide
Speaker 1: from the Balance to make your personal budget, and we'll
Speaker 1: go through all six. I do want to say I
Speaker 1: like the introduction in this article where they highlight that
Speaker 1: a budget does not have to be restrictive to be effective.
Speaker 1: And I know that this is often the hesitation and
Speaker 1: the barrier for people when we have this conversation, Jen,
Speaker 1: you and I just talked with a younger woman recently
Speaker 1: who's getting a handle on finances, has more expenses, so
Speaker 1: wants to know more about what should I be doing
Speaker 1: to be tracking because not knowing is making me anxious,
Speaker 1: but yet not feeling like she had the time to
Speaker 1: really get into whatever she can structed in her mind
Speaker 1: as what it means to have a budget. And I
Speaker 1: think that can be so much of our perspective on
Speaker 1: budgeting is it's going to be restrictive, or it's going
Speaker 1: to be a lot of time I'm going to have
Speaker 1: to put in a lot of work. And I just
Speaker 1: want to push back against that idea to say, it's
Speaker 1: not our budgets that are restrictive, it's our income that
Speaker 1: is restricted. And so if we're concerned about budgeting because
Speaker 1: we think that it's going to be restrictive, then I
Speaker 1: would challenge us to say, well, is it possible then
Speaker 1: that I'm spending outside my means? Is that really why
Speaker 1: I'm afraid to get into the nitty gritty of my
Speaker 1: finances and Usually we rip off that band aid and
Speaker 1: it is far less scary than we think it's going
Speaker 1: to be. It's usually the unnamed, unknown, mysterious thing that
Speaker 1: causes worry and anxiety. When we're actually able to look
Speaker 1: at it, name it, that is what reduces that anxiety.
Speaker 1: It takes the legs out from under it. So I
Speaker 1: think a budget can do that. And again, it doesn't
Speaker 1: have to look one way. It can be a lot
Speaker 1: of different things. We can choose different methods, but it
Speaker 1: is about knowing and about having a handle on how
Speaker 1: we are spending and saving and making our money. The
Speaker 1: suspense is always scarier than the actual picture. I think
Speaker 1: about horror movies and it's always the suspense. I can't
Speaker 1: watch horror movies at all. It's the suspense that gets
Speaker 1: me because once I see like the actual monster or
Speaker 1: whatever is actually going on, I'm like, well, this is
Speaker 1: dumb and why do you make these? But the suspense
Speaker 1: gets me so hard, like I freak out, And that
Speaker 1: is what happens with our finances. And the longer it
Speaker 1: goes on, the more the suspense builds. So it is
Speaker 1: one of those rip the band aid off things, and
Speaker 1: it is generally nine times out of ten, never as
Speaker 1: bad as you think it's going to be. And even
Speaker 1: if it is an ugly monster. Yeah, you know what
Speaker 1: the ugly monster looks like now, and you can deal
Speaker 1: with it. The devil, you know, is better than the
Speaker 1: wl you don't. I don't know that that's good. I
Speaker 1: don't know if that's a good idiom to be like repeating,
Speaker 1: but it is valid in this case. Yes, So let's
Speaker 1: go through it. Start us off, Jen, all right, So
Speaker 1: the first is ripping off that band aid, getting all
Speaker 1: your financial paperwork out. So that means your bank statements,
Speaker 1: your investment accounts, utility bills, and it's you know two.
Speaker 1: So all of these should be digital. We should not
Speaker 1: be pulling out papers. You should go paper lists if
Speaker 1: you're not already. So getting all of these things out,
Speaker 1: I find it easier to connect it to something like
Speaker 1: personal capital. You can um connect your your credit cards,
Speaker 1: your debit cards, your investment accounts, all of that. Honestly,
Speaker 1: when you're just starting out, don't worry about your investment
Speaker 1: accounts or retirement or any of that. Let's just look
Speaker 1: at your income and let's look at your expenses. Let's
Speaker 1: start there for first, because when we When we get that,
Speaker 1: then we'll be able to focus on retirement investing more.
Speaker 1: So let's focus on our our income and our expenses first,
Speaker 1: that foundational piece. So pull it all out and really see,
Speaker 1: like what you have going on? How like, and I
Speaker 1: would say for transactions, let's go back ninety days. Let's
Speaker 1: go back ninety days, and I like to copy them
Speaker 1: all into a Google sheet. Then you can sort the
Speaker 1: rows like alphabetically and that will um put the identical
Speaker 1: transactions together, and then you can categorize them from there.
Speaker 1: And so go through ninety days and see what you
Speaker 1: have spent on what over the past ninety days. You
Speaker 1: kind of combined one and three, which is so so
Speaker 1: sorry because we're such X person on us. But really
Speaker 1: I think that all these these steps they don't necessarily
Speaker 1: have to go in a certain order. At least with
Speaker 1: these first few, it's kind of a gathering. So that
Speaker 1: number one in the Google sheet gather, gather, and it's
Speaker 1: like steps one through three is basically gathering, and so
Speaker 1: gathering all of your financial paperwork was one. Number two
Speaker 1: is calculating your income. I mean, gather, gather up whatever
Speaker 1: you're in that money money if you're a W two
Speaker 1: employee and you get a regular paycheck where taxes are
Speaker 1: automatically deducted. This should be a pretty simple step to
Speaker 1: know how much you make every year, every month. Not
Speaker 1: always a half step, but it should be a simple step. Yeah. Uh,
Speaker 1: And certainly if you've got other forms of income coming in,
Speaker 1: whether it's social Security or child support, if you are
Speaker 1: a subcontractor, like a ten ninety nine worker, then gathering
Speaker 1: up what you made the this is definitely where that
Speaker 1: ninety days, I would even say potentially longer than that,
Speaker 1: maybe the past four months of what you made month
Speaker 1: to month. I know that can be a really hard
Speaker 1: thing when your income is variable. So giving yourself a
Speaker 1: good buffer of what has it looked like in the
Speaker 1: past to give yourself a good sense of what will
Speaker 1: it look like going forward conservatively. Of course, we love
Speaker 1: to aim at growth when we're subcontractors or business owners,
Speaker 1: but let's look back to give that trajectory and be
Speaker 1: pleasantly pleased if it ends up being more, and then
Speaker 1: begin to base your budget around a really conservative estimate,
Speaker 1: whether that i it could be the median, or it
Speaker 1: could be budgeting based off of your lowest month in
Speaker 1: the past. Four months, so that you have really a
Speaker 1: nice buffer for yourself. Yeah. And then third, create a
Speaker 1: list of monthly expenses. So this is where we're going
Speaker 1: to alphabetize the transactions on that Google sheet, combine the
Speaker 1: ones that are same, and then categorize them out. I
Speaker 1: would say, no, I mean as detailed as possible when
Speaker 1: you are starting out with this, or if you feel
Speaker 1: like you're restarting, as detailed as possible. You cannot have
Speaker 1: too many categories or or anything like that. It's not
Speaker 1: easy to maintain that. That's not sustainable. And that's okay,
Speaker 1: you're not supposed to sustain that. Just start out with it.
Speaker 1: You know, maybe next month we have a few fewer categories,
Speaker 1: maybe because we're intentionally spending and we can eliminate several
Speaker 1: whole categories. Um, And then month by month we get
Speaker 1: better and better and this budgeting becomes more and more sustainable.
Speaker 1: But yeah, so mortgage payments, car payments, insurance, groceries, utilities, entertainment,
Speaker 1: personal care, and you can we didn't google this, but
Speaker 1: view um can google like hundred budgeting categories. I am
Speaker 1: hunter percent sure if I googled that right now, I
Speaker 1: would in an article with a hundred budgeting categories, which
Speaker 1: is too much. It's an article that shouldn't have been written.
Speaker 1: But I bet you and well she does that. I'm
Speaker 1: going to talk about where we go after we've gathered,
Speaker 1: after we've done steps one through three, then we look
Speaker 1: at fixed versus variable expenses. When you look at all
Speaker 1: these categories and what you've spent over the last ninety days,
Speaker 1: consider what are the fixed expenses meaning mandatory expenses that
Speaker 1: you need to pay and set expenses like what's not changing?
Speaker 1: And then your variable expenses as in the things that
Speaker 1: can change month to month. What is fluctuating within each category?
Speaker 1: For me, that's typically groceries. I mine is so paired
Speaker 1: down at this point. I mean, I do like to
Speaker 1: be in the weeds with my transactions, but my variable
Speaker 1: expenses are just groceries and miscellaneous. Of course, there's tons
Speaker 1: of quote unquote subcategories that you could identify in there,
Speaker 1: but that's all I have. But figuring out what's fixed
Speaker 1: what's variable, that will provide a really good launching point
Speaker 1: to determine where do I have room to make adjustments
Speaker 1: in my budget? If I'm identifying I don't actually want
Speaker 1: to be spending this much or my income can't support
Speaker 1: this kind of spending, but parsing it out in that
Speaker 1: way is a good next step after the gathering stage.
Speaker 1: And I would challenge that there is no such thing
Speaker 1: as a fixed expense. I think all expenses are variable,
Speaker 1: So take with that what you will. Even your mortgage.
Speaker 1: You can refinance, your bills can be lowered, interest rates
Speaker 1: can be lowered. So no, if you have in your
Speaker 1: mind that no expense is fixed, then it can change
Speaker 1: how you alter and lower expenses in your budgets. So
Speaker 1: it's just a mindset shift to have no expense is fixed.
Speaker 1: You can always do something. You can move, you can
Speaker 1: get a different car, like some of these are not
Speaker 1: very super feasible, but there is literally always something you
Speaker 1: can do to lower or eliminate an expense. I love
Speaker 1: that pushback, and I think that's why I like how
Speaker 1: this article also highlights that it's some of those mandatory
Speaker 1: things like we will have to spend money on food
Speaker 1: and shelter, but it doesn't mean that it always has
Speaker 1: to be the same amount we spend. Right, there are
Speaker 1: some mandatory expenses, but nothing is fixed. And there are
Speaker 1: no less than seven articles that have one plus budgeting categories,
Speaker 1: So take your pick. I'm sure they are all identical.
Speaker 1: Well done. So the next step, step five, is to
Speaker 1: total your monthly income and expenses, and this is where
Speaker 1: they recommend the coming up and singing gross. I again,
Speaker 1: I think a zero based budget is best, especially if
Speaker 1: you're starting out and you don't know what your percentages are.
Speaker 1: These percentages, they are arbitrary, They are not customized, and
Speaker 1: you are a custom person, So make sure the only
Speaker 1: thing you need to make sure is that your expenses
Speaker 1: are less than or equal to your income. And if
Speaker 1: we're including savings, we want them to be exactly zero based,
Speaker 1: but we want those discretionary and mandatory expenses to be
Speaker 1: less than your income. And you can make your own percentages.
Speaker 1: And if after you've done step one through five and
Speaker 1: you're looking at this monster, but it's not such a
Speaker 1: scary monster anymore, or it's a shining gem of a jewel.
Speaker 1: Either way, it's worth now looking at any adjustments that
Speaker 1: need to be made to any of the expenses, like
Speaker 1: Jen highlighted, whether it's the mandatory expenses or the variable expenses.
Speaker 1: Considering now that you're looking at it and the worry
Speaker 1: and anxiety is taken away and we can see it
Speaker 1: all in front of our eyeballs. What needs to shift
Speaker 1: are their categories where I might be spending far more
Speaker 1: than I thought I was spending and it doesn't need
Speaker 1: to be that much because I don't actually value it
Speaker 1: that much, or wow, my income cannot continue to support this,
Speaker 1: or I want to be putting more towards savings or
Speaker 1: retirement or debt payoff. That's when we start to change
Speaker 1: and shift how much we're spending. And that's where we
Speaker 1: implement all of the other frugal tips that you have
Speaker 1: in all to two hundred seven other episodes in the
Speaker 1: archives of how to Do That with two hundred less
Speaker 1: Ways to Save Money, Frugal Friends podcast dot com, slash
Speaker 1: e book, and We've got you, We've got you. Just
Speaker 1: do it so that that's that you. You look at it,
Speaker 1: you make decisions, you make changes, you keep going, you shift,
Speaker 1: you adjust, you find new methods that work for you.
Speaker 1: But all along the way, you are growing the skill
Speaker 1: set and muscle of knowing the money coming in, the
Speaker 1: money going out, making those intentional values based decisions, and
Speaker 1: getting more and more confident content. I love that this
Speaker 1: the six steps to make a budget. Actually are only
Speaker 1: the first half of this article. The other half is
Speaker 1: how to use your budget review and tweak your budget
Speaker 1: and stick to your budget because the secret to success.
Speaker 1: I know, you hear these like debt payoff stories and
Speaker 1: stuff and they're like, what is the secret to your
Speaker 1: success and like getting on a budge it. And I
Speaker 1: was like, well, that's only half the story because sticking
Speaker 1: to the budget is you can make a budget every month,
Speaker 1: but if you don't stick to it, you're not going anywhere.
Speaker 1: That making the budget is only half. It's not even
Speaker 1: half of the story. It's like one tenth of the story.
Speaker 1: And I will say I think having a budget will
Speaker 1: also reveal where we might have an income need. I know,
Speaker 1: we talk about changing expenses and that's a great step
Speaker 1: and it's a low hanging fruit, but we also say
Speaker 1: make adjustments to your income wherever possible. If you're not
Speaker 1: able to get at the goals that you want quick enough,
Speaker 1: or you're not able to afford some of the even
Speaker 1: mandatory expenses that you have, then this is where we
Speaker 1: want to look at growing our skill set, knowledge base,
Speaker 1: advocating for ourselves for higher pay whatever the case is,
Speaker 1: we don't have to stay stuck either in how much
Speaker 1: we're making. Yeah, we're not advocates for racing to like
Speaker 1: having your spending ber race to the bottom to pinch
Speaker 1: every penny and spend as little as possible. We we
Speaker 1: do not advocate for that. We love spending money. We
Speaker 1: just love more like we love what we're spending on it.
Speaker 1: We don't spend to fulfill any like emotional needs or
Speaker 1: as an activity out of boredom or anything like that.
Speaker 1: We love the things that we are spending money on.
Speaker 1: And so that is a huge shift. It becomes so
Speaker 1: much easier to stick to your budget when you know
Speaker 1: you love the things you're spending money on, and you
Speaker 1: have your list of things that you don't love and
Speaker 1: you are confident enough to not spend money on them.
Speaker 1: You've created boundaries so that you can say no to
Speaker 1: family and friends when they ask you to spend money
Speaker 1: in those places. So it is a budgeting is not
Speaker 1: just numbers on paper or in an app. It is
Speaker 1: a refined ing of your character to be able to
Speaker 1: say no to self, no to others, and even yes
Speaker 1: to self and yes to others where it may have
Speaker 1: been difficult to before. So don't get discouraged if you're
Speaker 1: trying this and in three months you feel like you're
Speaker 1: still sucking at it, Because if you can change your
Speaker 1: personhood in like three months, that's awesome. We would love
Speaker 1: to interview you on this show because it is. It's
Speaker 1: almost impossible. But yeah, so just be encouraged that half
Speaker 1: of it, more than half of budgeting, is this process
Speaker 1: of learning how to use it and learning how to
Speaker 1: execute it. Do you know what else? I love? And
Speaker 1: it's not hard to execute. If it costs money, I'd
Speaker 1: love spending money on it. The Villa of the week.
Speaker 1: That's right, it's time for the best minute of your
Speaker 1: entire week. Maybe a baby was born and his name
Speaker 1: is William. Maybe you paid off your mortgage. Maybe your
Speaker 1: car died and you're happy to not have to pay
Speaker 1: that bill anymore. To bills, Buffalo bills, bill claim. This
Speaker 1: is the bill of the week. Hi, jenn and Jail.
Speaker 1: This is Lindsay and I paid off debt with my
Speaker 1: husband and we're from Pittsburgh, p A. We paid off
Speaker 1: about forty five thousand dollars and it took us two
Speaker 1: to two and a half years. We were each making
Speaker 1: about forty to forty five thousand dollars during that time,
Speaker 1: and it was all student loans, credit cards, and a
Speaker 1: car payment. And what made us decided to start paying
Speaker 1: off debt was that we were I was turning thirty
Speaker 1: and we just needed to get our lives together. Now
Speaker 1: that we don't have the debt, we can cash flow
Speaker 1: vacations and we're putting a lot of money towards our
Speaker 1: for a one case. I would tell anyone paying off
Speaker 1: debt that it's totally worth it, and once you get
Speaker 1: to the end, you get those results forever. Thanks love
Speaker 1: the podcast, Lindsay, Ah, this is amazing. Thank you so
Speaker 1: much for sharing this with us. We love hearing your
Speaker 1: debt payoff successes. And it is a monthly income for
Speaker 1: some people or is that monthly some people, right, But
Speaker 1: for most people it's a yearly income. So it's just
Speaker 1: so crazy to think that you you took essentially a
Speaker 1: year out of your life to pay this off in
Speaker 1: just two and a half years, and we're so proud
Speaker 1: of you. Lindsay well done. I love how you called
Speaker 1: out the need to just be an adult and the
Speaker 1: way that you worded that debt pay off is a
Speaker 1: forever result. I love that description and how you can
Speaker 1: enjoy that reality for the rest of your lives and
Speaker 1: some of the ways that you've highlighted that's been true
Speaker 1: for you. Cash flowing vacations, more money towards retirement. It's
Speaker 1: it is that gift that keeps on giving. So well
Speaker 1: done celebrating with you, Lindsay from Pittsburgh. Absolutely, if you
Speaker 1: want to submit your bill of the week, visit Frugal
Speaker 1: Friends podcast dot com slash bill to leave us your
Speaker 1: bill or your debt payoff celebration And now it's time
Speaker 1: for lightning round. It's like a game show. So today
Speaker 1: we are sharing what budgeting method did you start with
Speaker 1: and what are you using? Now? I forget what game
Speaker 1: show that's from, but I really or maybe it's not.
Speaker 1: Maybe it's from a sitcom. I don't know, if you know,
Speaker 1: if you could discern that, let us know. So I
Speaker 1: started with, obviously, the zero based budget um I have
Speaker 1: in my work as a personal finance writer. I have
Speaker 1: tried minus the last year two every budgeting app that
Speaker 1: has come onto the market. I have written story after
Speaker 1: story about them, review after review. I've just downloaded so
Speaker 1: many budgeting apps and I have not found one that
Speaker 1: I love. If I'm being completely honest, I really i've
Speaker 1: been using When I do do a budget, a regular budget,
Speaker 1: I'll just use a Google spreadsheet. But I've always been
Speaker 1: on the search for a budgeting app that I could love.
Speaker 1: But I have to come to the conclusion that maybe
Speaker 1: it's not for me. Maybe that's why I don't like.
Speaker 1: And we get asked all the time, what's your favorite
Speaker 1: budgeting app? We can never answer them because we basically
Speaker 1: basically we don't use apps, and so I've I've given
Speaker 1: up for the past maybe a year or so. So there.
Speaker 1: I'm sure there are a lot of new budgeting apps
Speaker 1: that are on the market that I have not tried,
Speaker 1: but they all when I see the press releases for them,
Speaker 1: they all sound pretty much the same. So yeah, I
Speaker 1: mean that's um. I started with zero based budgeting on
Speaker 1: an app and now I just wing it. Here you go,
Speaker 1: Jen Smith, she wings just wings it. Uh. But I mean, yeah,
Speaker 1: we are out of place. If we were out of
Speaker 1: place where we were not saving every month, and so
Speaker 1: this also comes down to the fact that we do
Speaker 1: not have any financial goals that we are trying to
Speaker 1: reach fast. So that's a big difference we've reached our
Speaker 1: fast financial goals. We paid off our debt, we saved
Speaker 1: our emergency fund, we built up two hundred thousand in
Speaker 1: our eat like a hundred k each in our retirement accounts.
Speaker 1: So we hit these milestones and we got to the
Speaker 1: place where we're like, okay, we can coast now at
Speaker 1: this savings rate and be okay. And so we got there.
Speaker 1: We decided this is our enough, this is when we'll
Speaker 1: hit it. And when we hit it, we started to
Speaker 1: take an interest in different things. So we we moved
Speaker 1: on and moved up. We started refining other parts of
Speaker 1: our lives because we had refined the financial part, and
Speaker 1: so that's where we currently are. Then you just have
Speaker 1: such a good handle and sense on how much do
Speaker 1: you make that's that's not elusive to you, and that
Speaker 1: you know for sure you're not spending that amount because
Speaker 1: you're hardly spending, so you don't have and what you
Speaker 1: do spend on you know that you're spending intentionally and
Speaker 1: within your values, so it doesn't you don't have to
Speaker 1: be in the weeds if you don't want to be
Speaker 1: any stage. And when we say like hardly spending, like
Speaker 1: I'm sitting here next to a latte that I purchase.
Speaker 1: You know, like I spend money, It's just that I
Speaker 1: don't spend it on things that I don't value. Like
Speaker 1: I make sure I really value everything I spend money on.
Speaker 1: And spoiler alert, if you value everything, you don't actually
Speaker 1: value anything. So there are very few things that I value,
Speaker 1: and I spend without hesitation in those things. I spend
Speaker 1: on them whenever I want, however I want. Wow, you're
Speaker 1: sounding like a fancy friend. Now it's my eleanor coming out.
Speaker 1: So for me, I, um, I started from the bottom
Speaker 1: and I'm still here. That's not totally true. I just
Speaker 1: wanted to say that, So I'm just meaning that my
Speaker 1: technique really hasn't shifted that much, but my skill in
Speaker 1: implementation definitely has. So I will say, as I mentioned
Speaker 1: earlier in this episode, I did begin using the cash
Speaker 1: envelope technique. Not it's not like you said it's on
Speaker 1: a budgeting method. It is a technique to help get
Speaker 1: me connected to the transactions that I'm making. And it
Speaker 1: did help, and I was writing everything down as it
Speaker 1: happened and experiencing cash leaving me. But now I don't
Speaker 1: need that technique to keep me on track anymore. I
Speaker 1: would say my budgeting method most aligns with the first
Speaker 1: method that we talked about in that first article, or
Speaker 1: where we look at estimated expenses and actual expenses, what
Speaker 1: you actually are estimated spending actual spending. That is a
Speaker 1: lot like how my spreadsheet looks. It's very paired down.
Speaker 1: There's only four or five categories. I do it based
Speaker 1: on payment, so we now get paid bi weekly. So
Speaker 1: that's how I budget based on my bi weekly spending,
Speaker 1: my bi weekly earnings, and I like to I like
Speaker 1: to be in the weeds. I know that that's not
Speaker 1: for everybody, but I like to look at every expense,
Speaker 1: that expenditure that we make, every trans action. I will
Speaker 1: say I found a lot not a lot, but a
Speaker 1: good amount of errors over the over the years of oh,
Speaker 1: this should have been returned to us and it wasn't,
Speaker 1: so I make that phone call, or we were charged
Speaker 1: in error for something, or we might have been compromised.
Speaker 1: So there's been a decent amount of times where keeping
Speaker 1: my pulse on it that strongly has helped me to
Speaker 1: know that I didn't actually spend that. I have a
Speaker 1: really good example of that. We'll talk about that in
Speaker 1: the aftershow something just recently happened the aftershow. Oh so anyhow,
Speaker 1: I I like it. It has worked for me all along.
Speaker 1: It's almost a cathartic experience for me bi weekly where
Speaker 1: I sit with a glass of wine or a cup
Speaker 1: of tea and and I go through it and it
Speaker 1: really helps us to stay on top of things and
Speaker 1: continue to make those mindful, intentional decisions with where do
Speaker 1: we need money to go next in the next two weeks.
Speaker 1: I do feel lead and this is mainly because a
Speaker 1: company sent me a budget binder that maybe I should
Speaker 1: try do an experiment with doing traditional paper budgeting, giving
Speaker 1: it a try. They sent me this very cute budgeting
Speaker 1: minor and if I like it, I'll tell you who
Speaker 1: it is because it's cute. So I feel like because
Speaker 1: I was sent that for free, m in the weeds. Cute, Yes,
Speaker 1: and I would like to hold it and hold it.
Speaker 1: I would like to carry it around in my purse
Speaker 1: and I guess, hold it, yeah, be seen with it
Speaker 1: with it? So yeah, and if you want more so,
Speaker 1: we actually have an entire beyond the basics budgeting like
Speaker 1: lesson in UM Personal Finance Simplified, which is our course
Speaker 1: in the Financial Freedom Mentorship. So we talk a lot
Speaker 1: about executing the budget. I mean that's a bad term,
Speaker 1: but like doing the budget, but implementing the budget. So
Speaker 1: that's definitely UM. There's way more we could go into,
Speaker 1: but these are the basics. So thank you so much
Speaker 1: for listening. I hope that you got something out of it.
Speaker 1: And we're going to switch it up today instead of
Speaker 1: reading one of your kind reviews about us, we actually
Speaker 1: wanted to celebrate one of our Financial Freedom Mentorship member wins.
Speaker 1: So we didn't listen to our Bill of the week
Speaker 1: until we listened to it just now and it just
Speaker 1: happened to be a debt payoff story. But we want
Speaker 1: to celebrate another debt payoff story from Christie in our mentorship,
Speaker 1: who paid off her credit card debt, and so this
Speaker 1: was what she posted in the group. She said, I
Speaker 1: joined this group to hold myself accountable and to learn.
Speaker 1: I absolutely love the podcast. When I joined two months ago,
Speaker 1: I stopped using my credit cards, I quit smoking, I
Speaker 1: stopped Starbucks runs, etcetera. She said, I have smoked on
Speaker 1: and off for years. I joined with having nine thousand
Speaker 1: in credit card debt. The only other debt we have
Speaker 1: is our house. I don't consider that a debt because
Speaker 1: when we still will make a profit. My hard working
Speaker 1: hubby came home and stead he got a bonus. I
Speaker 1: had no idea, and I have paid off the credit card.
Speaker 1: I'm still watching my spending behaviors because I do tend
Speaker 1: to overspend to fill that void board, lonely, depressed, etcetera.
Speaker 1: I enjoy reading other comments and info. We can do
Speaker 1: hard things, yes, Christie. I love that wrap up. We
Speaker 1: can do hard things and then experience the benefits and
Speaker 1: celebrations of it. What an amazing, beautiful gift to learn
Speaker 1: of an increase of income for your household and not
Speaker 1: have debt. Absolutely, so much more freedom with what you
Speaker 1: can do with that money. Congratulations, Christie. We're celebrating your
Speaker 1: win with you. Yes, So thank you all for listening.
Speaker 1: If you want to check out the Financial Freedom Mentorship,
Speaker 1: you can do that at Frugal Friends podcast dot com
Speaker 1: slash f f M. See what's going on in there,
Speaker 1: see you next week. Frugal Friends is produced by Eric Sirian.
Speaker 1: So all right, went out to a restaurant with some friends.
Speaker 1: We got the tab because it's easier that way, and
Speaker 1: Venmo exists and I do use a credit card now
Speaker 1: to get them points. Maybe I never carry a balance,
Speaker 1: so that works for me now that I don't do
Speaker 1: the cash envelope system. Well, the restaurant had the point
Speaker 1: of ale like a mobile point of sale, like it
Speaker 1: was like chilies or something. Well it wasn't chilies. It
Speaker 1: was a nice, fancy leg Okay, so they brought it
Speaker 1: over and it was more just like a credit card
Speaker 1: point of sale, so you couldn't see the print out,
Speaker 1: but it did give a total. But the waitress is
Speaker 1: standing right there, so I'm not seeing the whole print
Speaker 1: out of all of the expenses, and I'm kind of
Speaker 1: still in the middle of conversation, so I just give
Speaker 1: her my credit card. Thankfully, I did get a receipt.
Speaker 1: I don't always do that because I'm like, I'll see
Speaker 1: the transaction on the statement. But I did ask for
Speaker 1: one because I'm like, that seemed a little high for
Speaker 1: being here for happy hour for four people. So it
Speaker 1: was in my review, my bi weekly review of our
Speaker 1: budget to to realize, yeah, that was a lot of money.
Speaker 1: I need to go back and look at that, reviewed
Speaker 1: the receipt and found like eight additional charges in error
Speaker 1: and because I'm so aware of our spending and our
Speaker 1: ordering and how like. Even it was a week a
Speaker 1: week or two later, and I still remembered we did
Speaker 1: not get all those cheeses or that wine. So I
Speaker 1: called up the place, and thankfully, again because I happened
Speaker 1: to have the receipt, I was able to list out
Speaker 1: exactly what was listed on the receipt that we didn't get. Thankfully,
Speaker 1: I didn't have to advocate for myself too hard. I
Speaker 1: was like ready for a fight, like I know we
Speaker 1: didn't get these things, but he was able to see
Speaker 1: on their end when I called the restaurant that, however,
Speaker 1: their system is set up. When we ordered a second
Speaker 1: one of our cheeses, it was similar to what the
Speaker 1: table next to us ordered, so somehow there was a
Speaker 1: computer error where then all of their entire table order
Speaker 1: got put onto our check. So it was like an
Speaker 1: additional sixty dollars, and they refunded me right away, although
Speaker 1: they didn't refund me on the tip, but I wasn't
Speaker 1: going to push back on that because we did tip
Speaker 1: on like way more than what we actually thought. However,
Speaker 1: I could have walked away having spent an additional sixty
Speaker 1: dollars and not needing to. If I wasn't paying as
Speaker 1: close of attention, dang, yeah, well I probably won't be
Speaker 1: frequenting this fancy restaurant, I know. And it does make
Speaker 1: me wonder did the table next to us have to
Speaker 1: pay too or did they realize once we left, like, oh,
Speaker 1: your tap just ended up getting paid for. It's so bizarre.
Speaker 1: So be careful with those wandering point of sales systems
Speaker 1: at the restaurant. I guess maybe that's the takeaway. And
Speaker 1: even though it feels like this kind of on the
Speaker 1: fly transaction, pay attention to what you're buying. Pay attention
Speaker 1: to what you're buying. I probably would have looked at
Speaker 1: it and been like, oh oh no, oh no, and
Speaker 1: then I would have been like, I don't know what's
Speaker 1: on here, but I'm saying it was just like, you know,
Speaker 1: in the middle of conversation and she's there and here
Speaker 1: you go and search your card, and so it was
Speaker 1: like in passing, Yeah, oh wow, that seems like a
Speaker 1: high number. Yeah. I don't go out to fancy restaurants often,
Speaker 1: and I am hyper aware of checking before I pay
Speaker 1: because I worked at restaurants and so I know Mistakes
Speaker 1: get made, Yeah, but that has never happened in my
Speaker 1: Anybody getting somebody's just transfer, somebody's table just transfers over
Speaker 1: to yours. That's bizarre, happy accident for them, or the restaurant,
Speaker 1: or that woman who got a massive ship. She was
Speaker 1: great though, so I didn't I don't want to speak
Speaker 1: poorly of this waitress. She was awesome, and I think
Speaker 1: it was a genuine mistake. We got our money back,
Speaker 1: but pay attention.