April 15, 2025 • 24 mins
What do you do when your spending exceeds your income? Join Canna Campbell - a financial planner for 20 years - and Fear & Greed's Michael Thompson as they deal with a rather uncomfortable reality of budgeting.
The information in this podcast is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.
Canna Campbell is a Corporate Authorised Representative and Corporate Credit Representative of Wealthstream Financial Group Pty Ltd ABN 35 152 803 113 Australian Financial Services Licensee AFSL 412079.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to How Do They Afford That, the podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed business News, and as always I'm with
Canna Campbell, financial planner, founder of Sugar Mama TV, the
financial literacy platform on podcast, books, Instagram, threads, TikTok, YouTube
and more. Hello Canna, Hello, how are you? I am good?
(00:22):
Thank you. Today's episode is about budgeting in a way,
and it's actually pretty embarrassing. I feel like I embarrassed
myself on this show a lot more than you do.
I've mentioned in a previous episode how we recently saw
a financial planner right and before that meeting, we wanted
to go into it up to date with everything to
(00:43):
make sure that we were informed and we had all
the information ready to go, so that it was going
to be a really detailed discussion. And it was a
great discussion. But as part of that preparation, we revisited
our household budget just so that we had our info
in place, and the budget gave us a shock. It
gave us quite a significant surprise because obviously life has
(01:08):
gotten very expensive. Interest rates are high, mortgages is expensive,
kids and school and a whole bunch of kind of
other things going on that's all cost money. And our
household expenses have crept up and up and up and
up to the point that on paper at least, and
I'll explain kind of how that happened, but on paper,
(01:29):
at least, we were spending five hundred dollars per week
more than we were bringing in, right, Yeah, it was.
It was a bit of a shock, which explained then
why suddenly we'd been eating into our savings and into
our emergency money and all of these things. It hadn't
(01:50):
hit crisis point or anything yet, because when I talk
about it, we were spending that on paper, it was
because a lot of big expenses that we had been
budgeting for, and so we in the spreadsheet having been
budgeted for hadn't actually come around yet. So they were
things like kind of car rego and car insurance and
annual home insurance and all of these big ticket items
(02:11):
that would come in later in the year, but we
were allocating a certain amount of money for them each week,
notionally on this spreadsheet. That's why it then looked like
we were actually spending five hundred dollars a week more
than we're bringing in. I want to talk to you
about this today, about this idea of kind of lifestyle
creep budget creep. It's a problem. I suspect it's not
(02:32):
a unique problem to our kind of household. What do
we do? Please put me out of my misery and
assure me that this is a common problem.
Speaker 2 (02:41):
All right, stop right there. You do not need to
beat yourself up about this. It is really common.
Speaker 1 (02:47):
This is good news. I'm sorry, bad news to anyone
else's I'm sorry.
Speaker 2 (02:52):
Is in the same boat as you.
Speaker 1 (02:54):
But welcome aboard. Come on to this sinking ship.
Speaker 2 (02:57):
Particularly right now. You know the high cost of living,
rising interest rates, and look if look at your situation,
You've got two young children, you've got medical expenses, and
we've got general inflation. Everything is just so expensive. So
you know, those variables alone make it very easy for
this to happen. And the other thing is people don't
(03:18):
actually realize until their savings starts dwindling or they can't
come up with the money to cover a big expense,
like you know when your car read JEW and CTP
comes at the same time it might be saying two
thousand dollars. They didn't realize it until that bill comes in,
that we've got a problem with our cash.
Speaker 1 (03:33):
Flow, and that was that was it for us Catalyst. Yeah,
the fact that there was this the savings had provided
a buffer and the emergency money had provided a buffer.
That probably meant that we didn't realize as soon as
we would have if those big expenses had come in
and suddenly just drained every account we have.
Speaker 2 (03:54):
Well that's why I recommend a couple of different accounts,
but we'll talk about that later. So, and the other
thing is we've got you've got can't forget about, like
we live in such a cashless society. We are tapping
our phones. We don't even get our cards out of
our wallets anymore. Most of us just tap on our phones.
So we're living in this like digital payment world where
we can very easily overspend without even realizing. And that's
(04:15):
on top of you know, after pay and you know
all those subscriptions that come out of our accounts or
for our credit cards as well. And then we've also
got constant distraction and temptation around us. So it is
so easily done thank you. In fact, I bought a
like I got certain ad on Instagram the other day
(04:35):
and bought a cellul light massaging device which is still
sitting in the box three weeks later. And here you go,
And that was not in my budget.
Speaker 1 (04:45):
Man, I ask how much it was?
Speaker 2 (04:47):
Well, one hundred and eighty dollars. I'm really embarrassed to
admit this, but it's not uncommon.
Speaker 1 (04:53):
Okay, that does make me feel better. Just once again,
I'm sorry. I'm just trying to bring people down to
my level.
Speaker 2 (05:00):
Back there. Even they can come even lower down to my.
Speaker 1 (05:02):
Level that you are very financially savvy, but even you
can kind of get drawn into making what sounds a
little bit like an impulse purchase.
Speaker 2 (05:10):
Jumped on it. I was like, oh, I'll give this
a go. I want this, and it's so easy. I
clicked on my phone. All I had to do is
face recognition and even entering my credit card details and
off I go on my doorset was this device that's
still sitting.
Speaker 1 (05:24):
Yeah, when you certainly have Amazon kind of one click purchase,
like can you just press one button and it's done
and you're like, oh boy, that it's arriving tomorrow.
Speaker 2 (05:32):
If you've got Amazon Prime.
Speaker 1 (05:33):
That was too easy, wasn't it? Okay, this kind of
expense creep kind of thing, because it's not really lifestyle creep.
It's not like in the traditional sense where we've talked
about where you get a pay rise or something and
your lifestyle just kind of gets a bit more extravagant
and you spend more and it fills that gap that
that that kind of buffer that you that you had.
(05:54):
It's not that. It's almost kind of like a budget
creep kind of thing, isn't it is it? Is it preventable?
How easily preventable is it?
Speaker 2 (06:01):
Well, look, okay, it is preventable. It's not necessarily easily fixed.
So yes, you are going to have to be a
lot more pay a lot more attention to your budget,
but not just your budget, your cash flow and tracking
your transactions. It's great to have a budget, but if
you're not sticking to the budget. But the budget is
just basically a flimsy piece of paper, so you need
(06:22):
to track that you are sticking to the budget. And
this is why I teach a cash flow system for
budgets in the Sugar Mamant Budget and Cashow Academy is Also,
you're gonna have to be disciplined. You're going to have
to keep your eye on the budget on a regular basis.
I know for myself, I check our budget and our
cash flow and transactions every Friday and every Sunday, twice
(06:43):
a week. Twice a week. Yeah, because there's so many distractions,
Like look at me, I went and bought a one
hundred and eighty a little silly light machine that, for
the record, really hurts to use.
Speaker 1 (06:52):
I'm going to be honest, it sounds it sounds overwhelming,
like that sounds like it is just a.
Speaker 2 (06:58):
Stop right there.
Speaker 1 (06:59):
A lot of work.
Speaker 2 (07:00):
So because because I'm checking it regularly, it literally takes
me two minutes. I can do it, obviously not whilst
driving the car, but I can do it in the
car waiting at school pickup. And because I'm checking it
so often, I don't need to go it back through
a month's worth of transactions. I'm literally going back through
what we spent on the weekend on Sunday afternoon or
Sunday morning, and what we spent between Monday to Friday.
(07:20):
But I'm checking it on Friday, so it literally takes
me a few minutes.
Speaker 1 (07:24):
And so what you're then comparing that against your budget, Yes,
to make sure that you haven't overspent within a certain category.
Speaker 2 (07:30):
Yes. And if I see something where I've slipped up,
like the silly light machine, I know, Okay, well, I
need to trim off other areas within our budget to
help make up for that whoopsie that happened the other week.
So it means that things don't spiral out of control
and compound, because if I was checking it at the
end of every month, you know, that could mean that we,
you know, don't have the right amount of money in
(07:53):
our account to pay for the groceries that week. That
could be disastrous.
Speaker 1 (07:56):
Yeah, I don't mean to be so negative. I'm bringing
a lot of neg Well, I don't mean to be,
but I'm just naturally negative on this one in that
it's all well and good to say, then just trim
in other areas. But what if everything else is already trimmed.
What if you are kind of just going, okay, well,
we've cut everything else. We've kind of we've cut back
(08:16):
to the kind of bare bones. What then, like.
Speaker 2 (08:21):
It's trying to return the sea limits, it's just checking
the return to policy. Okay, No, like and obviously this
is the problem, and that's where you go, all right,
what can I do to then bring in some money
to replace that one hundred and eighty dollars that I
just literally stupidly And you should never beat yourself up.
We're all trying our best, But how do I replace
that money? Because you know you may not be able
(08:42):
to find the X amount of dollars you know from trimming? Okay,
well I won't. I'll make sure we you know, don't
buy meat this week. We'll have a vegetarian dish or
you know we we normally maybe want some month go
up for restaurant to dinner. We won't be doing that.
There is sometimes you just can't do that.
Speaker 1 (08:56):
And that's where the discipline comes in.
Speaker 2 (08:57):
And that's why that awareness and also that I will
not go and do that again. Every time I see
that box, I beat myself up. I'm so frustrated myself
for being silly. And of course, again like it's not
about punishing ourselves, it's about learning. And I can safely
say and probably say, I have not want anymore things
off Instagram since.
Speaker 1 (09:18):
I want to get to some more of those kind
of practical steps, because that's a really good point about
kind of tracking your transactions and comparing them against your budget.
But just in terms of this idea of not beating
yourself up about it, this and the difference between kind
of lifestyle creep and essentially just the rising cost of living,
(09:40):
because there is a difference between those two.
Speaker 2 (09:43):
It's a big difference when people get them mixed up.
I think they're the same thing. They're not. So lifestyle
creep is like earning more but spending more, so you know,
it'd be nice to have that, so I'm going to
buy it. And so when we earn more money, two
things tend to happen. Typically we either buy the same thing,
but the more expensive version the same thing, so we
you know, we don't we buy maybe a more expensive car,
(10:04):
or we buy more expensive clothes or accessories or makeup,
or we go and buy more of the same things.
So that's the lifestyle creep. And often it's disguised as
you know, self care or treating yourself or working so
hard as a reward. And you know, it can actually
be avoidable with having awareness and intentional spending, but also
(10:26):
having some financial goals to actually work on and direct
your energy and focus to and if you go and
do spend things using cash at all times, the rising
cost of living is different. So that's where those same
essential expenses, you know, the rand or mortgage, or the
grocery bill, utilities, childcare, they are increasing without any necessary
(10:48):
upgrade or value add to your lifestyle. And frustratingly, you know,
this is the hardest thing about the rising costs of
living is sometimes there, most of the time they're completely
out of your control. So when inflation kicks in and
you've got interest rates on the rise, it makes things
really challenging and incredibly stressful because your dollar doesn't stretch
(11:10):
as far and there's nothing left over sometimes, so you've
really got to adapt and adjust your budget, not just
cut out luxuries. You're in a fortune position. If you
can cut out luxuries.
Speaker 1 (11:21):
I reckon you've hit the nail on the head there
with the fact that this is frustrating, because it seems
frustrating for so many people that they are working and
working and working as hard as they possibly can, right
and they are trying to be responsible with their money
and trying to kind of save money where they can,
and yet they are still having to do the grocery
(11:42):
shopping and they seem to be getting less and less
and less for the money that they have to spend,
and it just feels as though no matter what you do,
you just can't get ahead.
Speaker 2 (11:51):
Yeah, it's like you're just constantly treading water, but only
just keepping your head aub off water. And it's exhausting,
it's draining, it takes a toll on your mental health,
and it just gets hard to see light at the
end of the tunnel.
Speaker 1 (12:04):
All right, now that everyone's feeling nice and miserable, we're
going to take a quick break, Probably the worst time
to take a quick break. But on the other side,
the promise is that we've got some more tips, yes,
and some more advice on how to turn that situation around.
Speaker 2 (12:16):
I'm going to share some hacks.
Speaker 1 (12:17):
Well, great, we'll be back in a second. We are
talking about budgeting and the rising cost of living and
this realization that on paper, at least our household was
spending five hundred dollars more than we were earning a week.
(12:38):
Because of all of these expenses, we want to know
the hacks, the trip, the tips and the tricks and
things to try and get this back under control. We
talked about the first step is the first step to
really just make sure your budget is accurate, but then
to track your spending. A case is that step number one.
Speaker 2 (12:54):
Okay, Step number one is more actually about your mindset.
Speaker 1 (12:57):
One knew it was going to be about mindset, And
as soon as started talking, I'm like, I've definitely stuff.
Speaker 2 (13:01):
This stuff is going to be no to your credit.
You have actually just jumped ahead, which is my Ford thinker.
So I actually think you just need to acknowledge the numbers.
You know, five hundred dollars per week is a lot
of money. Think about that's over two thousand dollars per month,
and think about that over a year.
Speaker 1 (13:24):
Yeah, there's a lot of money.
Speaker 2 (13:25):
That's a new car.
Speaker 1 (13:26):
Car.
Speaker 2 (13:27):
Yeah, So you've got to take this. That is your
reason for taking this very very seriously. You've got to
go beyond the budget. You've actually got to start tracking
your spending and tracking those transactions for at least the
last three months. You can really see what's going on.
And this is a very confronting experience because you and
I say this all the time. We really downplay, including myself,
(13:49):
how much money we really do spend. We like to
tell ourselves, oh, look, I'm pretty good with money. I
don't buy this, I don't buy that. But when you
look at your transactions, it off and tells a very
different story if you have a deficit, particularly like the
one you've got, So you need to then obviously identify
the essential and the non essential spending and cut out
(14:10):
those the leaks to the bucket, so the subscriptions, the takeouts,
that spontaneous shopping like cellulin machines.
Speaker 1 (14:19):
If only it was as easy as kind of having
something sitting there that you're like, okay, this was kind
of one of those things. But all of a sudden
you're looking at kind of all of these things like
they have value, they have purpose. But so it's about
making some hard decisions. How do you make those cuts though,
without feeling deprived that you were just cutting all of
the joy and the important stuff out of your life.
Speaker 2 (14:39):
Well, this is why I say, look at the reality
of the numbers. This is quite serious. You know, that's
a large deficit and it's only going to compound and
get worse with the lifestyle creep and you know, the
rising cost of living. So by having that, taking this
serious is not about depriving, It's actually about fixing your
financial well being, which something to feel proud, to feel
(15:01):
empowered to actually step up and take ownership and know that, Okay,
we're going to fix the hole in this bucket so
that we're not put in a financially compromised or putting
ourselves in financial jeopardy because we're blowing money that we
really shouldn't be blowing and we don't actually really have.
We're going backwards financially. So it is not about depriving.
It's about getting real and getting authentic as to what
(15:25):
your family really need and how you can creatively find
ways to save money.
Speaker 1 (15:30):
How do you keep your family on board then with
a leaner budget like that.
Speaker 2 (15:36):
So communication, I think you know and I don't hold
back with Obviously I'm not going to go dump our
financial worries on my children, but I let the children
know we have a budget and this is why it's
important that we stick to it, because we don't want
to stress each other out. We want to make sure
that we have money for Christmas, time to buy gifts
that we can afford, to be able to throw a
(15:56):
birthday party. So everyone understands their all in the position
in the family in making us all accountable and obviously
you're also there's an element of financial for the children.
They can benefit from this as well. Obviously you want
to go and to stress them out and make them anxious,
but empowering them to be a part of this. You know,
(16:17):
my children, they love Kmart and I've started to say no,
we're saving up to make to do things, special things
to the house. So now they tell me off for
spending money and make me accountable. So it's become a
really nice kind of bonding experience. So and just because
you can't get takeout doesn't mean the fun is gone.
I mean you can do picnics, you can have friends over,
(16:41):
you can you know, do something. Maybe it's not once
a week getting a take out, it's once a month.
So you've been then value and honor that special treat
even more so, our society is filled with this over consumption.
And I know there are a lot of people who
are not doing that and doing it tough and hon
a really tight budget. But we need to be honest
with us ourselves. And if we go in with the
(17:01):
mindset of this is going to be this is going
to suck, this is going to be boring and dull.
I can't have this. I can't have that. That's not
going to service in any way, and it's not going
to make this process enjoyable, and we're probably not going
to see the results were capable of achieving. But if
you go all right, there's a bit of short term
pain because we need to fix this. But once we've
fixed it, we'll be back on track again and we'll
see our emergency money rebuilding and we'll be able to
(17:22):
start setting some really exciting goals like a regular savings
plan for a holiday overseas every year. So you've got
to look to the big picture and see the light
at the end of the tunnel. Short, short term pain,
long term gain.
Speaker 1 (17:33):
Okay, when this is my last question, when is cutting
back not enough? When do you need to actually just
go okay, we need to rethink our financial goals here.
Speaker 2 (17:46):
Yeah, and that is when you can't take away anymore.
You're down to the bare bones of your budget. This
is the sign to look into, all right, where can
we bring in more money, because at the end of
the day, we've got to live. We need food, we
need to accommodation, we need to be able to move
around to get to our jobs and get our kids
to school. So this is where you go, all right,
(18:07):
how can we work smarter not harder? Can we change
our hours? Perhaps you can change your shifts to make
to earn over time. Can you look at a pay
rise or is this now the time to get a
new job. We know that the biggest and best pay
rises you get are when you change jobs. Perhaps the
sign that okay, I need to look at a different
(18:27):
career path or I need to look at applying for
a new job. You know, what are some things? Can
I do some additional courses and training that increase my
qualification so I go up a different paid grade. This
is where you need to look at solutions beyond the budgeting,
earning extra money? You know, do we need to do
a big declutter, Like you've got young children but they're growing.
(18:49):
Surely there'd be toys or sporting equipment that they don't
fit into anymore, or they're too small for wa.
Speaker 1 (18:56):
Houses are overflowing with toys.
Speaker 2 (18:57):
There you go. Well, according to Gumtree, and this report
came out a couple of years ago, so it may
not be it actually might be even more, but the
average Australian household has around just over five thousand dollars
worth of unused items that could be sold.
Speaker 1 (19:10):
So there is you know, it's ten weeks.
Speaker 2 (19:13):
Yeah yeah, see, so it's not all the end of
the world. But you do need to put your thinking cap.
You do need to get creative. There is going to
be hard work. You've got to pull your sleeves up,
but you will come out of it not just fixing
the situation, but so much more responsible with money and
so much more respectful with money. You won't want that
to happen again because it's the pain you've had to
(19:35):
go through that. This is writ talk about the gestation
period with money is the period has made you never
want to repeat that again. But how long it's taken
to fix that problem.
Speaker 1 (19:46):
It actually made me feel pretty good about this.
Speaker 2 (19:48):
Oh I think you can. I show you some cash
flow tips now please?
Speaker 1 (19:51):
Oh yeah sure, okay, yeah.
Speaker 2 (19:53):
So I recommend that people have a couple of different accounts.
And this is the problem where budgets are really hard
to stick to because we get most of us get
paid consistently, you know, for example, once a fortnite and
once a month, and it's a set amount. Now that's
easy to manage because we know exactly what we're going
to get and how much. But the problem is, and
this is why I think you know this got went
(20:15):
on for a while before you realized it is our
living expenses dramatically vary from month to month throughout the year.
Christmas is an expensive time, you know, school holidays are
expensive time. Getting your REDGIRO and CTP, you know, is
an expensive time. When you understand how they are scattered
throughout a three hundred and sixty five day year, you
(20:37):
realize that you actually have to manage your cash flow
differently to what your budget says. So I recommend you
have your money paid to one key account and that
is called your everyday account, and that is to pay
for all your short term expenses, so that you know,
the food, the mobile phone, the gym membership takeaways, that's
your short term living expense. You then have a second account,
(21:00):
which is called your life sash financial float account. This
is money that when you get paid, you put a
certain amount in, say each month when you get paid,
to help stockpile your cash flow so that when that
rego came through, is not coming out of emergency money
is coming out of that account. Christmas time buying gifts.
If that's what you celebrate, it would come out of that.
(21:22):
Then on top of you have your emergency money, which
can sit in a redoor facility or an offset account.
So if you put a mortgage, which you do so
that will help you save interest in the meantime, but
you're actually adding to each of those three accounts to
help manage your money, so when things do come up,
you've actually got that allocated. Now what you do is
you there's a bit of short term pain to this,
(21:43):
because you must have your financial float sitting at a
decent level so that if you have a particular time
of the year where a lot of those expenses, those
irregular ad hoc expenses coincide, your financial float can actually
handle all of them without you having to dip into
other accounts like your emergency money. So what you would
do is go aggressively for say three months, to build
(22:05):
up your financial float so that it has enough money
to account for everything. And then going forward, you put
a set amount of money into each of those three accounts,
and you can tweak it adjut accordingly as to how
much money you need an emergency, how much you need
in your float, and of course what's going on in
your short term living expense account. It's what I do,
is what I've always done, and it's really satisfying because
(22:26):
I don't even own a credit card, so I have
to make sure I'm on top of our cash flow.
Because there is no credit card to lean on. It
means that we don't things don't bounce, they don't default.
I'm on top of everything. And I because I'm not
using credit cards, I never really with the exception of
the machine, don't go and blow things. And I'm checking
(22:47):
the accounts regularly and I go to I've got three
accounts to check really just too. To be honest, I.
Speaker 1 (22:52):
Think that is actually very inspiring.
Speaker 2 (22:56):
Thank you. I can do this, and I even do
one on one sessions with people.
Speaker 1 (23:00):
This I feel like I've just had a one on
one session.
Speaker 2 (23:02):
Oh no, this goes into way more detail.
Speaker 1 (23:05):
Okay, I might have to explore this because you know that.
I mean, we talked many many moons ago about our
first episode about the fact that I have twenty six
bank accounts and you are here just talking about three. Yeah,
And I cut a whole stack of accounts out and
I got down to like eighteen or so, which is
(23:27):
still six times. It's still six times more than you're recommending. Yeah, okay,
I've got some work to do.
Speaker 2 (23:33):
But do have a holiday savings account and we do
have a financial goal account as well. Oh so there's
technically five. If you really want to be honest.
Speaker 1 (23:41):
I'll see you. You're misleading me.
Speaker 2 (23:42):
No, but they're the key functioning ones for a cash
flow and budgeting for busy people.
Speaker 1 (23:47):
Still, it sounds great. It actually sounds like it would
provide enormous clarity and just visibility over your spending and
makes that process of as we talked about at the start,
going back tracking your spending comparing it to the budget
with make it's so much easier because it's just all
in kind of one of two places those expenses coming
out exactly. All right, that is great. Anyone wanting more
information from you, where do they track you?
Speaker 2 (24:10):
Send me a DM on Instagram, can a cable official
sugar Mame TV, and I can send you the details.
Speaker 1 (24:15):
And you can hear me every day with Sean Aylmer
on Fear and Greed Daily business news for people who
make their own decisions. Thank you for listening to how
do they afford that? Remembered follow on the podcast, and
the very best thing you can do is tell somebody
else or send them this link to this episode and
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you for your company. Join us again next week.
Welcome to How Do They Afford That, the podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed business News, and as always I'm with
Canna Campbell, financial planner, founder of Sugar Mama TV, the
financial literacy platform on podcast, books, Instagram, threads, TikTok, YouTube
and more. Hello Canna, Hello, how are you? I am good?
(00:22):
Thank you. Today's episode is about budgeting in a way,
and it's actually pretty embarrassing. I feel like I embarrassed
myself on this show a lot more than you do.
I've mentioned in a previous episode how we recently saw
a financial planner right and before that meeting, we wanted
to go into it up to date with everything to
(00:43):
make sure that we were informed and we had all
the information ready to go, so that it was going
to be a really detailed discussion. And it was a
great discussion. But as part of that preparation, we revisited
our household budget just so that we had our info
in place, and the budget gave us a shock. It
gave us quite a significant surprise because obviously life has
(01:08):
gotten very expensive. Interest rates are high, mortgages is expensive,
kids and school and a whole bunch of kind of
other things going on that's all cost money. And our
household expenses have crept up and up and up and
up to the point that on paper at least, and
I'll explain kind of how that happened, but on paper,
(01:29):
at least, we were spending five hundred dollars per week
more than we were bringing in, right, Yeah, it was.
It was a bit of a shock, which explained then
why suddenly we'd been eating into our savings and into
our emergency money and all of these things. It hadn't
(01:50):
hit crisis point or anything yet, because when I talk
about it, we were spending that on paper, it was
because a lot of big expenses that we had been
budgeting for, and so we in the spreadsheet having been
budgeted for hadn't actually come around yet. So they were
things like kind of car rego and car insurance and
annual home insurance and all of these big ticket items
(02:11):
that would come in later in the year, but we
were allocating a certain amount of money for them each week,
notionally on this spreadsheet. That's why it then looked like
we were actually spending five hundred dollars a week more
than we're bringing in. I want to talk to you
about this today, about this idea of kind of lifestyle
creep budget creep. It's a problem. I suspect it's not
(02:32):
a unique problem to our kind of household. What do
we do? Please put me out of my misery and
assure me that this is a common problem.
Speaker 2 (02:41):
All right, stop right there. You do not need to
beat yourself up about this. It is really common.
Speaker 1 (02:47):
This is good news. I'm sorry, bad news to anyone
else's I'm sorry.
Speaker 2 (02:52):
Is in the same boat as you.
Speaker 1 (02:54):
But welcome aboard. Come on to this sinking ship.
Speaker 2 (02:57):
Particularly right now. You know the high cost of living,
rising interest rates, and look if look at your situation,
You've got two young children, you've got medical expenses, and
we've got general inflation. Everything is just so expensive. So
you know, those variables alone make it very easy for
this to happen. And the other thing is people don't
(03:18):
actually realize until their savings starts dwindling or they can't
come up with the money to cover a big expense,
like you know when your car read JEW and CTP
comes at the same time it might be saying two
thousand dollars. They didn't realize it until that bill comes in,
that we've got a problem with our cash.
Speaker 1 (03:33):
Flow, and that was that was it for us Catalyst. Yeah,
the fact that there was this the savings had provided
a buffer and the emergency money had provided a buffer.
That probably meant that we didn't realize as soon as
we would have if those big expenses had come in
and suddenly just drained every account we have.
Speaker 2 (03:54):
Well that's why I recommend a couple of different accounts,
but we'll talk about that later. So, and the other
thing is we've got you've got can't forget about, like
we live in such a cashless society. We are tapping
our phones. We don't even get our cards out of
our wallets anymore. Most of us just tap on our phones.
So we're living in this like digital payment world where
we can very easily overspend without even realizing. And that's
(04:15):
on top of you know, after pay and you know
all those subscriptions that come out of our accounts or
for our credit cards as well. And then we've also
got constant distraction and temptation around us. So it is
so easily done thank you. In fact, I bought a
like I got certain ad on Instagram the other day
(04:35):
and bought a cellul light massaging device which is still
sitting in the box three weeks later. And here you go,
And that was not in my budget.
Speaker 1 (04:45):
Man, I ask how much it was?
Speaker 2 (04:47):
Well, one hundred and eighty dollars. I'm really embarrassed to
admit this, but it's not uncommon.
Speaker 1 (04:53):
Okay, that does make me feel better. Just once again,
I'm sorry. I'm just trying to bring people down to
my level.
Speaker 2 (05:00):
Back there. Even they can come even lower down to my.
Speaker 1 (05:02):
Level that you are very financially savvy, but even you
can kind of get drawn into making what sounds a
little bit like an impulse purchase.
Speaker 2 (05:10):
Jumped on it. I was like, oh, I'll give this
a go. I want this, and it's so easy. I
clicked on my phone. All I had to do is
face recognition and even entering my credit card details and
off I go on my doorset was this device that's
still sitting.
Speaker 1 (05:24):
Yeah, when you certainly have Amazon kind of one click purchase,
like can you just press one button and it's done
and you're like, oh boy, that it's arriving tomorrow.
Speaker 2 (05:32):
If you've got Amazon Prime.
Speaker 1 (05:33):
That was too easy, wasn't it? Okay, this kind of
expense creep kind of thing, because it's not really lifestyle creep.
It's not like in the traditional sense where we've talked
about where you get a pay rise or something and
your lifestyle just kind of gets a bit more extravagant
and you spend more and it fills that gap that
that that kind of buffer that you that you had.
(05:54):
It's not that. It's almost kind of like a budget
creep kind of thing, isn't it is it? Is it preventable?
How easily preventable is it?
Speaker 2 (06:01):
Well, look, okay, it is preventable. It's not necessarily easily fixed.
So yes, you are going to have to be a
lot more pay a lot more attention to your budget,
but not just your budget, your cash flow and tracking
your transactions. It's great to have a budget, but if
you're not sticking to the budget. But the budget is
just basically a flimsy piece of paper, so you need
(06:22):
to track that you are sticking to the budget. And
this is why I teach a cash flow system for
budgets in the Sugar Mamant Budget and Cashow Academy is Also,
you're gonna have to be disciplined. You're going to have
to keep your eye on the budget on a regular basis.
I know for myself, I check our budget and our
cash flow and transactions every Friday and every Sunday, twice
(06:43):
a week. Twice a week. Yeah, because there's so many distractions,
Like look at me, I went and bought a one
hundred and eighty a little silly light machine that, for
the record, really hurts to use.
Speaker 1 (06:52):
I'm going to be honest, it sounds it sounds overwhelming,
like that sounds like it is just a.
Speaker 2 (06:58):
Stop right there.
Speaker 1 (06:59):
A lot of work.
Speaker 2 (07:00):
So because because I'm checking it regularly, it literally takes
me two minutes. I can do it, obviously not whilst
driving the car, but I can do it in the
car waiting at school pickup. And because I'm checking it
so often, I don't need to go it back through
a month's worth of transactions. I'm literally going back through
what we spent on the weekend on Sunday afternoon or
Sunday morning, and what we spent between Monday to Friday.
(07:20):
But I'm checking it on Friday, so it literally takes
me a few minutes.
Speaker 1 (07:24):
And so what you're then comparing that against your budget, Yes,
to make sure that you haven't overspent within a certain category.
Speaker 2 (07:30):
Yes. And if I see something where I've slipped up,
like the silly light machine, I know, Okay, well, I
need to trim off other areas within our budget to
help make up for that whoopsie that happened the other week.
So it means that things don't spiral out of control
and compound, because if I was checking it at the
end of every month, you know, that could mean that we,
you know, don't have the right amount of money in
(07:53):
our account to pay for the groceries that week. That
could be disastrous.
Speaker 1 (07:56):
Yeah, I don't mean to be so negative. I'm bringing
a lot of neg Well, I don't mean to be,
but I'm just naturally negative on this one in that
it's all well and good to say, then just trim
in other areas. But what if everything else is already trimmed.
What if you are kind of just going, okay, well,
we've cut everything else. We've kind of we've cut back
(08:16):
to the kind of bare bones. What then, like.
Speaker 2 (08:21):
It's trying to return the sea limits, it's just checking
the return to policy. Okay, No, like and obviously this
is the problem, and that's where you go, all right,
what can I do to then bring in some money
to replace that one hundred and eighty dollars that I
just literally stupidly And you should never beat yourself up.
We're all trying our best, But how do I replace
that money? Because you know you may not be able
(08:42):
to find the X amount of dollars you know from trimming? Okay,
well I won't. I'll make sure we you know, don't
buy meat this week. We'll have a vegetarian dish or
you know we we normally maybe want some month go
up for restaurant to dinner. We won't be doing that.
There is sometimes you just can't do that.
Speaker 1 (08:56):
And that's where the discipline comes in.
Speaker 2 (08:57):
And that's why that awareness and also that I will
not go and do that again. Every time I see
that box, I beat myself up. I'm so frustrated myself
for being silly. And of course, again like it's not
about punishing ourselves, it's about learning. And I can safely
say and probably say, I have not want anymore things
off Instagram since.
Speaker 1 (09:18):
I want to get to some more of those kind
of practical steps, because that's a really good point about
kind of tracking your transactions and comparing them against your budget.
But just in terms of this idea of not beating
yourself up about it, this and the difference between kind
of lifestyle creep and essentially just the rising cost of living,
(09:40):
because there is a difference between those two.
Speaker 2 (09:43):
It's a big difference when people get them mixed up.
I think they're the same thing. They're not. So lifestyle
creep is like earning more but spending more, so you know,
it'd be nice to have that, so I'm going to
buy it. And so when we earn more money, two
things tend to happen. Typically we either buy the same thing,
but the more expensive version the same thing, so we
you know, we don't we buy maybe a more expensive car,
(10:04):
or we buy more expensive clothes or accessories or makeup,
or we go and buy more of the same things.
So that's the lifestyle creep. And often it's disguised as
you know, self care or treating yourself or working so
hard as a reward. And you know, it can actually
be avoidable with having awareness and intentional spending, but also
(10:26):
having some financial goals to actually work on and direct
your energy and focus to and if you go and
do spend things using cash at all times, the rising
cost of living is different. So that's where those same
essential expenses, you know, the rand or mortgage, or the
grocery bill, utilities, childcare, they are increasing without any necessary
(10:48):
upgrade or value add to your lifestyle. And frustratingly, you know,
this is the hardest thing about the rising costs of
living is sometimes there, most of the time they're completely
out of your control. So when inflation kicks in and
you've got interest rates on the rise, it makes things
really challenging and incredibly stressful because your dollar doesn't stretch
(11:10):
as far and there's nothing left over sometimes, so you've
really got to adapt and adjust your budget, not just
cut out luxuries. You're in a fortune position. If you
can cut out luxuries.
Speaker 1 (11:21):
I reckon you've hit the nail on the head there
with the fact that this is frustrating, because it seems
frustrating for so many people that they are working and
working and working as hard as they possibly can, right
and they are trying to be responsible with their money
and trying to kind of save money where they can,
and yet they are still having to do the grocery
(11:42):
shopping and they seem to be getting less and less
and less for the money that they have to spend,
and it just feels as though no matter what you do,
you just can't get ahead.
Speaker 2 (11:51):
Yeah, it's like you're just constantly treading water, but only
just keepping your head aub off water. And it's exhausting,
it's draining, it takes a toll on your mental health,
and it just gets hard to see light at the
end of the tunnel.
Speaker 1 (12:04):
All right, now that everyone's feeling nice and miserable, we're
going to take a quick break, Probably the worst time
to take a quick break. But on the other side,
the promise is that we've got some more tips, yes,
and some more advice on how to turn that situation around.
Speaker 2 (12:16):
I'm going to share some hacks.
Speaker 1 (12:17):
Well, great, we'll be back in a second. We are
talking about budgeting and the rising cost of living and
this realization that on paper, at least our household was
spending five hundred dollars more than we were earning a week.
(12:38):
Because of all of these expenses, we want to know
the hacks, the trip, the tips and the tricks and
things to try and get this back under control. We
talked about the first step is the first step to
really just make sure your budget is accurate, but then
to track your spending. A case is that step number one.
Speaker 2 (12:54):
Okay, Step number one is more actually about your mindset.
Speaker 1 (12:57):
One knew it was going to be about mindset, And
as soon as started talking, I'm like, I've definitely stuff.
Speaker 2 (13:01):
This stuff is going to be no to your credit.
You have actually just jumped ahead, which is my Ford thinker.
So I actually think you just need to acknowledge the numbers.
You know, five hundred dollars per week is a lot
of money. Think about that's over two thousand dollars per month,
and think about that over a year.
Speaker 1 (13:24):
Yeah, there's a lot of money.
Speaker 2 (13:25):
That's a new car.
Speaker 1 (13:26):
Car.
Speaker 2 (13:27):
Yeah, So you've got to take this. That is your
reason for taking this very very seriously. You've got to
go beyond the budget. You've actually got to start tracking
your spending and tracking those transactions for at least the
last three months. You can really see what's going on.
And this is a very confronting experience because you and
I say this all the time. We really downplay, including myself,
(13:49):
how much money we really do spend. We like to
tell ourselves, oh, look, I'm pretty good with money. I
don't buy this, I don't buy that. But when you
look at your transactions, it off and tells a very
different story if you have a deficit, particularly like the
one you've got, So you need to then obviously identify
the essential and the non essential spending and cut out
(14:10):
those the leaks to the bucket, so the subscriptions, the takeouts,
that spontaneous shopping like cellulin machines.
Speaker 1 (14:19):
If only it was as easy as kind of having
something sitting there that you're like, okay, this was kind
of one of those things. But all of a sudden
you're looking at kind of all of these things like
they have value, they have purpose. But so it's about
making some hard decisions. How do you make those cuts though,
without feeling deprived that you were just cutting all of
the joy and the important stuff out of your life.
Speaker 2 (14:39):
Well, this is why I say, look at the reality
of the numbers. This is quite serious. You know, that's
a large deficit and it's only going to compound and
get worse with the lifestyle creep and you know, the
rising cost of living. So by having that, taking this
serious is not about depriving, It's actually about fixing your
financial well being, which something to feel proud, to feel
(15:01):
empowered to actually step up and take ownership and know that, Okay,
we're going to fix the hole in this bucket so
that we're not put in a financially compromised or putting
ourselves in financial jeopardy because we're blowing money that we
really shouldn't be blowing and we don't actually really have.
We're going backwards financially. So it is not about depriving.
It's about getting real and getting authentic as to what
(15:25):
your family really need and how you can creatively find
ways to save money.
Speaker 1 (15:30):
How do you keep your family on board then with
a leaner budget like that.
Speaker 2 (15:36):
So communication, I think you know and I don't hold
back with Obviously I'm not going to go dump our
financial worries on my children, but I let the children
know we have a budget and this is why it's
important that we stick to it, because we don't want
to stress each other out. We want to make sure
that we have money for Christmas, time to buy gifts
that we can afford, to be able to throw a
(15:56):
birthday party. So everyone understands their all in the position
in the family in making us all accountable and obviously
you're also there's an element of financial for the children.
They can benefit from this as well. Obviously you want
to go and to stress them out and make them anxious,
but empowering them to be a part of this. You know,
(16:17):
my children, they love Kmart and I've started to say no,
we're saving up to make to do things, special things
to the house. So now they tell me off for
spending money and make me accountable. So it's become a
really nice kind of bonding experience. So and just because
you can't get takeout doesn't mean the fun is gone.
I mean you can do picnics, you can have friends over,
(16:41):
you can you know, do something. Maybe it's not once
a week getting a take out, it's once a month.
So you've been then value and honor that special treat
even more so, our society is filled with this over consumption.
And I know there are a lot of people who
are not doing that and doing it tough and hon
a really tight budget. But we need to be honest
with us ourselves. And if we go in with the
(17:01):
mindset of this is going to be this is going
to suck, this is going to be boring and dull.
I can't have this. I can't have that. That's not
going to service in any way, and it's not going
to make this process enjoyable, and we're probably not going
to see the results were capable of achieving. But if
you go all right, there's a bit of short term
pain because we need to fix this. But once we've
fixed it, we'll be back on track again and we'll
see our emergency money rebuilding and we'll be able to
(17:22):
start setting some really exciting goals like a regular savings
plan for a holiday overseas every year. So you've got
to look to the big picture and see the light
at the end of the tunnel. Short, short term pain,
long term gain.
Speaker 1 (17:33):
Okay, when this is my last question, when is cutting
back not enough? When do you need to actually just
go okay, we need to rethink our financial goals here.
Speaker 2 (17:46):
Yeah, and that is when you can't take away anymore.
You're down to the bare bones of your budget. This
is the sign to look into, all right, where can
we bring in more money, because at the end of
the day, we've got to live. We need food, we
need to accommodation, we need to be able to move
around to get to our jobs and get our kids
to school. So this is where you go, all right,
(18:07):
how can we work smarter not harder? Can we change
our hours? Perhaps you can change your shifts to make
to earn over time. Can you look at a pay
rise or is this now the time to get a
new job. We know that the biggest and best pay
rises you get are when you change jobs. Perhaps the
sign that okay, I need to look at a different
(18:27):
career path or I need to look at applying for
a new job. You know, what are some things? Can
I do some additional courses and training that increase my
qualification so I go up a different paid grade. This
is where you need to look at solutions beyond the budgeting,
earning extra money? You know, do we need to do
a big declutter, Like you've got young children but they're growing.
(18:49):
Surely there'd be toys or sporting equipment that they don't
fit into anymore, or they're too small for wa.
Speaker 1 (18:56):
Houses are overflowing with toys.
Speaker 2 (18:57):
There you go. Well, according to Gumtree, and this report
came out a couple of years ago, so it may
not be it actually might be even more, but the
average Australian household has around just over five thousand dollars
worth of unused items that could be sold.
Speaker 1 (19:10):
So there is you know, it's ten weeks.
Speaker 2 (19:13):
Yeah yeah, see, so it's not all the end of
the world. But you do need to put your thinking cap.
You do need to get creative. There is going to
be hard work. You've got to pull your sleeves up,
but you will come out of it not just fixing
the situation, but so much more responsible with money and
so much more respectful with money. You won't want that
to happen again because it's the pain you've had to
(19:35):
go through that. This is writ talk about the gestation
period with money is the period has made you never
want to repeat that again. But how long it's taken
to fix that problem.
Speaker 1 (19:46):
It actually made me feel pretty good about this.
Speaker 2 (19:48):
Oh I think you can. I show you some cash
flow tips now please?
Speaker 1 (19:51):
Oh yeah sure, okay, yeah.
Speaker 2 (19:53):
So I recommend that people have a couple of different accounts.
And this is the problem where budgets are really hard
to stick to because we get most of us get
paid consistently, you know, for example, once a fortnite and
once a month, and it's a set amount. Now that's
easy to manage because we know exactly what we're going
to get and how much. But the problem is, and
this is why I think you know this got went
(20:15):
on for a while before you realized it is our
living expenses dramatically vary from month to month throughout the year.
Christmas is an expensive time, you know, school holidays are
expensive time. Getting your REDGIRO and CTP, you know, is
an expensive time. When you understand how they are scattered
throughout a three hundred and sixty five day year, you
(20:37):
realize that you actually have to manage your cash flow
differently to what your budget says. So I recommend you
have your money paid to one key account and that
is called your everyday account, and that is to pay
for all your short term expenses, so that you know,
the food, the mobile phone, the gym membership takeaways, that's
your short term living expense. You then have a second account,
(21:00):
which is called your life sash financial float account. This
is money that when you get paid, you put a
certain amount in, say each month when you get paid,
to help stockpile your cash flow so that when that
rego came through, is not coming out of emergency money
is coming out of that account. Christmas time buying gifts.
If that's what you celebrate, it would come out of that.
(21:22):
Then on top of you have your emergency money, which
can sit in a redoor facility or an offset account.
So if you put a mortgage, which you do so
that will help you save interest in the meantime, but
you're actually adding to each of those three accounts to
help manage your money, so when things do come up,
you've actually got that allocated. Now what you do is
you there's a bit of short term pain to this,
(21:43):
because you must have your financial float sitting at a
decent level so that if you have a particular time
of the year where a lot of those expenses, those
irregular ad hoc expenses coincide, your financial float can actually
handle all of them without you having to dip into
other accounts like your emergency money. So what you would
do is go aggressively for say three months, to build
(22:05):
up your financial float so that it has enough money
to account for everything. And then going forward, you put
a set amount of money into each of those three accounts,
and you can tweak it adjut accordingly as to how
much money you need an emergency, how much you need
in your float, and of course what's going on in
your short term living expense account. It's what I do,
is what I've always done, and it's really satisfying because
(22:26):
I don't even own a credit card, so I have
to make sure I'm on top of our cash flow.
Because there is no credit card to lean on. It
means that we don't things don't bounce, they don't default.
I'm on top of everything. And I because I'm not
using credit cards, I never really with the exception of
the machine, don't go and blow things. And I'm checking
(22:47):
the accounts regularly and I go to I've got three
accounts to check really just too. To be honest, I.
Speaker 1 (22:52):
Think that is actually very inspiring.
Speaker 2 (22:56):
Thank you. I can do this, and I even do
one on one sessions with people.
Speaker 1 (23:00):
This I feel like I've just had a one on
one session.
Speaker 2 (23:02):
Oh no, this goes into way more detail.
Speaker 1 (23:05):
Okay, I might have to explore this because you know that.
I mean, we talked many many moons ago about our
first episode about the fact that I have twenty six
bank accounts and you are here just talking about three. Yeah,
And I cut a whole stack of accounts out and
I got down to like eighteen or so, which is
(23:27):
still six times. It's still six times more than you're recommending. Yeah, okay,
I've got some work to do.
Speaker 2 (23:33):
But do have a holiday savings account and we do
have a financial goal account as well. Oh so there's
technically five. If you really want to be honest.
Speaker 1 (23:41):
I'll see you. You're misleading me.
Speaker 2 (23:42):
No, but they're the key functioning ones for a cash
flow and budgeting for busy people.
Speaker 1 (23:47):
Still, it sounds great. It actually sounds like it would
provide enormous clarity and just visibility over your spending and
makes that process of as we talked about at the start,
going back tracking your spending comparing it to the budget
with make it's so much easier because it's just all
in kind of one of two places those expenses coming
out exactly. All right, that is great. Anyone wanting more
information from you, where do they track you?
Speaker 2 (24:10):
Send me a DM on Instagram, can a cable official
sugar Mame TV, and I can send you the details.
Speaker 1 (24:15):
And you can hear me every day with Sean Aylmer
on Fear and Greed Daily business news for people who
make their own decisions. Thank you for listening to how
do they afford that? Remembered follow on the podcast, and
the very best thing you can do is tell somebody
else or send them this link to this episode and
spread the word about how do they afford that. Thank
you for your company. Join us again next week.
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