Frugal Friends Podcast: Budget Better Bonus Series | Step 1: Look To The Past

Release Date: December 28, 2024

Introduction to the Budget Better Bonus Series

In this special Budget Better Bonus Series premiere, hosts Jen Smith and Jill Sirianni of the Frugal Friends Podcast embark on a transformative journey to help listeners gain better control over their finances. This three-part series is specifically designed to aid those aiming to save money, spend wisely, embrace minimalism, pay off debt, or pursue financial independence. The series kicks off with Step 1: Look To The Past, setting the foundation for effective budgeting by examining past financial behaviors.

Step 1: Look To The Past

1. Embracing the 90-Day Transaction Inventory

Jen and Jill introduce the concept of a 90-day transaction inventory as the critical first step in budgeting. This method involves meticulously reviewing all financial transactions from the past three months to understand current spending habits comprehensively.

Jen emphasizes the importance of neutrality in this process:

"Before we get into the past, let's just set a foundation of neutrality. We are looking and we're not judging." [04:39]

2. Collecting and Organizing Transactions

The hosts outline the steps to gather financial data:

• Gather Statements: Collect credit card and bank statements from the last 90 days.
• Create a Spreadsheet: Input all transactions into a spreadsheet, ensuring that every expenditure is accounted for, including fixed costs like rent or mortgage.

Jill highlights the versatility of using spreadsheets:

"We can order it by date, we can order it by location, we can order it by spending amounts so that there's a variety of ways that we can kind of observe ourselves." [06:20]

For those who prefer digital tools, Jen recommends budgeting apps like ynab or Monarch, which allow automatic transaction uploads and easy categorization:

"If you use frugalfriendspodcast.com/monarch, you get 30% off of your first year. So that's really great." [10:37]

3. Analyzing Spending Habits

With all transactions organized, the next step is to analyze spending patterns. Jen and Jill encourage listeners to ask themselves non-judgmental questions to uncover the motivations behind their spending:

• Triggers: What prompts each purchase? (e.g., location, time of day, emotional state)
• Necessity: Did the purchase achieve the desired outcome?
• Impulse: Was the purchase driven by habit, social influence, or emotional response?

Jen advises against asking "why did I spend so much here?" to maintain a neutral perspective:

"We want to avoid the why question. So... how did I feel about this purchase? Did it achieve or get me what I wanted this spending to get me?" [09:48]

4. Creating 'Yes' and 'No' Lists

A practical outcome of the transaction inventory is the development of 'Yes' and 'No' lists:

• Yes List: Items or categories you genuinely value and want to continue spending on without guilt.
• No List: Expenditures you decide to eliminate or reduce to align with your financial goals.

Jen underscores the importance of these lists:

"We need to have a no list and a yes list. They don't need to be long, especially when you're first starting out." [18:17]

5. Evaluating Fixed Expenses

While discretionary spending often garners attention, Jill reminds listeners to scrutinize fixed expenses such as housing, transportation, and food. Understanding these major cost centers can reveal opportunities for significant savings:

• Housing: Consider downsizing, negotiating rents, or exploring cost-effective insurance options.
• Transportation: Evaluate the necessity of multiple vehicles or look for ways to reduce car-related expenses.
• Food: Analyze spending patterns related to groceries and dining out to identify potential reductions.

Jill shares her personal insight:

"We spend the majority of our money on the weekends... It has led to just a greater awareness of free activities both on the weekend and throughout the week." [28:17]

6. Personal Experiences and Insights

Jen and Jill share their own experiences with the 90-day transaction inventory, offering relatable insights and encouragement:

• Jen's Takeaway: Discovered excess cash flow by continuously monitoring transactions, even without formal budgeting.

  "I was happy with what all of our spending was. That's the year." [24:27]

• Jill's Observation: Noted high spending on weekends due to social activities and sought ways to balance spending throughout the week.

  "Knowing I do need to get out, but I don't necessarily want that to lead to increased spending." [28:17]

Their stories illustrate the transformative power of self-awareness in financial management, inspiring listeners to undertake their own transaction inventories with confidence.

Conclusion and What's Next

Jen and Jill conclude Step 1: Look To The Past by reinforcing the value of understanding past spending behaviors as a foundation for future financial planning. They tease Step 2: Present Changes You Can Make Now, promising practical strategies to adjust current spending habits based on insights gained from the transaction inventory.

Jen wraps up with encouragement:

"Thank you so much for joining us in Step one of the Budget Better bonus series. Tomorrow we will be back with step two, which is what do we do with changes now as a result of what we've learned from our past transactions?" [28:17]

Listeners are encouraged to stay tuned for the next installment, which will delve into actionable changes to implement in their budgeting efforts.

Key Takeaways

• Neutral Assessment: Approach past spending without judgment to gain honest insights.
• Comprehensive Tracking: Include all expenses, both fixed and discretionary, for a complete financial picture.
• Pattern Recognition: Identify triggers and behaviors that drive unnecessary spending.
• Strategic Lists: Develop 'Yes' and 'No' lists to guide future financial decisions.
• Continuous Monitoring: Regularly review transactions to maintain financial health and prevent unauthorized spending.

By following Step 1: Look To The Past, listeners lay a solid groundwork for creating effective budgets and achieving their financial goals. Join Jen and Jill in the next episode as they explore immediate changes to enhance your budgeting strategy.

Produced by Eric Sirianni.