NWN Podcast Ep. 1 Budgeting

Episode Transcript

Jim (00:32):
Welcome to Netwealth Nest podcast.
I'm your host, Jim LeBoeuf, andwelcome to our first episode
for this podcast.
Our goal is to help you buildyour net wealth and really that
financial stability andfoundation.
Over the course of our podcast,we're hoping to keep 'em short
and simple, and we're reallydesigning them to focus on

(00:53):
mindset around money.
Knowledge and how you can usethat knowledge.
And then last not least, kindof actions that should be taking
to do that.
So today our first episode'sgonna be focusing on one of the
most basic things that everybodytalks about, and that is
budgeting.
We're gonna go over a handfulof reasons why people either
don't budget or struggle tobudget or why it seems

(01:14):
intimidating to them, andhopefully give you some,
different aspects that you canuse to create your budget.
So let's get right into it.
The first one that most peoplestruggle with is
overcomplicating the budgetprocess and not knowing where to
start.
And there's a lot of differentthings you could do.
There's a lot of differentprograms, all these things, and
we're gonna talk a little bitabout some of that.

(01:35):
First and foremost, let's talkabout what a budget is.
It's really simple.
It's how much money you'rebringing in and how much money
is going out, and that's exactlyhow you should view your budget
when you are creating it.
What are you bringing in withyour job or your paycheck or
your side hustle or whateveryou're doing, whatever income's
coming in, you should trackthat.
And you should add all of thatup.

(01:56):
And then you should look atyour expenses and you should
understand what are you spendingon.
I.
Key things.
A couple key things to look atright away is going to be things
like your housing.
So either rent or mortgage,it's going to be your food, how
much you're spending ongroceries those sorts of things.
And then it also should be yourtransportation.

(02:16):
Do you have a car payment?
How much is gas?
Do you have to take publictransportation because of where
you live?
Maybe you live in a big cityand that's easier.
All these things, those are themain things that you should
look at to start off.
And then you start adding ontoyour budget whether it be other
needs you might have, thingslike maybe the internet, the
cell phone.
I.
And then maybe your wants.

(02:37):
And so those could be thingslike, I wanna be entertained and
I wanna go out with friends andfamily.
I wanna go out to eat, I wannago out to the movie, I wanna do
this.
I wanna go to concerts.
And all of those things thatadd up your other
entertainments, maybe thingslike Netflix or YouTube TV or
Hulu, any of those types ofsubscriptions that you might do
if you go out and buy otherthings like clothing and all of

(02:59):
that.
All of those.
Everything you should do, youshould look at your bank
statements, if you have creditcards or credit card statements,
all of those things.
And you should start to add allthose up and define the budget.
And that kind of brings us tostep number two, which some
people find difficult is settingspending limits or what really
you should be spending.
And really what your goal is todefine whatever your income is.

(03:20):
Whatever you're bringing in,you need to get all those
expenses.
Underneath the amount of thatincome, and if you're over, you
are in trouble.
And that's where we talk aboutkeeping score and understanding
what you're actually bringing inand going out and how you stay
out of debt.
Specifically bad debt, likecredit card debt or high
interest debt, and how you startbuilding.

(03:42):
Wealth through doing otherthings with that money that
you're not spending mainlyinvesting.
And again, we'll get to that inthe future, but make sure you
set those spending limits andyou are going to probably have
to tinker with it a little bitto understand I really should
only be spending maybe x amounton this.
Your needs.
So when I define needs that wetalked about, your housing, your

(04:04):
transportation, and your food,you've gotta look at those.
If you have rent right now or amortgage right now, you're
probably not able to change thatinstantaneously.
So you need to have those mightbe set expenses right now, but
all those other ones, you'regonna need to have to try to
tweak potentially to fit inunderneath your budget.
Third thing that many peopleforget about is irregular

(04:26):
expenses.
So those could be things likeannual subscriptions.
Maybe you have a maybe you havea gym membership that is only
you pay for the whole year inadvance, or maybe you pay for
your car insurance for the wholeyear.
People forget about those anddon't budget those into their.
Monthly budget plan because itonly comes around once a year

(04:47):
and that's a big mistake becausewhen you get to that time where
you have to pay that, do youhave the money set aside to
cover those bills?
And so we wanna make sure thatwe do not forget about annual
subscriptions.
The next step, notunderstanding how to allocate.
For savings.
So one of the big things thatwe promote at Netwealth Nest is
building your emergency savingsif you don't already have one,

(05:08):
and that should be your firststep.
But understanding like what isthat first initial emergency
savings and.
The place I like to startpeople is, let's get to at a
minimum a thousand dollars.
60% of all Americans could notafford a thousand dollars
emergency expense if it happenedtomorrow without putting it on
some sort of debt credit cardmainly.

(05:30):
Okay.
So getting that where you don'thave to do that, where you
don't have to take a highinterest debt to afford, let's
say you need new tires for yourcar or you have a, you have to
stop in at the doctor 'causeyou're sick and you didn't plan
that medical doctor visit.
Any of those types of things, athousand dollars is a great
place to start.
And that's how you shouldallocate your savings Beyond
that.
What we recommend the mostpeople is three to six months of

(05:54):
whatever your income is.
So let's say you're bringing in$2,500 a month in income, you
should shoot for long term overthe course of a about a year.
Probably you should shoot tosave about $7,500.
$2,500 times three is 7,500bucks.
Okay?
So that will put you in aposition where you have options

(06:14):
if something happens.
Maybe your job goes away or youlose your job and you need time
to find a new one.
Maybe you have a largeemergency expense of a couple
thousand dollars and you're ableto again afford that without
having to use high interestdebt.
So once you define your budgetand you fit your income, and you
fit your expenses and youdefine Hey, I need that first

(06:35):
emergency, so this is what I'mgonna start saving and maybe
you're already investing alittle bit, but again, let's
focus on that emergency savingsand make sure that's where it is
before we get too deep ininvesting.
Everybody goes, okay, I got abudget.
And then they move on withtheir life and they miss a huge,
and probably the most importantstep.
And that step is specificallyyou have to track it.

(06:56):
You've got to track all yourexpenditures.
Day in, day out, month in andmonth out.
And the reason you do that isyou need to understand are you
actually holding to your budgetor did you say, Hey, I'm gonna
spend a hundred dollars a monthgoing out to eat and I'm
actually spending 250 and rightbefore I get paid and I'm like

(07:16):
outta money, or maybe I'moverdrafting or I'm putting
stuff on the credit card when Ishouldn't be.
But you have.
To work on tracking it eitherby pen and pencil, by an Excel
spreadsheet, by an app like,rocket Money or something like
Empower there's a millionoptions out there on apps on the
phone.
Just go to your Google store oryour Apple app apple Store and

(07:38):
they will show you the differentoptions, but.
You've gotta be able to trackthat money because what you want
is you want to be able to makeadjustments.
And that's where some peoplestruggle is they struggle to
adjust their budget based on thecircumstances they're in or
based on their habits andbehaviors.
So if you know that you'reconsistently going out to eat
with your friends and you reallywanted to only spend a hundred

(07:59):
dollars.
But you're spending 200 or 250,let's say, every month.
You need to make a decisioneither A, is that really
important to you and you'd liketo keep that in your budget?
And if that's the case, optionA, then you need to figure out
where else in your budget canyou cut from to make up for that
difference, B.
Do you want to cut down onthat?

(08:21):
And that might mean tellingyour friends, Hey, I'm only
gonna go out instead of once aweek.
I'm only gonna go out once amonth.
Or, Hey, can we, instead ofgoing to a restaurant, can we go
somewhere where there's, lessmoney involved and maybe it's
going out to a free communityevent, or maybe it's going to
the park and hanging out, orwhatever that might be.
But there are different ways todo that, but at least once

(08:43):
you're tracking, you're seeingthe landscape of what's
happening.
With your money, and then youcan make educated decisions from
that standpoint.
The last piece I'll cover, andwhat I'll tell you is many
people have made budgets in thepast and then failed to stick to
their budget, and then theygive up or they hear different
things like different rules fortheir budgets.

(09:05):
One big example of this is the50 30 20 rule, and what the 50,
30, 20 rule states is 50% ofyour money should go to your
expenses that you have to have.
Again, we talked about like thehousing, the transportation,
the food.
30% goes to your wants, sogoing out, doing whatever.
Netflix, all these things,right?

(09:27):
And then 20% is supposed to goto your savings and investments.
And many people look at thatonce they like start looking at
their budget and I'm not savinganything.
I'm not investing in anythinghow in the, I'm not gonna get
20%.
And then they give up.
So they've had past attemptsand they failed those attempts
and they just think, it's notsomething I can do.

(09:48):
I promise you this is somethingthat everybody can do.
They just have to put in thework and they just have to be
realistic with themselves whenthey start.
And so a great example of thatis when somebody is first
starting to save and they lookat something like the 50 30 20
rule and they go, I can't save20%.
I can't do this, I can't do it.
You don't have to start at 20%.

(10:09):
Anything is better thannothing.
Okay?
And so starting to save is moreimportant than how much you are
saving.
I'm gonna say that again Forintentional effect.
Starting to save no matter howmuch is more important.
How much you are saving.
Okay, so let's say you startwith 1%.

(10:32):
That is better than saving 0%and it is putting you on the
path to getting where you wantto be.
It is okay to save 1%, figurethat out for a month or two, and
then move that up.
This is the great part aboutbudgets.
You get to adjust.
You get to make educateddecisions on where your money is

(10:53):
going and how it is being spentso that you can achieve the
goals that you want to achievelong term.
So maybe you start off with 1%,you get through a month or two
and you're like, this is no bigdeal.
I'm gonna move it up to 2%.
You go another month or two andyou're like, Hey, I'm doing
great.
I'm not even missing thismoney.
It's only 2%.
I'm gonna jump to five.
You jump to five.
Ooh, that was a really roughmonth.

(11:15):
I got to the end of the monthand I almost did not make it.
That was uncomfortable.
Okay, I'm gonna dial it back.
Maybe I'm gonna do three and ahalf or 4%.
Okay.
I'm more in a comfortable spot.
Let me build into that 4%.
Okay?
A couple months more go by.
I'm now, I'm ready to take thatplunge into 5% because I've cut
down some of these otherthings.
I'm more mindful of where mymoney is going and what I'm

(11:36):
doing with it.
This is where I can be.
And so all of those things willhelp you build your budget.
They will help you.
Stick to that budget and theywill help you start to achieve
or move towards the goals thatyou are working for.
At Netwealth Nest, one of thethings we really wanna promote
is it's about progress, notperfection.

(11:58):
It's about moving the rightdirection, step by step, and
just continuing that progress.
You will get to where you wannago, potentially faster than you
really think you can long term,but you've gotta keep taking
steps in the right direction andyou only are failing if you
give up.
And stop doing what you'redoing.
It's the only way you fail.

(12:18):
Doesn't matter if you have adown month or a poor month where
you overspend or any of that'snot failing.
That is just part of theprogress in your journey to
building your financial wealth.
So those are the things I'mgonna leave you with around your
budget today.
Again, just to recap and bringit up quick, you start your
budget.
It's income, it's expenses.

(12:40):
You're fitting your expensesunderneath your income, so you
are not.
Spending more on expenses thanyou are in income, and that
might take some tough decisions,at least to start.
Then you are tracking it.
You're tracking every penny sothat you know where that money
is going, and then you can makeeven more decisions on, yes, I
wanna spend money on this.

(13:00):
No, I actually don't wannaspend money on this.
The goal is to make a gapbetween your income and your
expenses as big as possible.
And right now we're focused onthe expenses.
Longer term You'll also look atincreasing your income, and
again, you start to separate itout.
Okay, so continuing to increasethat gap between your income

(13:20):
and your expenses is key.
And then emergency savings, doyou have at least a thousand
dollars?
Great.
Once you get to that a thousanddollars, let's work towards
three months of income to reallyput you in a stable position
where you're not worried aboutwhat happens tomorrow.
You're in a great spot.
And then once we get beyondthat, we will talk in future
episodes of how you use thatexcess money.

(13:42):
Where should you invest?
What is investing, how to doit, where do I go?
All those things.
But for today, let's get ourbudget straight.
Let's get rocking and rollingon that and let's continue to
track that money so we knowexactly what we're doing.
And that's all we have fortoday.
Again, my name's Jim Lobe.
I'm the host of the NetwealthNest podcast.
Thanks again for showing up.
We'll see you next time.