Transcript
Keith (00:02):
Welcome back to the Proper Cents podcast where money doesn't talk, it works. Keith here, and I'm back with both of my shrewd and sharp witted co-founders, Eric and Nick. What's going on guys? How you guys holding up in these crazy times?
Nik (00:18):
I just spent the day in Salem. So I've been better. Now I'm in my cozy closet office and rapping with you guys.
Eric (00:27):
Yeah, I can't complain down here. It's definitely nice to see a little bit of a light at the end of the tunnel. I had an opportunity to have dinner with grandmother and grandfather last weekend and get the kids together. So it's nice. It's nice to be able to see some light on the horizon.
Keith (00:48):
It's nice to see that we might be getting back to a little bit of what we call normal. Yeah, Nik?
Nik (00:54):
Eric, I know everybody's a little bit different. Unfortunately, my grandparents have passed away, but what's the attitude with your grandma and grandpa about getting together? How cautious are they? Have they got the vaccine?
Eric (01:09):
Yeah. So we were able to do it because they had their second shot here a couple of weeks back and it was nice. I think they've taken the right amount of precaution over this whole time. They weren't overly fearful of this whole process as some people probably have been. Rightfully so, especially people that have experienced loss directly within their families and know what that's like, but they were cautiously optimistic the entire time. They took the right precautions, made sure to stay out of public spaces being in that high risk category. And then were very adamant about getting their vaccines and followed the whole process with that and waited the appropriate time before they came over for a nice small gathering with the family.
Keith (01:57):
Yeah, that is exciting stuff. I was just reading in the news today, which we're going to kind of get into, it seems like the vaccine is ramping up. Obviously Eric, our grandparents are vaccinated and you got to see them, but something like 20% of Americans have received at least one dose and I think 10% are fully vaccinated. So hopefully that will provide, as Eric said, some light at the end of the tunnel.
Nik (02:21):
So Keith, where are you on the vaccination list?
Keith (02:26):
I'm at the very bottom. Let's just say that. So out of curiosity, I went into one of these aggregators or marketplaces rather to see where I landed. The questions they asked were whether I was a smoker, obese, had pre existing conditions or was a frontline worker. I've been hearing of people that were happy to go in there and work the system. I kind of feel like it's my fiduciary responsibility to stand back and let the people that need this to jump in front of me. But, I think that they would have done that for me. So I don't think that I'm getting it anytime soon.
Nik (02:58):
So our cohort, buried Down deep in the weeds on this, I think we'll probably have to wait for some time. I was just telling Keith off the air that I will wait until someone makes it so easy for me, then I will get a vaccine.
Eric (03:12):
Well, there you go. Does that make you part of the problem or part of the solution if they're going to have to drive to your house to get it?
Nik (03:19):
No, I'm conceding. I'm letting at-risk population go before me and then I'll dovetail back. But I'm not an anti-vaxxer or adverse to getting this. I think it's important that we all do our part to stop the spread so we can get back to normal life.
Keith (03:34):
I think I'm on the same page there too. Nik, even if you wanted to get it, as I was saying, it's too difficult right now. I think the people that really do need it are struggling enough. So I'm kind of with you there. Once there's a surplus of them lying around and I can walk into to Walgreens and pick up my prescription and get stuck with the vaccine at the same time, I think that'll make most sense.
Eric (03:53):
Yeah. It's been nice to see actually just the run-up in speed though. It took a little bit getting it all caught up in terms of production and now watching them exceed vaccination goals is a very promising sign. I've been listening to them talk about summertime. We should be looking at potentially herd immunity by that point.
Nik (04:14):
Yeah. And that's something that I think is not talked about enough, not only Americans, but the global community from a science and medicine standpoint rallying together in what is usually a multi-year process and created a vaccine in six to eight months. That is that is a miracle of modern medicine. And then the logistical challenges of vaccinating at-risk populations, getting it sent out, the vaccine has to be stored at a certain temperature. I mean, all of that is really humankind and technology and medicine working together. And it's truly amazing. It's not talked about enough, in my opinion.
Eric (04:59):
Yeah. I agree. I think that it's refreshing to see people work together, especially when we were living through such divisive times as it is. It's amazing what we can do as humans when we all have the same goal and are working towards it. I just wish we would see that a little bit more often these days.
Keith (05:18):
So it sounds like we're all agreeing that we're at least getting on the right track scientifically with these vaccinations as we follow the news on that. Sort of along that same line, paying attention to this $1.9 trillion fed relief lever, does that get us back on track? It's the second one that they're trying to get passed and get the dollars out to the American people. Is this simply a band-aid to kind of slow the inevitable bleeding out of the working class Americans while we continue to just add Dollars to the federal debt?
Nik (05:51):
I don't have all of the answers. This is beyond my pay grade. I tell you I'm wary of central planners in government solving problems just because I think they cause more problems than they solve, and they actually make problems worse when they try to solve them. Unpacking this huge bill that was put together pretty quickly when you adjust for size, there there's a lot of wood in it. There is a decent chunk of this bill that's going to things that don't directly help the American public, which is par for the course, but that is kind of disappointing. And then a lot of it is going to States as well. And I don't want to get political. I don't drink from a fire hose, either left or right.
Nik (06:41):
I try to be an independent thinker, but you think about what a lot of these States have done shutting down their economies, hurting the most vulnerable, those that are required to show up on the job for work, construction worker servers and bartenders, and there's many more. So they took the brunt of it. You can't work from home if you're a police officer. You can't work from home if you're a server. So it's nice to see that they're getting some relief, but so much of what has happened has permanently impaired a lot of these businesses. And I'm not sure that a windfall from the government is a long-term fix.
Nik (07:24):
A lot of this is going to have to go back to education and repurposing of resources, and if you're a server or a bartender, maybe getting out of that and doing something else. I think there needs to be some assistance from an educational standpoint, but it certainly has been an uneven recovery. The gap between the haves and the have nots, you can argue is wider than it's ever been. I'm not sure a government bureaucrat is going to solve that problem.
Keith (07:53):
It's tough to look at this from a macro level and talk about the financial reasons and decision making behind it, while at the same time taking a more empathetic approach. I don't know about you guys, but I'm sure that there's some people listening and I know plenty of them, in my circle or that I know here around town that that could use that extra 1400 bucks multiplied by however many people are in their family. So it's tough to say if its the long-term solution? Maybe, maybe not. And that's probably a long rabbit hole that we could go down, but from just looking around and seeing how small businesses and people are hurting, the other side of the coin is again that when stimulus checks land in peoples mailboxes, it can be a big help right now.
Eric (08:36):
Yeah, I think that's the valid point here. Nik touched on it. This has effected people so differently, right? You've got people at one end of the spectrum that their entire lives have been flipped over. Not even speaking to the people that have experienced family members or multiple family members that have been lost in this, but just from the financial side itself, to bring it more back into focus of what we're talking about. There's some people that just have nothing. They lost their job months ago. They're struggling to find work. There's just nothing out there. Congress, in that sense, they've been moving so slowly with any of this stuff. On the other end, you've got people that have had relatively high paying office jobs that has moved to their house where the biggest complaint now is having to deal with their kids making noise in the background, while they're working in their pajamas and not having to commute and saving money on dining out and auto transportation, gas, all of these things. So the effect that this has had on people is so dramatic. And so when we do this sort of, helicopter spend of resources, that's just for the most part distributed to everybody evenly. I don't know how you fine tune it and get help to just those people you're talking about Keith versus the rest. But I guess we'll see.
Keith (10:04):
Yeah. So jumping back up to the 30,000 foot view. Forecasters have anticipated the 2021 federal deficit to remain, I think, somewhere well above 2 trillion at more than 10%, roughly, of our GDP. This year's budget is anticipated to be the second largest since world war two. Now, the interesting thing is last year was the first largest. It's understood in personal finance that you can't, or you shouldn't, think that you can spend your way out of debt, right? That just is oxymoronic and it doesn't make any sense, but Eric, tell us why the fed thinks that they can?
Eric (10:41):
Well, let me start by saying, it's very common to equate the federal budget to that of a normal household. Since that's what we understand, that's the prism that we look at it through. So you hear political pundits talk about it all the time in terms of not spending what you don't have. You can't do that at home. So why does the government do it? All these other examples that they'll use. It's important for everyone listening, all of us to understand that these are two different beasts, right? So in a personal budget, when I say personal, I mean, an individual, a household, a company, an organization. There's natural constraints that are placed on any sort of spending. So take me, for example. I could liquidate everything that I own, turn it into cash, spend all of that cash and utilize every bit of debt that's available to me.
Eric (11:36):
And eventually I'm going to run out of spending capacity. I can't do it anymore. I've consumed everything I've got. And at that point I need to go out and make more money, create something, do something that's going to bring more into the system. Where the federal government doesn't operate that way. We all know that they have the ability to print money as we call it. Most of it isn't printed these days. There's just numbers transferring on a computer screen, But that is an important distinction because it leads us to the second point. And that is the purpose of a household budget or a company budget versus a government budget is different. The purpose by and large of a household budget is to not only manage expenses, but also to create a foundation, to build wealth, to save money, to save things for future use.
Eric (12:25):
And overall just sort of increased quality of life. When it comes to governments, government budgets, government spending, the primary purpose is to create a framework for a society that allows for economic growth and economic prosperity within the system. And sometimes that involves spending money, even in cases like this when they don't actually have it. So the theory here, to answer your question, why do they think they can spend their way out of it? Part of it from a very macro standpoint is the idea that a rising tide lifts all boats. So in this case, we inject a bunch of money into the system at the bottom level, where all the individuals are. They're going to take that money. Most of them are going to spend it. Some on necessities, some on luxury, some people are going to save it, pay down debt, but for the most part, a lot of the money is going to make its way into the system, through this spending, which then goes onto the business balance sheets.
Eric (13:23):
So they can hire more people, buy more equipment, buy more material. That creates more jobs further down the line. And over time that brings us all up. That's the theory, at least. The dark side of that is how that can affect things like inflation. So the basics of inflation as you get more of something, it becomes worth less. There's a thousand things you could research out there if you really wanted to understand the impact of printing more money. So we really don't know. Are they going to be able to spend their way out of this? Who knows? Like we were touching on a little bit ago, this is kind of uncharted territory. So we don't know what the ultimate solution is going to be. And we don't know what the ramifications of these decisions right now are.
Keith (14:07):
All right, guys. Well, this is a good segue into today's topic, which we fittingly titled you can't afford to be bad at driving a car, the same is true for budgeting. Today's topic is one of the foundational tools in shoring up a sort of a bad financial situation yet it's so often ignored. I do want to preface this for you guys listening today, while you listen keep in mind one simple premise, you weren't born knowing how to drive a car. You learned it because you had to. So let's jump into it. Eric, start with the basics. What is a budget?
Eric (14:41):
At its core, a budget is simply a plan for your money. It's a powerful tool that serves as a foundation for just about any sort of long-term financial success. But before we dive further into that and what it is, I want to talk about what it's not. Because there's something that people do that personally drives me nuts. It's not a dirty word for you to use when you're complaining to your friends. And let me give you an example, Hey, we're going to go out to dinner on Friday night. Do you guys want to come? Nope, I can't. I'm on a budget. We've all heard it.
Eric (15:21):
In fact, I would say that in my own life, even working in this field, that is probably the number one way I hear people refer to a budget. They refer to it as this constraint and almost an excuse as to why they can't do something. And given the fact that most people don't actually have a budget, one, they're either not even telling the truth, but two it's also perpetuating this negative view of what a budget is. So you have people walking around thinking that the reason why their friends or family sometimes are not able to do something is because of this evil thing called a budget. So now let's talk about what a budget actually is. In my opinion, it's the first step to financial freedom. It's the first foundational piece that you build when you are starting to get your financial life on the right track.
Eric (16:16):
It's an example, or not even an example, it's a showcase of your priorities. It shows you not only how much money you make, shows you how much money you spend. It shows you what you spend your money on. So let's say you may think that it's a priority of yours to donate to your favorite cause. But at the end of the year, you look at your whole spending because you finally tracked it and created a budget. And you realize that you donated a hundred dollars and you spent $10,000 on Grub Hub. So yes it might be a priority of yours in your mind to do this. Your actions are showing that it's actually not. And the beauty of that is it's not designed to be a gotcha and go ha told you you're a liar. What it is is it gives you the tools and the information necessary to make changes.
Eric (17:01):
Because once you start to see the pattern, once you start to see how you spend your money on what you're doing with it, then it gives you the ability to find where you can spend less or where you can spend more or where you can transfer this from here to there. And you can start making those subtle changes that over the course of a lifetime will lead to a huge difference in your financial life. So ultimately it becomes a roadmap for your money. Just like when you head out on a trip, we used to take a map with us, or we used to print it off the internet. Now we just plug it into Google. But the bottom line is you don't just head off on the road without thinking about where you're going. You make a decision, you think about it, you make a plan and you head out and the budget is the first step in doing that for any financial plan.
Keith (17:48):
Nik, would you agree that running A household budget is important?
Nik (17:52):
It's extremely important. You look at any business, they have a detailed income statement and a balance sheet. How could you measure progress, either good or bad, without taking a snapshot in time with what's going out and what's coming in? If you make X amount each month and you go out to dinner with your spouse on a Friday night, every Friday night, if you have a casual budget, Hey, I spend 500 bucks on dinner, but you compare that in the context of your monthly income and find out that you're spending over 10% of your monthly income on going out suddenly that becomes a problem. If you're doing it by feel or have some sort of mental accounting system, you're probably missing that. Okay. So getting it down on paper, see what's coming in, see what's going out.
Nik (18:39):
That's a fundamental building block for any household or business. It really is the best way. It's really the only way to capture where you're currently at. If your habits are destructive or they're conducive to building wealth. The other part of that would be get your spouse involved, get your parents involved, get your friends involved. Because iff I keep my budget to myself and cheat and take a vacation, or I spend money on grub hub, like Eric says, and I break my budget, no one's going to hold me accountable. But if you're sharing that with your spouse, which by the way is best practice anyway, because you're a team and you both need to be plugged into what you're doing, but there's a level of accountability which leads to better outcomes. And then the last thing I would say is just get started, right? A lot of people might prepare to do something with their budget or research different software platforms, or start to build a spreadsheet. No, just get started. Just start tracking the numbers, what's coming in and what's going out and then refine it from there.
Keith (19:43):
Nik, I want to touch on the spouses here real quick. Many years ago Eric was actually the first one kind of harping on me to get my family budget put together. I was young, just out of school and he was a few years ahead of me, but talked to me about the importance of doing it early and understanding it. Now, I've always been kind of a finance nerd myself and thought that was a good idea, and went ahead and did that. But the difficult part for me was to get the buy-in from my spouse. Currently we both look at our budgets monthly, enjoy it, because I think that there's actually an aha moment there for somebody that maybe isn't naturally as financially inclined or as excited about doing that. But when you really go, okay, what do you think we're spending this month? Where do you think our dollars are actually going and what dollars are coming in? Then kind of play that game with them and flip your computer around and say, actually, this is what we're spending. Oftentimes, it's going to be much more and in different departments then you think it's going to be. That can be kind of exciting as a, oh, I thought I could just wing this, but this is actually something that we need to be paying attention to together.
Nik (20:48):
Yeah. I've actually kind of made a game of it. My wife is at home with our three kids. She's never really understood investing and finances. I've done a couple of things to try to make it fun for her. She's a big coffee person, right? Loves Starbucks coffee. So I bought her Starbucks stock in her Roth IRA to try to spark some interest on saving and investing. It didn't work, but it was one of the things that I tried. I keep our balance sheet and income statement and what's coming in, what's going out, what our investments are worth. She starting to take an interest in that. I dovetail it into, Hey, if we continue on our current arc and retire early, we'll be able to travel. play games, dangle carrots, try to buy stocks that she knows. I can't say it's worked, but it's definitely increased her interest into what we're doing. And it creates more of a team comradery approach.
Eric (21:50):
I think that's a good approach. You have to do it together. You can't do it in a silo. Certainly there will almost always be one that is more interested in it, and one that isn't. And in a lot of relationships, you'll have a spender and you'll have a saver. Sometimes you'll have two savers and that will lead to good things on the balance sheet, but probably not as much fun day to day. And sometimes you got two spenders and then you've really got your work cut out for you. But the bottom line is you can't do it in a silo. If you're the one that is focused on it and wants to do the daily or weekly or monthly tracking of things, then that's fine. But you have to keep the other one included. Otherwise it turns into a control item and that's where things can become really bad because if you're the one doing it all the time, I bet you are more likely to point out the things they're spending money on, but not necessarily illuminate the dumb things that your spending money on in that conversation. And so if you do it together and you're both a little bit humble about it and admit when you went and bought something silly or spent too much in this category, then it can actually be a very good thing together. But if you use it as another tool of control, then it can lead to problems and animosity between the two of you.
Nik (23:11):
One thing that I did not do, I just got really lucky. But if you're thinking of getting married or if you're engaged or about to get married, talk to your spouse about money, talk to your future spouse about money. Find out their attitude towards debt and spending. Trust me, it's maybe uncomfortable conversation to have now, but it's going to save you headaches in the long run. Do not be afraid to talk about money.
Keith (23:41):
That's excellent advice. So let's get a little bit specific here, Eric, many years ago, you taught me the specifics of budgeting. So let's get to it. How do you do it and what are the building blocks?
Eric (23:54):
So building a budget can be easy. It can be moderately difficult. It can be incredibly hard. And that's completely up to you as the individual or the couple or the household, and how far in the weeds you want to get. I don't recommend difficult budgets. I think that difficult budgets are reserved for people that have a special knack for finance, and that actually enjoy that type of thing. There are some people that like to get very micro with tracking and all the way down to the nitty-gritty on every single detail, but for the general audience, it's best to keep it simple. What we'll talk about here briefly is just a very rudimentary budget to get the wheels turning. Eventually you'd want to get to somewhere where you've got things like savings goals. You're going to have emergency funds. You're going to have targeted goals for trips in the future. And all of those might sound a little weird right now, but we'll come back to those in later podcasts, as we explore the concept of budgets a little bit more in depth. But for now to keep it kind of high level, let's just look at a very basic budget.
Eric (25:01):
So a basic budget at its core is going to be what you make and what you spend. So you start with income. You start with finding how much money you make. And that doesn't mean, Oh, I make $60,000. My spouse makes $60,000. That's $120,000. So we make $10,000 a month. No you don't. You got taxes, you got health care. You might have an FSA or throwing into an HSA. Your 401k. You need to get a handle on the amount of money that's coming into your checking account for a simple budget. So look back in your statements for a month or two, figure out what you got averaged out. Put that at the top. Think of that as your big income bucket at the top of the page or the spreadsheet, whatever you want to us. Next, you go through your bills and you find all your fixed expenses. Your fixed expenses are going to be things that don't change every month. So your rent or your mortgage, your cell phone bill, your car insurance payment. You list those all down.
Eric (25:57):
Finally, you're going to pull your variable ones. These ones are going to be a little bit different. These are things like your grocery. You're dining out. Your fun money. And then add one more at the bottom called miscellaneous. Now you start with the income budget on the top or the income bucket. That one's full. Go down the list, fill in the numbers next to each single bucket that you've listed. So if your mortgage is $1500, you put $1500. Then you take $1500 out of the income bucket. You go all the way down until you fill it out. When you get down to the variables, you take your best guess. You could look at your previous statements, but you just throw in a number there and you start to adjust as you go through and you get the real numbers. The key is every dollar has to come from somewhere. You can't make it up.
Eric (26:41):
We're not the federal government. You're not allowed to spend money that you don't have. So after you've listed all of your expenses below your income budget, hopefully there's some more money left in the income bucket. And that's the things that you can do things with. You can save, you can put it towards other things. But if there's not, then there's an issue there. That means you're probably running up credit card bills or some other forms of debt. And the next goal is you need to go through and you need to find areas that you're spending too much. So once you have a basic budget, as you go forward through your months or through the month, every single transaction needs to go into one of those buckets. And if it doesn't fit neatly into one of them, it goes into the bottom one. That's called the uncategorized bucket. You do that for a month or two, and you're going to start to develop a very clear picture on where your money goes. And so, as I said, that's a very rudimentary example of how to build a budget and we will get further into the weeds on later podcasts, but start doing that now. And then when we get to there, we'll start figuring out how to add in things like emergency funds, savings, retirement, and all of the goodies, and really take you to the next level.
Keith (27:52):
Yeah, that's good. I too don't want to drill down into this too much, but I think that the big takeaway, at least for me is that starting out and the simplistic view of a budget is that every dollar has a place to go. If at the end of your budget you've got some dollars, some income left over, those two will have a place to go in that budget. Whether it's investments, saving for a vacation, a wedding or whatever thay may be. But, at the end of the day, your budget has to net zero. And I think that that's an important concept that people need to understand.
Nik (28:25):
The best thing you've ever said on this podcast is every dollar needs a place to go. I think that needs to be seared in to the bylaws of Proper Cents.
Eric (28:35):
Yeah, that's the foundation of the zero sum budget. And that is when we get further into it, I'm going to actually build upon that basic budget. I like to write it up as income, savings and then expenses. And when you're really a pro at it, you take your income, decide what you want to set aside for various other things. And then you build your life with the expenses that are left over versus just thinking you can save when you don't spend it all. Because what happens is if you wait until the end of the month to save your money, you're going to find a way to spend it.
Nik (29:11):
The bigger message, what we're all saying is what works for Eric might not work for Keith, and what works for Keith might not work for me. So budgeting, as Eric said, has this negative connotation, beaten down and saving. No, it could be fun. You can create your own version of it. You can use Excel, you can use Mint, you can use any back of the napkin approach that you want to, but you should own it and get creative because what putting together a sound budget will do today, you're basically gifting yourself time in the future. Resources in the future to do whatever you want to do.
Eric (29:48):
Exactly. My wife and I have been on the budgeting journey for over 15 years. And I can go back to the very first budget on a spreadsheet that I still have and show exactly where we were back then. And one of the cool things about it is the evolution. It starts and you spend a couple hours and you're grinding through it, and you're trying to find transactions. And by week or month three, you're already up and you're jogging and you're getting better. And it takes you barely 15 minutes to put one together. You just get progressively better. It gets as fun saving money with a proper budget as it does spending in many times too. So when you think we're going to take a vacation to Mexico next Christmas, and we want to save $3,000 to do it. And every month you're taking those savings dollars and you're putting it into that.
Eric (30:37):
Or when you clip a bunch of coupons, because you want to really get into it and you save some money at the grocery store and you transfer another $30 into that fund, watching that grow can have the same dopamine hit as walking into the mall and buying random crap that you're going to wear for a month. And then it's going to end up in the trash. So it's not a constraint. It's a tool that allows you to do the things down the line that all of your friends, that don't budget and they're trying to keep up with the Joneses are not able to do.
Keith (31:08):
Eric, you touched on something here kind of briefly, emergency funds. Without getting too deep into this, let's talk about what constitutes an emergency. I think for the people here listening this will be good for them to hear. Is my spouse, Nick, seeing some fancy shoes that she's been having her eye on, on sale, all of a sudden for 50% off, is that an emergency? Is our daughter's wedding an emergency? What constitutes an emergency and how do people need to really be thinking about that concept?
Nik (31:37):
You can copy and paste the year 2020, drop it into a spreadsheet. That's an emergency. All of the random stuff that happened to you in 2020, that's why we budget. That's why you have three months of savings. Three months of expenses saved up or six months or whatever number that you're comfortable with. I've heard three, I've heard six, it's whatever. But have some sort of buffer in case your plan doesn't go according to plan. And if it's like 2020, it's probably not. Give yourself a margin of safety so one month of random stuff happening does not derail your journey.
Eric (32:13):
And we're going to dive into things like emergency funds as part of future podcasts, obviously. And we're going to unpeel that onion, and we are going to give you the tools necessary to take a budget, how to carve money out of it, set it aside, why you need to do it and what an emergency fund is for. And yes, as you said, Keith, the shoes on sale are not an emergency.
Keith (32:39):
Eric, you talked about budgeting as something that can actually be fun, but a lot of people listening right now are thinking math, finance and maybe I'm not skilled in that. Nick, we understand that it's important. We've heard that. Can anybody do this, or do they need an advanced degree in mathematics to be successful in this? Walk us through how easy, or not, it is to setup a traditional standard home budget.
Nik (33:06):
One. You don't have to be good at math. You can be terrible at math. You can embrace technology, the calculator on your phone. And if you can punch some keys and do basic pluses and minuses, you can put together a budget. And if you don't know how to put together a budget and you don't want to listen to us, you can go online and type in how to put together a budget. And there's probably no shortage of outputs there from Google or Bing or whatever you use. You're going to have to take some initiative, saying you're not good at math or saying it's too complicated. That's not good enough in 2021.
Keith (33:40):
If "I'm not good at math," is not a good enough excuse, what do we say to all those listening now who would say they don't need a budget? I can keep track of it in my head. Maybe my job is super secure. I've been there for 10 plus years. I've got a union job or I'm already debt-free. Essentially, how can we convince any excuse from anyone at any different point in their financial stability or their journey that they too need a budget?
Nik (34:08):
If you're balling out of control and you don't need a budget, and what you've been doing is working, I guess that's fine. If you're like most Americans, that's probably not the case. If you are struggling with money and you're refusing to put together a budget, well, we don't enter this world as finished products. You are a creature of your habits. And I would say, you need to look at the culmination of your habits and you probably have some deeper issues if you're digging in and don't want to create a budget or there's something that's so ugly on your balance sheet or income statement that you think the problem is too big to fix. You're not going to get anywhere. You're not going to make any progress. If you keep doing the same stuff and have the same habits. I've said this before, every body has the same goals, right? We all want to be financially sound and on firm footing and not have to worry about money, but it really comes down to your systems and processes. Your systems and processes you have in place today are going to determine if you reach your goal, or if you fail. And if you're failing and you're digging in against creating a budget, you need to look at your processes and systems and change your behavior.
Eric (35:26):
A budget is simply a tool. You can dig a hole without a shovel. It's just harder, right? And it's probably not going to be as good. It's going to take longer, but you can still do it. And there are unicorns out there that just don't need to budget. You know, there are people that naturally are frugal. There's people that naturally live well below their means. They're not incentivized by things. They don't constantly lust after bigger houses and fancy vacations. They just naturally find a spot in life that they like, and they just make more money than they need. And they know what to do with the money leftover. So there are people out there that can do just fine without a budget. Now, I would wager to say that a budget wouldn't hurt them and they would probably see even better performance as far as long-term wealth building with a budget. It's kind of like salt. Salt can in the worst case scenario, bail an awful meal out, and at least make it palatable.
Eric (36:31):
Like a budget for somebody who's just completely all over the map financially can be that foundation that brings all of their stuff together and gets them on the right track. Whereas on the other end of the spectrum, you walk into a nice steakhouse where you get a $50 steak and what salt going to do? Well, the steak's already great, but it's just going to add a little bit of enhancement to it. It's going to bring that flavor profile up just a little bit better. So even to those unicorns that have everything sort of dialed in, I would say even in that case, a budget is still going to add value. So it's never going to detract. It's only going to make things better by highlighting the areas that you need to improve and giving you extra tools in your tool belt on your financial journey.
Keith (37:19):
There you go, folks. You can't afford to be bad at driving a car, the same issue with budgeting. So go build one. This is a big topic, which we can, and we will spend lots of time on, but that's all the time we have today. So you'll just have to listen in next time when we dig in even deeper on another proper sense podcast and as always be sure to check us out at propercents.com.
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