How much money do you spend on coffee each year? According to Acorn’s 2018 Money Matters Report, the average American spent $1,100 per year on coffee. 40% of those surveyed reported that they spend more money on coffee than saving for their investments. Today’s show is about budgeting, and how by developing and committing to a budget, you can take control of your spending. A budget is a holistic overview of your month to month income and expenses. Ultimately, it helps you manage your finances responsibly.
What are the benefits of having a budget?
a) It helps you to live within your means and avoid debt.
b) It serves as a way to relieve the stress of financial uncertainty.
c) It enables you to make the most of your income by aligning your budgets to your goals.
So, how do you get started with making a budget? Start with monthly gross income, or you begin with take-home pay. Starting with take-home pay is much easier because it is a natural starting point. However, you might want to start with monthly gross income and input all the deductions from your salary like federal tax withholding, social security tax, and state income tax. Then, categorize all your monthly expenses, but first, you will need a category map. Make sure to take note of any unusual large lump of expenses or income and reevaluate this budget every couple of months to make sure you’re on track.
Then, Brett tells us how he creates a budget by using an excel sheet and calculating how much he thinks taxes, insurance, and meal expenses will cost. Plus, he has a baby, so that’s a significant up-front expense; however, the costs are now leveling out. Budgeting has been incredibly helpful for Brett and his wife to understand how they can afford an apartment in New York City. Also, it has been helpful for Brett and his wife to both understand how much they will spend on food each month. Find the right balance between what you will be specific about, (rent, utilities, car payments, and student payments) and what you will have flexibility on in your budget for things like monthly allowances, shopping, and beers. Brett points out that you want some cushion in your budget for the unexpected. Later, Brett explains how he has two budgets – one for the overall budget and then a budget for himself with his wife excluded. Brett has freedom over his budget, and he tries to save some of his allowance for trips. Stay tuned to hear what apps are helpful for budgeting, why you should calculate your taxes, and the trivia questions of the week.
Enjoy the show!
Timestamps:
[01:40] About Brett Lacher
[03:00] The basics of budgeting
[04:00] How do I get started with a budget?
[04:45] Interview with Brett Lacher
[15:00] Apps to help with budgeting
[19:50] Advice for beginning budgeters
[25:20] How does categorizing help with budgeting?
[29:20] Listener question: What are some useful tips around budgeting?
[32:15] Trivia time!
Resources:
Website: https://moneybagel.com
Trivia: http://moneybagel.com/trivia/
Acorn’s Money Matters Report
Brett’s LinkedIn: https://www.linkedin.com/in/brettlacher/
Albert
Tax Calculator
Quotes:
• “Do you have a firm handle on how much you will owe at the end of the year?” -Gabriel
• “Make sure you are achieving your savings goals.” -Gabriel
• “Try to always be conservative in your budget.” -Brett
• “I don’t trust my paystubs; I calculate the taxes myself.” -Brett
