2: Track Spending & Budget

To see the examples in the episode checkout the free corresponding course https://moneyforaveragejoes.com/course/track-budget/

Only transcription below

Welcome to money for average Joe’s, a 12 part series on personal finance. I’m your host, Jason Weaver an average Joe.

0:12

Episode Two is all about understanding where your money is going. And then start course corrections so that you can kind of send the money where you want it to go. Instead, I’ll cover tools and average spending by category so you can live better have more money for what matters most. I love this quote, Chris Hogan. And a study found that 93% of millionaires stick to the budgets they create. And you might say, are they millionaires? And they want to spend their money and have a budget or more likely they’re millionaires because they had a budget, right? So you need one too. And essentially, the envelope system is the best budgeting system that I can find out there. You essentially say here’s how much money I have. You start out allocating it to the different categories, you spend your money. And then when issues arise, you reallocate so a medical bill, something happens month over month or whatever, it’s gonna take multiple months to catch back up, you’re going to reallocate some of your emergency fund, or some of your, you know, fund fund or eating out fun. And you know, whatnot. So I’m going to cover in future episodes, how do you make more money? How do you even spend less work?

1:28
What can you do because some people honestly don’t make enough money to cover all their expenses. And some people want to live a little bit better, so that they can have a nice vacation, the earlier or whatnot. So definitely cover that in future episodes. There are three options that are close to the envelope system that I thought would be great to share with you there are three free and then they all have premium options as well. So I use the app meant it’s completely free. It’s better for seeing where you overspent Okay, it’s not exactly A true envelope system per se, but I use it because it’s free. And it’s on my phone that syncs up everything. And then I review at the end of the month, and so it’s not as good for course correcting in the middle of the month for, for instance.

2:15

So good budget is from Dave Ramsey. And it’s really great for forcing you to move money from one category to another one, something changes, okay. And some people really love the free option, because then you have to manually enter everything and it hurts a little bit more because when you’re using a credit card, it hurts a little less or debit card.

2:40

So Excel is the last option. You can totally use Google Docs or drive and share that with your spouse as well. But essentially, you have the categories we’re going to spend money and if you don’t know how you’re spending your money now whatever budget you make is going to be completely bogus. So you got to use a tool for couple months, at least three, let’s say and then you can say Okay, this is where I’m actually spending my money. And all along the way you can try to try to course correct, of course, but you got to get an honest picture of, you know, do I even have enough money coming in for my expenses. And then I just want to give you a quick refresher Episode One was all about choosing your money roadmap, I take three kind of plans. And I compare them even the Dave Ramsey and the free personal finance course by the Church of Jesus Christ of Latter Day Saints. And now if you can have a plan, that kind of helps you actually have a goal that you want to achieve with your money. So then you can go execute that plan, and reach those goals through a budget may take longer than you want, but you can do it.

3:48

So you can actually manage less to win more. So my wife and I prefer to only manage the categories we always overspend in, and they just so happened to be the same that this marriage can study by offer up found that essentially people have to cut back in or reduce their spending when they’re way over budget or they’re in debt. So, most Americans prefer 68% prefer to cook from home instead of eating out 66% prefer to spend less on clothes and beauty products. I don’t have any problem with that. But 55% cut down on meal expenses. Okay, so even when you’re eating at home not eating as extravagant or pancakes, I guess 46% skip social or extra curly curricular activities. So hanging out with friends. Gotta get over that FOMO there 9% opt out from planning a vacation so no vacation if you’re really really struggling or Why not just do something local or go stay at your parents house or go camping, whatever super cheap, or camp in your backyard, still have some fun 30% took a supplemental or part time job, that’s something I’m gonna cover later, you know, having a side hustle or building business, and a future episode, I really am a huge advocate of increasing your income, help solve the problem more than reducing your spending. And then 7% move to a cheaper home. And I hope that before you buy a home, or pick an apartment, that you get to my episode about that, so that you can, you know, not have to downsize or reduce your spending. And you can, you know, spend less on things like your home that really eat up a huge percentage of your income monthly because, you know, if you’re spending 35% of your income on where you’re living, then that leaves a lot less for everything else that you need. So I also This quote is from the Church of Jesus Christ of Latter Day Saints personal finance free course. Many couples believe that the solution to their financial problem is increasing their income. However, a divided approach to managing money can be far more damaging to a relationship than lower income or lack of financial resources. I love that quote, because you and your wife have become united. And so before I cover how the rest of the United States spends their money by categories, which is pretty neat. I want to mention to our listeners, I created the show as a supplemental guide as you attend with your spouse, the free local LDS personal finance course in your area by the Church of Jesus Christ of Latter Day Saints. Or it could be a supplement for any personal financial training. For instance, Dave Ramsey’s Financial Peace University is really good. But I’ve noticed that these courses don’t dive deep enough at times into the specific tools of are pulled from the best outside studies or resources that kind of have, you know, their framework. And I like to cover things like how do you actually know whether you should rent versus buy, or which school is best for my degree, or, you know, dive a little deeper. And so those are the things we’re going to be covering. But I just want you to know that I’m not officially authorized or affiliated with the Church of Jesus Christ of Latter Day Saints, or Dave Ramsey, or any other personal finance course. I’m just sharing my personal journey and the best resources I have found.

7:33

So let’s cover how the US government actually every year pulls information on on budgets or how most households spend their money, okay. And they report that back and we can go ahead and look at it and I have broken it down by a couple years, and then the percent of spending of that last year’s worth of data. And so we can look and see most Americans are saying they’re spending, you know, 10 Almost 11% 10 and a half percent on food, which kind of surprises me because I love eating. So it’s been more definitely, and I’ll cover how I spend my budget here in just a minute as well, then I won’t cover all of these, but I’ll cover some of the big most expensive expenses. So housing there at about 27% for the churches plan or course that’s high 25 to lower closer to 20% or less is preferred. Then we’ve got transportation 13%. Okay, so most are choosing to spend a little more on their transportation than their food, which blows my mind, but hey, maybe they live far away from where they work, and should actually consider that last option where you move somewhere more affordable or closer where you work, right so you can spend less on transportation as well. So most are only spending 6.7% on health care, and I have to say, if that’s the case, then most of them are actually getting free government health care. Because 6.7% that’s really low. Right? And then there’s a few more on there like, it’s actually says that most Americans have 18% or so left over. And that’s got to be a lie cuz most people are in debt. So personal insurance and pensions, most are putting 9% towards that. Dave Ramsey would say, hey, if you can get closer to 15%, even better, and I know there’s a lot of different studies and there’s a lot of different places you find this information, but I thought that was insightful. You know, entertainment, only 4.35. Right? So I’m assuming vacations fall under entertainment. So that kind of surprised me as well. But you gotta remember, this is you versus you, right? But if you’re like way outside of one of these numbers, if you’re sitting Spending 30% on food and you live in the United States and you have a high paying job and your average income is close to the stats of 60,000. Back in 2017, for instance, then something’s wrong. Right? You’re probably way over on food. So I want it to be you versus you and your situation can be unique, right? But if you’re, like I said, three times more expensive on something like food, then you really got to focus on that. So let’s talk about where I spend my money. You can actually look I took a random three month snapshot, and just did the percentages right there from mint. And mint has its unique special categories with good budget, you might have different categories. That’s one thing that’s interesting mix a little bit hard to compare, right? Like what falls into all these categories from these comparisons. Right? But for my home, I’m 23% of my income food 18% so definitely need to get that down shopping 15 percent need to get that down. Right? auto and transport. I’m 15%. So I’m actually a little bit think I’m a little bit better. No, I’m just a little bit worse 2% worse than the average American so I could probably go down to two from two cars to one car if I wanted to. Right But I’m still pretty close on that. And then it just goes down to down from there health care and fitness. There’s mostly health care. So in those fitness conscious is going to be 10% right See, that’s where I’m thinking that there’s a little bit bogus when it comes to some of these steps the government’s pulling in and then gifts and donations so I donate 10% of my income to my church. So at 10% and then it goes down. All like way down from there. Kids 3% bills and utility 2% fees and charges 2% that was back when I was paying off my credit card. I do not use credit cards anymore for personal will use and so I don’t have that problem anymore. So I got that 2% back. Yeah, that’s probably why it’s going to transportation personal care 1% visions Business Services 1% I think that’s probably my I don’t even remember what that one is uncategorized You know, there’s random stuff 1% you know, and there’s just, it just keeps going from there down to eventually zero.

12:34

So let’s go look at Dave Ramsey actually has a little bit more specifics when it comes to budget, but he gives you a low and a high, right? And all these budgets really suck for divorced people, right? Because divorce people are very poor. They have two houses. So way too much income going towards housing, for instance. And so you’re just going to have to deal with it and if you have irregular income, best thing I can say is just only budget what you currently have. And you know Try to make your money last, you know if you’re a Seasonal Worker had planned to have money during the offseason, right? So you’re gonna have to save a boatload more money during the times you’re making money. But Dave Ramsey’s, you know, he’s got the low end that he recommends and that the high and you can fluctuate a bit, but obviously, if you did all the high, you know, that comes out to like 162% of your income. Right? So I just took the average income another study 2016 saying the average income for American family was $73,000. And then I plugged in, you know, the low and the high on everything from from tithing to housing to transportation. And then you can see, you know, how much money would actually cost you if you have the high budget or the low budget, and how how much percentage he allocates, you know, 24 5% for housing would come out roughly on the low end. To $18,393 in go through all of these on money for average Joe’s calm you stuff to subscribe and you get access to the the 12 lesson course completely free. And then you can actually dive into each one of these. I’m just trying to think what else would be interesting on the high end for housing? $25,751 it’s just, it’s too high. I mean, if you’re a 35% of your income for your house, trust me, you’re going to be I think they call it house poor, right? It’s just all your money is going your house you have no money for anything else unless you’re way high income earner 200,000 hundred and 50,000 a year, and you’re paying 25,000 or 30,000, but you have you know, 20 30,000 a year going towards your your, your savings or your investing. You know, yeah, you can do that. I’m not saying you should maybe you should get more, help more, do whatever else with your money to as well but mean 35% spit insane for the average American just don’t do it. Okay. Transportation the low and 10% right so you can see how this varies from how the United States general populace is spending how Dave Ramsey recommends, I found that his categories are pretty great. The Church of Jesus Christ of Latter Day Saints doesn’t give very specifics on those categories except for like housing, right? So, you know, it’s good, your budgets going to be your budget, and you gotta do what you gotta do. But I hope these comparisons help you see, you know, even me, I’m not average, I’m an average american, you’re probably not average american. And then, like I said, Dave Ramsey from from one of his books, I pulled these I think I pulled the stats. I think he’s moved away from that. 35% for housing stat.

15:58

And that was Episode Two show notes. And how to gain access to the resources from the nine principles course covered today with a bonus. courses that brings up to 12 can be found at money for average Joe’s calm, just a scribe and you’ll have full access to everything for free by educating yourself and applying what you learn. Today you’ll gain new skills and have fun and have money for when it matters most in your life. The show social media hashtag is MFA Joe’s no apostrophe. Please take the time to share something you learn online or share with friends. This show is for general education. I am merely a financial coach. I am not a certified advisor or planner. I have not reviewed your situation so this episode is not considered personal financial advice for you. This is general education. So this is Jason Weaver with money for average Joe’s Have a good day and I’ll see you next time.

Transcribed by https://otter.ai