Everyday Finance and Economics with the Siglers
Everyday Finance and Economics with the Siglers
EP 02: Budgeting for the Newly Employed Part 1
Hello! and welcome to Everyday Finance and Economics with the Siglers! The podcast where we discuss what you need to know about personal finance and economics and give you practical advice on how to get started and be smart with your money.
This episode is all about budgeting! Join us as we discuss what benefits budgeting can have for you and your money, and some popular strategies, old and new, that can help you get started. The second half of this episode will be out next week and will continue our budgeting conversation with even more budgeting specifics. As always don't be afraid to reach out with any questions and be sure to join us next time!
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Intro music:
Coffee & Lullabies R&B mix by J.Lang (c) copyright 2020 Licensed under a Creative Commons Attribution Noncommercial (3.0) license. http://dig.ccmixter.org/files/djlang59/62099 Ft: CrazyLittleAsian aka SHA
Coverart by Karina Ng @karina.ng on instagram
Hello.
Speaker 2:Hello and welcome to everyday finance and economics with the Sigler's the podcast where we discuss what you need to know about personal finance and economics, and give you practical advice on how to get started and be smart with your money.
Speaker 3:Where are your hosts? Glenn and Christina Sigler's. So Christina, what's going on in the economy this week.
Speaker 2:All right. Here's what matters right now. Uh, president Biden just announced his American jobs plan, which is a$2.2 trillion plan to invest in infrastructure, um, across a lot of areas, including roads, bridges, ports, utilities, broadband, and internet, and public transportation. Along with many other categories. Uh, this would increase U S investment and infrastructure projects greatly and would be paid for by increasing corporate taxes. This is the biggest infrastructure investment proposed since FDR is new deal in the 1930s, and it's really important and needed since the United States has basically cut infrastructure spending since the 1980s and our economic term of the episode is a budget, which is an estimate of income and expenditure for a set period of time. All right, dad, I think it's time we get into this week's topic. What are we talking about today?
Speaker 3:The magic word is budgeting.
Speaker 2:Yes, yes, yes. So as a college student, I don't have that much money. So like, why should I budget when there's so many things that I want to buy?
Speaker 3:Well, budgeting helps you keep track of your money. It allows you to create a plan for your money. Just think of it this way. A budget is a plan that helps you prioritize your spending your choices with a budget. You can move to focus your money on the things that are most important to you. It may be getting out of debt and maybe saving for a home or working on starting your own business. Your budget creates a plan and let you track it to make sure you're reaching your own goals. And remember each month you're going to set aside some money in your budget to help you reach those goals. And as you continue on that, you're going to enjoy the process of watching you make, uh, make progress towards your goals each month. That sounds like a commitment dad. It's really an example of your choices and your priorities.
Speaker 2:So long-term, we're thinking longterm with budgets
Speaker 3:Short and longterm, cause you gotta have a plan for what you're gonna spend today.
Speaker 2:True. That's true. So in that context, should I feel guilty about every$5 cup of ice coffee that I buy?
Speaker 3:So a lot of people feel that budgeting is restrictive. When you're budgeting, you get to decide what your priorities are. You get to decide how much you're going to spend on each category. So if you want to put a significant portion of your money toward coffee or avocado toast or whatever it is, you shouldn't feel bad about it as long as you're still savings and meeting your other goals and obligations, right? So if you can, you know, buy a$5 cup of coffee each day and still make your ma make all your other goals, then you should, she should feel pretty comfortable about that,
Speaker 2:Right? It seems like to do this correctly. You have to be really realistic about yourself and what you want and need.
Speaker 3:Well, that's the real part of the exercise. And we're going to get into that a little bit later, but remember budgeting is not about limiting the fun of your life. It's about opening up the opportunities to have more fun and let you worry less about what you're doing today. If you're following your plan, if you've created a plan and you know that it's a it's working and you see it working, then you shouldn't worry about the$5 you spent on that coffee because that was in your plan.
Speaker 2:Right? Okay. So what makes a good budget done?
Speaker 3:Well, first off, it's gotta be something you can live with, not so restrictive or so complicated that you can't easily understand your financial position. Quickly. Budgeting can be flexible. You can move money between categories as you need throughout the month. Um, so generally you should restrict yourself from touching money that you're setting aside for your big goals. So if you're saving money for a car, don't Rob the money that you're saving for your free car to go pay for your coffee, that's the feeding the purpose. Um, but you can adjust the amount of money you spend from one category to another to help you reach your goal. You know, just as long as you're, you're really not, um, overspending in one category, okay? It's uh, this is a way that you help keep yourself from overspending. It allows you to recognize your issues, your money issues, and adjust so that you don't end up eating ramen at the end of each month just to make and remember going one more thing, you know, if you do this right, you're going to be able to adjust and cover any unexpected expenses because at the end of the day, you really try to plan for the unexpected.
Speaker 2:So what are some budgeting strategies or popular methods that people can use? Okay, but
Speaker 3:Let's start out with the basics in your definition. You got it right. If we're going to use a period of a month, how much money did you make in a month? How much money they should spend in a month, if you're, you're going to be successful. If you keep your, the amount of money that you spend in a month, let less than the amount of money that you make. That's the basics. Um, you know, one of the things that I try to tell people to do is, you know, you might not know where your money's going, or you may not be conscious of all the places where your money's going. So one of the key things that to do to start is to track your money for 30, 60 days. I mean, everything, everything that you spend and see where your money's going find out, if there's any surprises, you know, did you know, you thought you were spending only$5 a day on coffee. It might be 15,
Speaker 4:Turns out, turns out$5 adds up, right?
Speaker 3:And, and then if you're doing that five days a week, well, is that the right thing for you to do? Um, so you're going to, you want to track all your spending for a month, track all your sources of income. And that gives you the, the basic idea of what your cashflow is doing on a monthly basis. So you asked for methods and there's lots of different methods. One of the early ones is the envelope method. This is when people pay for money, their bills and cash, essentially get a, get an envelope for each of your bills. You put the money in that, that envelope, when that bill came, you took the money out. You paid that bill, you know, or if it was for groceries or something like that, or something like that, or, you know, something fun when the envelope was that
Speaker 4:That's when you stop spinning. Yeah. That requires that you use cash though. And I have not touched a dollar bill
Speaker 3:And people don't use that a lot. I
Speaker 4:Have not touched a dollar bill,
Speaker 3:Know that one's not as appropriate for what's going on today. And then there's other things like the 50, 30, 20, uh, approach 50% goes on your needs. 30% goes on your wants, 20% goes on savings and or debt reduction and so forth. So the fit first 50% will be on the mandatory things like mortgage, rent, utilities, healthcare, groceries, transportation, and childcare, the things you have to spend every month, right? Savings and debt. Those are pretty, um, pretty self-explanatory whether you're going to put money in a bank account, you know, put it in on Robin hood invested, or you're going to pay down your student loans or other loans like that. That's that 20%, it's that 30% for the ones that's where people typically get in trouble, you know, and, and people, um, not really understanding the difference between a want and a need. You know, I might, I might want that, you know,$500 jacket. Um,
Speaker 2:I need it right now. I want the new Jordan's dad. I need them.
Speaker 3:Well, you might need some shoes. You might not need the, you know, several hundred dollars pair of Jordans. Um, and so making distinctions about that, that's really,
Speaker 2:That's when you really got to take a look at yourself and be like, okay,
Speaker 3:Right. And, and so then there's, some of the other approaches are a zero-based budget approach where you say, Hey, look, I make a thousand dollars every week and each week I'm going to account for where every dollar of that thousand dollars go. So I get in a thousand, I'm going to spend the thousand, but when you do take that approach savings as part of that spin. So if you're going to say, I say I'm saving 15% or$150, all right. So that means you got$850 to spend on your other stuff. Uh, a bare bones budget, where you really only focus on the things you absolutely have to have every day or every month. So food, food, clothing, rent, electricity, transportation. This is something that I think, you know, uh, you know, this might not be a long-term solution, but this is a great tool when you're, you know, either just starting out and trying to figure things out, or you you've gotten yourself in trouble and you need to dig yourself out of a hole
Speaker 2:Or like there's an event coming up.
Speaker 3:And so it's, Hey, it's bare bones budget. And then everything else goes toward the thing that I'm looking to do,
Speaker 2:That seems like something you could do, like you do it for like a little bit, but then afterwards you realized that you didn't really need the other things anyway.
Speaker 3:Well, and that's what happens that that's what happens. But you know, this one is, I'm just going to be honest with you. This one's hard to maintain for a long period of time and this, this people get worn out because you're, you're, you know, this is the one that, you know, you're sacrificing and sometimes budgeting is about a little bit of sacrifice. So you can get to your ultimate reward,
Speaker 2:Right? It's tough to stick to, but it seems like it would create good habits.
Speaker 3:Realistically budgeting is about creating good habits, know good, good discipline around how and why you spend your money. But some other methodologies, there's the bullet journal budgeting, which is essentially remember I said, at the beginning, you try to tell people to track all their spending, or this is an extensive version of that, where you write down everything that you spend so that you can see where every dollar went and, and what you eventually do over a period of time, as you find out and you say, Hey, look, I really spent some money in some places that I really don't need to spend money. Right. And then you learn and you learn from that observation and you change that behavior. Um, calendar budget. You just say, when, um, when are my bills pay, you know, you know, put them on your calendar or on your, or, you know, on your planner, on your phone or in your computer, and then pay your bills on those dates, paycheck, budgets, you know, exactly when you get paid, pay your bills as you get your money in. And then another version of 50, 30, 20 is needs once savings and emergencies. Now that you know, that, you know, they're all, some form of that. And, and, um, you know, some of these things overlap, but the basics are the same, um, you know, really determining the difference between what you have to have and then what you'd like to have and then some savings
Speaker 2:[inaudible]. Okay. So what softwares can you use to budget? I use an app called every dollar and there's literally thousands of apps.
Speaker 3:Well, that's exactly what I was going to tell. There are so many apps out there that you can use, but there's also some tools embedded in things that you already use today. Um, so, you know, I'm just going to name a few off the top of my head mints out there, nerd, while it's out there spending trackers out there, I use Microsoft Excel. Um, there, there, there are skills, there are some, um, um, some tools within, in Excel that allows you to do that. I don't use Excel for that. I mean, it is a spreadsheet. I use it so that I can do some trending work and see if I'm moving toward the goals that I want over longer periods of time. Um, but there's other ways to do that. The one thing that I want to focus on is that if you have a bank account, if you have a credit card, if you have investment or financial management program, they all have some sort of budgeting feature in them.
Speaker 2:Yeah, that's true. But the one my bank has is really confusing.
Speaker 3:So you've got to, again, you've got to be comfortable with it, but you know, that you have to ask yourself why do all these, all these things have budget tools in it, because budgeting is important. That is a fundamental aspect of money management budgeting. You got to know where your money goes, right? Absolutely.
Speaker 2:So when do you use data?
Speaker 3:I use, I use combination of the banking software because you know, my bank, uh, shows me, Oh, you spent your money on all these things. Um, and Excel. So I worked back and forth between them. The other thing that need to do is they, uh, I've talked to several people. They say I do some of my work in, in my credit card. I do some of my work in the bank. I do some of that work that gets, can be a little bit confusing. I try to force everything through one lens so I can see where all the money goes and so that you're not missing anything. And, and then I essentially take that information from my banking tool into Excel, so I can do some other things with it, um, uh, later on, but that's just me. Not everybody has to do that. Find the tool that you're comfortable with and then move from
Speaker 2:That requires you to have some Excel skills. And dad, did I tell you I failed the Excel tests that I had to do for physics both times.
Speaker 3:So I'm going to have a talk about, I need a fel scale. We're gonna, we're gonna, we're gonna talk about that, but that's not for this program. Right. Okay. Oh, and I've also used Quicken, so there's Quicken quick. Well, there's Quicken QuickBooks, the folks that do TurboTax, um, they also have QuickBooks for businesses. Um, they create a, they created a personal finance software tool that ties in, so you can track your money. It's essentially another budgeting tool. Um, I use that for, uh, for, for a little while I got out of that. I liked Excel better.
Speaker 2:Yeah. Yeah. That's fair. All right. That's part one of our show on budgeting. Be sure to join us next time when we finished the second part, part two of our budgeting episode. Um, and if you have any questions for us, you can email us@efespodcastatgmail.com and follow our Instagram at E F E S podcast. Thank you so much for listening. Take care guys.