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NerdWallet's Smart Money Podcast
Budget Rehab: What Our Hosts’ Spending Reveals About Smarter Money Moves
00:37:33
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- [00:00]
A
Hey, Smart Money listeners, we've got some exciting news. Smart Money is nominated for two Signal Podcast Awards. We would love to win them, but we need your help to do so.
- [00:10]
B
That's right. These awards are basically a popularity contest, so we need you. Yes, you. To vote for us. You can find a link to vote in the description of this podcast episode. You should know that voting closes on Tuesday, October 9th. Put it in your calendar and hop to it.
- [00:26]
A
And thank you for your support as always. Those of you who've been following the show lately know we have a new segment where we rehab a listener's budget soup to nuts and how much they're paying for that soup and those nuts. Today, we're doing a very special edition of Budget Rehab with some unexpected guests. Welcome to NerdWallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Pyles.
- [00:53]
B
And I'm Elizabeth Ayola. Later this episode, Sean and I are going to help two listeners with a new budget Rehab. Guess who? It's us.
- [01:03]
A
But, Elizabeth, we are not listeners.
- [01:05]
B
Yeah, I know we're not, but it sounded good. We're going to go through our budgets and let you all in on the nitty gritty of what your favorite podcast hosts spend their money on.
- [01:13]
A
Oh, boy. But first, our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. For those who are looking for a rundown of what the government shutdown means for your finances, we did an entire segment on it last Thursday, so that's available for you to go back and listen to. Our news colleague Anna Hilhosky is with us for this segment that honestly goes really well with the budget rehab, because it's all about money stress.
- [01:36]
B
Yeah.
- [01:36]
C
Now, everyone take a deep breath. Both of you, take a deep breath.
- [01:39]
A
Literally.
- [01:40]
C
Yes. Do it. We're all breathing. Are your shoulders tight? Is your jaw clenched? You might be stressed.
- [01:46]
A
Yes.
- [01:47]
C
Right. So there are probably a lot of contributing factors there. But today we're going to talk about money stress. Now, a new survey from Neurwald shows that roughly half of Americans, that's about 51%, feel regular stress about money. And that stress doesn't really hit everyone equally either. Here are some of the findings that I want to point out. First off, women report more frequent money stress than men, 56% versus 45%. And by age, Gen Z is most likely to feel money stress, 63% compared to millennials. At 59% and Gen Xers at 54%. Baby boomers, those in their 60s and 70s are less likely to feel this kind of stress compared to younger generations. Now, that's not really all that surprising. Unless you're born into wealth or you're striking it rich at a young age. Younger people are bound to be less financially secure. And right now, there's a lot to be stressed about. Would you both agree?
- [02:39]
A
Yeah, absolutely.
- [02:41]
B
I said too.
- [02:41]
A
I mean, I feel like every time I go to the grocery store, my beloved cream cheese costs a dollar more. I paid $6 for a thing of cream cheese and I'm still not giving up my lox bagels. But it hurts every time I have to pay for it.
- [02:52]
C
Yeah, I don't blame you. Inflation, uncertainty over economic policy, high housing costs, et cetera, those are all going to be causing some stress. And on top of that, money carries a stigma. So if you're struggling, you might also feel pressure to hide that struggle. And that can make your stress worse. But here's the thing that everybody should remember. Money stress is incredibly common. The key is to just figure out how to manage it one step at a time.
- [03:16]
A
Right. And one of the best ways to lower money stress is to take back control where you can amid a situation that can feel kind of out of control. So let's talk through some of these steps so people can feel a little bit more empowered with their money.
- [03:28]
B
Yeah, so I'll kick it off. And something I have grown to love is keeping tabs on where my money is going. Now, I know just saying that out loud might sound stressful, but it can be even more stressful to actually ignore where your money's going. So assess your spending so you can understand what your needs versus your wants are. And you might even find that you have recurring subscription expenses. Last year I found I had two Amazon subscriptions with two different email accounts. I know by looking through my statements. Exactly. And what you can do is track your expenses for at least a month. And I would advise just to do make this like a non judgmental activity. Don't judge yourself. Just observe where your money is going and you're probably going to see some patterns and then where you can make improvements. I'm old school, so I do like to use spreadsheets, but there are apps, budgeting apps, going to plug the Nerd wallet app if you like that, you know, and different kind of tools you can use to track your spending.
- [04:23]
A
Yeah, what I find really helpful is to do this on a weekly basis. I set aside probably 10 to 15 minutes each Sunday when I'm just bored sitting on my sofa and I want to see exactly what I spent my money on over the past week. Does it align with where I want my money to go? What feels good about my spending? What do I want to maybe change over the coming week? And are all of these expenses things that I actually spent my money on? This can also help you find fraud if something does happen to your credit card. So just making sure you have a regular habit of some sort so that you know what your money is doing, that's one of the healthiest ways to stay in control of your finances.
- [04:54]
C
You're better than me, Sean. I do it on pretty much like a monthly basis. So at the end of the month, right before my rent is due, I just want to check and say, what did I actually spend money on this month? And I go back through my accounts and through my various credit cards and just take a look. And sometimes I'm like, didn't do so bad. And then other times I'm just pretty embarrassed.
- [05:12]
B
Who did that?
- [05:13]
C
Who did that?
- [05:14]
A
I mean, monthly or weekly is okay, as long as you have some system. I like weekly because I used to have a problem with overspending. So this kind of helps me rein in my spending a little bit.
- [05:23]
C
Yeah.
- [05:24]
A
Another tip that we like to recommend is really creating a plan for the money that you have. And that's basically what a budget is. It's just a plan for your Money. So at NerdWallet, we recommend the 50, 30, 20 budget, where half of your after tax income is going to needs, 30% goes to wants, and 20% goes towards debt payments and savings. And we realize that a lot of people live in expensive places where this is not realistic. But it's a good general framework to help you find balance to your money. That's what the entire framework was originated around as having some sort of balanced way for allocating your finances, knowing where it's all falling.
- [05:57]
C
And part of that 20% for savings includes an emergency fund. Now having three to six months of needs, expenses that are actually saved or put away. You can tap them when you need to. It gives you a buffer, something to fall back on if things go sideways. But that might not be realistic for everybody. Three to six months is quite a lot. But starting small, setting aside something every single time that you get paid, it'll give you a little bit more peace of mind than if you didn't put any away. And a high yield savings account is always a nice place to park that.
- [06:28]
A
Yeah. Even having $1,000 set aside, which again takes a while to build up for some people, can help you weather most financial shocks. I remember one time I had to get all of my tires replaced on my car that I wasn't expecting. And guess what? My emergency fund helped me weather that without having to sell any of my investments.
- [06:46]
C
Yeah, I just spent twelve hundred dollars I wasn't expecting to on some dental work earlier this week. So yeah, had to tap that. But I wouldn't say I didn't blink, but it just didn't make me feel as like upset about it.
- [06:59]
A
Like, okay, well that's what the money is for.
- [07:01]
C
Exactly. And it's a total need. My teeth are very important to me.
- [07:05]
B
They are.
- [07:06]
A
I'm gonna cosign that.
- [07:08]
B
Speaking of emergency funds, another helpful tip is to reduce your debt. Sometimes when you don't have that emergency fund, you may end up having to charge that expense onto a credit card. High interest, and then it can snowball from there. So you want to look at unsecured debt. Credit card debt especially is tied to higher stress. Now two methods that you can use to pay down what you owe is one, the debt snowball. This can be good for people who like instant gratification and just want to see those, one of those balances gone. So you pay off the smallest debt so that you can gain some momentum and hopefully get to the end of your debt road. Now the second thing you can do is a debt avalanche. And that's when you focus on debts with the highest interest rates first.
- [07:46]
A
Another area to explore as you're considering your own personal financial stress is where your housing falls. We saw a NerdWallet survey that homeowners are less likely to report feeling money stress than renters. It was 46% versus 62%. But of course we have a housing shortage in this country and that's led to widespread housing unaffordability. But owning often locks in your housing costs and provides some stability. If buying is a long term goal, you should explore whether there are loan programs, incentives or lower down payments to make it more accessible. That said, homeownership isn't right for everyone. So just make sure it fits your financial situation and what your personal goals are, not what you think you should be doing with your money.
- [08:26]
B
Yeah, and I don't think that I should be buying a house. So I am actually renting and enjoying renting.
- [08:33]
C
Same here. Sometimes an unpopular opinion, but actually like to rent. It gives me a lot more freedom to move if I need to. Or if my life changes. I am currently living in a condo building, and that building has a ton of problems. Pipes need to be replaced. There are problems with heating and air conditioning. There's mold behind my shower that I inherited. Yeah. And one of the board members, who happens to be a retired detective, and he's amazing, has been looking into everything. He said to me, if you can hang in there, it's such a great building to live with. I'm not an owner, so I don't have to hang tight through a bad situation. And in fact, I am moving next week. So in addition to that. Thank you. Thank you. In addition, that $1,200 for dental work, I also get to pay for moving. I don't renting as throwing money away either. I'm paying for the roof over my head and I wouldn't be able to afford to buy in my neighborhood. So there's that.
- [09:24]
A
Yeah.
- [09:25]
C
Yeah.
- [09:25]
A
I think that sometimes when you're a property owner, either in a building like you're describing Ana, or even just like a single family home, there's a certain amount of Stockholm syndrome that comes with it where you're like, I'm just going to put up with this house because it's great. Oh, this mold isn't so bad because I made it myself through living in this house, and that's not so good. Yeah. But, you know, you live in a really expensive city, so renting is just often the much more affordable option. I have enjoyed being a homeowner so far over the past four years or so. It's especially done some really great things to my net worth that I love. But I'm admittedly not super handy, and I really hate doing home maintenance. The good news for me now is that since I'm renting out my house, my property management company deals with all of that for me, so it's great. Best of both worlds. Kind of.
- [10:10]
C
The bottom line here is that financial literacy and education matter. The neural survey found that about 27% of Americans aren't confident about their financial knowledge. And that was a little bit surprising to me.
- [10:23]
B
Yeah. Knowledge is power, and that's why we.
- [10:26]
A
Have this podcast here.
- [10:27]
C
Exactly.
- [10:28]
B
That's right. That's right. Spreading the good news. And I can say from personal experience, knowledge can definitely boost your confidence. The more you know, the more tools you have to plan, and the more tools you have to plan, the more you can make decisions about what you're going to do with your finances.
- [10:43]
A
And if people aren't feeling confident, I think it's smart to just do one small thing that can make them feel a little bit more empowered. Maybe it is tracking their spending for a month or finding a new savings account that helps you get a better yield on what you're tucking away each month. Something that is really tangible. But you don't have to do everything all at once. And realize that improving your finances, feeling more confident is a really gradual long term process that everyone is doing right.
- [11:05]
C
Revisiting that every month and then adjusting your plan to life changes makes a lot of sense too.
- [11:10]
B
Thank you, Anna. I can definitely say I'm feeling much better now, which is good, because next up, it's budget confession time. And if we hadn't gone through all this, I would still be much more stressed.
- [11:20]
A
Me too. But do stay tuned because you're going to hear much more about Elizabeth and mine's personal money management than you ever thought possible or even asked for.
- [11:29]
B
But before we get into that, a reminder to send us your money questions. Maybe you're feeling financial stress and you need help working through one of the specific stressors. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730-Nerd. We love emails, so please send them to us@podcastnerdwallet.com in a moment.
- [11:52]
A
This episode's Money Question Stay with us. We're back and answering your money questions to help you make smarter financial decisions. This episode we're doing another round of our budget Rehab series, but we're doing it a little bit differently. Elizabeth and I are going to rehab each other's budgets and get a little bit nosy about what we spend our money on and what kind of money we have coming in. We're doing this IRL in person at the Scottsdale, Arizona HQ of NerdWallet. So if you hear people running around in the background, that's just a bunch of nerds making things. Great for you. So with that, let's do it. Elizabeth, should we look at your budget first or mine?
- [12:32]
B
Yours? This was very vulnerable because even though Sean and I are cool co host, we don't know each other's business like that. So now I know more about how Sean spends his money and he knows more about how I spend my money. Okay, so let's start with your budget, Sean.
- [12:45]
A
So I made a little 50, 30, 20 spreadsheet that we use for this segment and I modeled it after Elizabeth Warren's book where she lays out the 50, 30, 20 budget so it was my fun little project putting this together for myself. So looking at my after tax income, this includes my nerd wallet income and my rental income from my property in Washington, I'm making just under 10,000amonth, $9,988. And I'm spending that on all sorts of things. If we look at my 50, 30, 20 breakdown, my must haves, my needs are a little over 35% of my income. My savings score, the amount I'm putting away is around 35.44% specifically and my want score is 30%. So instead of doing 50, 30, 20, I'm kind of doing 30, 30, 30 ish.
- [13:36]
B
Isn't that. I feel like that's so reflective of your personality. It feels so organized and even very balanced and balanced. When I looked at your budget, one of the things that surprised me is how much you're saving. So I know the saving rate, depending on your age and stuff is usually maybe advice to be around 15% right a year.
- [13:53]
A
General advice to put away between 10 and 15% of your income for retirement. But I'm able to save a lot more largely because my needs expenses are pretty low. So right now I have my place in Washington. I pay my mortgage on that. The rental income basically covers that. I throw a thousand bucks a month to my partner for part of his mortgage and I'm not really paying utilities right now. I give my mom 50 bucks a month for the cell phone bill. But beyond that I'm not paying a water bill, I'm not paying electricity and I am paying for homeowner's insurance, but that's part of my mortgage which is like just under $1300. So I'm really fortunate that I have pretty low expenses. I paid off my car earlier this year. That was a big difference. Yeah, that's saving me 350 bucks a month. My car insurance is like 180amonth. I hate to see how high that is, but that's actually pretty normal for my car. And I'm spending like a hundred bucks a month on gas because I work from home. So yeah, I can save so much because I don't have a lot of needs pulling out my money. I don't have kids like you do, so it makes it easier for me to do these things.
- [14:57]
B
I was curious about your healthcare or rather your healthcare expenses. So there was nothing there. So tell me about that.
- [15:02]
A
Yeah, I mean I have a high deductible healthcare plan and I put money into my HSA each month and I don't spend a lot on healthcare, which is why I have an HDHP and an hsa because it's a smart. If you. An HSA is often a good idea if you either have very low health care expenses or really high healthcare expenses and you're going to hit that deductible. I'm knock on wood. And the former category where like I just don't spend a lot on my healthcare, I'm hoping that doesn't change, but it makes it so that my income is pretty stable.
- [15:31]
B
Yeah. So tell me, have you always had that high savings rate? And actually I'm going to ask you a follow up question about your expenses after that. Tell me that first.
- [15:39]
A
I would say no. I think when I was paying off my car, I had, you know, like a lot more. I actually want to play with my spreadsheet and see what my savings rate would be if I had that $350 a month payment in there. So now my must haves are like 38%. So like a 3% difference. That changes things a little bit. And that impacted the amount that I could tuck away. So now the amount I was putting toward my car payment, I'm actually putting that into a car fund because as much as I love my car and I want to drive it into the ground, it only has like 70 something thousand miles on it. I know eventually I will need a new car. So I would love to use the hopefully 10 years that I have before that happens to be able to tuck aside a bunch of cash.
- [16:19]
B
So organized. And honestly, I'm about to pay off my car loan next year. Oh, wow.
- [16:23]
A
Congratulations.
- [16:24]
B
I have not started thinking about planning for a new car, so you're making me feel embarrassed here. So that's definitely something to do. But Sean, your budget is beautifully vanilla. So I want to know, since I can't see it in your budget, what do you spend your disposable income on? And don't tell me all the responsible things that you spend your disposable income on.
- [16:43]
A
I spend most of my disposable income on going out to eat, going to bars and slightly overpriced clothes.
- [16:51]
B
Oh, okay.
- [16:52]
A
So that's my indulgence is like I will buy some nice clothes like once or twice day a. A quarter.
- [16:56]
B
So if I were to look at your bank statement, where do you go out to eat the most?
- [17:00]
A
There's a bar in my neighborhood called Roscoe's that I love. They serve the neighboring joints sushi because they share a kitchen and you can get beer from Roscoe's tap list. And they also, they have Cajun food, which, like, frankly, is just so so. But they have really good Cajun tots, so you can get a bunch of sushi rolls and then you can get your Cajun tots and you can get your beer, and it's the best. So that's where I eat probably most often. There's also an amazing Thai place in my neighborhood called Yaowarat. It's one of the top Thai restauran the country. And it is expensive. My partner and I go there like maybe once every six weeks and it feels indulgent, but it's 100% worth it because life is short. You got to treat yourself.
- [17:37]
B
It is. And money is there to be spent as well, not just saved. Right?
- [17:40]
A
Yeah.
- [17:41]
B
And of course, I have to ask you, where are you buying these slightly expensive clothes from? What are your top stores?
- [17:46]
A
I would love if they would sponsor this podcast and give me free clothes, but I'm a huge fan of Alex Mill. It's a boutique, and the guy there used to work at J. Crew, and they just make really nice basics that I can wear with pretty much anything. You can dress them up or down and they'll last forever. So, yeah.
- [18:01]
B
Love it. I want to know if you could change one thing about your budget. If anything, I don't see nothing that you could. That you really need to change. But what would you change?
- [18:12]
A
I would like to save even more. So maybe find a way to trim, like my. My car insurance. I don't really see a great way to do that. I have a really good price right now. Eventually I'll have my student loan paid off and paying $221.50 a month for that. I would love to not have that, but it's going to be a few years. So then I would just put that amount of money toward my brokerage account, which I consider a form of savings and investing that money. But now I want to hear about your budget, Elizabeth, because we've gotten into some of my details. So let's. Let's pop this little spreadsheet open here. What do you have?
- [18:46]
B
Okay, so in terms of my after tax income, it's about $9,183, roughly, somewhere around there. So that includes my nerdwall income and then my freelance income as well.
- [18:57]
A
And your freelance income is mostly from you writing articles?
- [18:59]
B
Yeah, that's all I do. And a tip for that is I have contracts with these people, so I know basically how much I'm going to make each month. Which each of the contract works.
- [19:09]
A
There's often such a regularity to it. Right?
- [19:11]
B
Exactly. I have my housing costs, I pay rent. Happy renter. And I pay $2,375 in rent.
- [19:19]
A
That's for that. Good for your area. I have no idea what the Houston rental market is like.
- [19:22]
B
That's amazing. Living in Florida, I was paying that amount for a two bedroom apartment. I pay this for a four bedroom house with a lush garden. So to me, definitely value. Utilities are boring, but I pay around $200 for that.
- [19:37]
A
That's not bad.
- [19:38]
B
No, it's not. Internet and phone. I'm proud of myself because I think at the beginning of this year or last year, I cut that bill down to about 60 bucks. So my phone bill, how do you do that? Well, I switch my phone. Don't ask me the company right now. I should know, but I don't off top of my head. But I pay about anyway. Exactly. I pay about $25 for my phone bill and the reception is fine, just fine.
- [19:57]
A
25 dol. And you have like unlimited Internet and it works where you want it to and hotspot too.
- [20:04]
B
And I was paying around $70 before.
- [20:06]
A
So I know you heard it here folks.
- [20:08]
B
Exactly.
- [20:09]
A
Cut your cell phone bill.
- [20:10]
B
And you know what? It was actually a nerd shout out to Tommy who recommended that to me because he has an article, Tommy Tindall, on how to basically get cheaper phone plans.
- [20:18]
A
We'll link to that in the show notes.
- [20:20]
B
There we go. Medical care. I only pay $47 a month, so.
- [20:24]
A
Like that's also not bad.
- [20:25]
B
No, it's not. So like you, I have a high deductible health care plan and an hsa. I also don't go to the doctor often, so I don't spend much money for you. I know, I know. Let me see what else I got in here. I still do have a car payment and I pay about $350 a month for that. I'm about to up that to 400 so I could pay it off at the end of next year.
- [20:46]
A
Show me how your money maps out in terms of like the 50, 30, 20.
- [20:50]
B
Oh yeah, sure, yeah. Okay. So in terms of the 50, 30, 20, 41% is spent on must haves monthly savings. I have about a 46% savings rate and a 12% want score.
- [21:03]
A
That's really good. I mean I will say your wants seem a little unbalanced. Are you going out to eat? Are you having fun?
- [21:09]
B
I absolutely am. And I'm a shameless going out to Eat. I order queva kava, however you say it, maybe like once or twice a week. So I do eat out quite often. And like I said, I do like to shop, so thrifting is my guilty pleasure. For clothes.
- [21:22]
A
Is that where most of your wants budgets going toward the cabo?
- [21:25]
B
Yeah, Food and clothes, I would say. And then sometimes so what I don't do. So you didn't ask me this yet. If I had to improve something about my budget because I have such a relatively high savings rate, sometimes I don't plan for, like, unexpected expenses and I'll just pull it out of my savings.
- [21:39]
A
But one time a year, something pops up. Yeah, I just had that with my pet's health insurance, and it was a nice, like, $2,200 surprise. And that's. So I did the same thing. There is this kind of rebalancing of. All right, I guess I pulled some money from my home improvement fund because my pets are part of my house is how I justified it. That was a good girl Matt there. But it's. It's really easy to forget those expenses, right?
- [22:00]
B
It is. And speaking of which, my credit card annual fees always surprise me, and they need to stop surprising me. So I go, oh, my God, 504. So I'll go, oh, my God, $500. Oh, my God, $700. So, luckily, I have it in savings, but I should plan better for it.
- [22:19]
A
By putting aside a reminder.
- [22:20]
B
Exactly. $100 extra in my savings a month or whatever, so that.
- [22:24]
A
Another savings bucket just for your annual fees.
- [22:26]
B
Who knows, Sean? I might end up with 10 savings accounts just like you. Exactly. I might. I might.
- [22:32]
A
Okay. And so what would you say was surprising going through this exercise? Because had you mapped out your finances in this way before?
- [22:39]
B
No. So I haven't, actually. And, guys, don't. Again, don't stone me. But I haven't actually put my budget in a 50, 30, 20 budget. So it was interesting to see how high my savings rate is. And also settling for me, because I'm hard on myself and I feel like I should be saving more, but it's like, girl, you're almost saving half of your income.
- [22:57]
A
If I'm looking at the spreadsheet correctly, you're ma. You're maxing out your 401k.
- [23:01]
B
I am. Yeah. And I'm aiming to max out my education. Thank you. Thank you.
- [23:06]
A
And you're putting 500amonth into a taxable brokerage account.
- [23:09]
B
You know, I want to retire early.
- [23:10]
A
That's so good. I'm putting in 300amonth in mine. And I just actually upped that because I was doing like 150. And I figured, like, I can, I can do that. I also want to ask too, what feels gratifying about how you spend your money?
- [23:23]
B
The first thing that comes to mind is going on adventures with my son. I think that's priceless. So whenever I spend money on our little adventures, I'm always happy. And just knowing that I'm saving towards retirement, that's not something many people in my family have done, you know, so it just feels like I'm doing something different. And also, I'm showing my son what's possible in terms of if you're diligent and consistent and you save. So it's nice seeing my income go up in terms of my savings.
- [23:49]
A
Yeah, yeah. For me, one thing that I've been trying to invest more in is donating to causes that I really like. So I. I care a lot about hunger and so I donate to food banks in this small town in Washington where I have my house in Oregon. And I just started donating to World Central Kitchen because they provide meals for people in Palestine. So it's important to put your money where your values are. We talk a lot about values on the show. So, yeah, I've been just trying to think about that too, because I. We are so fortunate to have our needs not be 50% or 60% of our income like it is for so many people. So where can we put our money to make it more effective, to make a better world?
- [24:26]
B
I agree. I do donate to a few charities, but you're reminding me that I could definitely donate more.
- [24:31]
A
So one thing I'm wondering about too is where your son fits in. Is he part of that 12% of your wants, like in terms of his extracurriculars, or is he under that 46% of your or 41% of your needs?
- [24:45]
B
Yeah, he's in both, so he's definitely in the wants. So going out to eat, he's muddled somewhere in there too. I'm not a huge toy buying mom, so I do not buy him a lot of toys. He barely plays with the ones that he has. So honestly, I'm more of an experienced mom. So I'll spend money on you guys just went ziplining. Exactly.
- [25:00]
A
So cute. I saw the videos of that.
- [25:01]
B
It was so fun. And it was probably spent with. With food because we went out to eat after that probably was like $150 trip. Right?
- [25:07]
A
So after you did that, if you spent that money on the Experience. Did you discuss, okay, I allocated this amount of money for us to go out and have this time together. And I'm putting my money into this versus buying you some other piece of plastic.
- [25:19]
B
Absolutely. So I have started trying to help him weigh out, like, the value of what something is. So, for example, he's been wanting to buy a drone. Every time we go to the store. He's like, mom, can I get this drone?
- [25:30]
A
And how much does the drone cost?
- [25:31]
B
Well, we were at Walmart the other day and he saw one for $60. And I'm like, okay, that's great, but we have to do, you know, price comparison. So this might not be the best one for the best value. So let's look at some other stores and see if we can find one at a good price that's also good value. And then he had a pause and he's like, oh, right.
- [25:47]
A
So the light bulb went on.
- [25:48]
B
The what? The light bulb went on. So we kind of do have all these money conversations every time we do an activ. And maybe he asked for something else and he's like, I didn't get anything today. And it's like, well, no, we just paid for ziplining and food. Right.
- [25:59]
A
You don't need a treat every day.
- [26:00]
B
Not every day.
- [26:01]
A
As nice as that would be.
- [26:02]
B
Exactly, exactly. So, Sean, we've been talking about all this, but I want us to go back a little in your history of budgeting, and I want you to tell me when you actually started budgeting and why. So how did you start budgeting?
- [26:13]
A
I can honestly say I didn't really start budgeting in a sincere, thoughtful way until I started working at NerdWallet, which was like, nine years ago at this point. And it wasn't because I had loads of money to throw around. In fact, I didn't really have much at all. But I just put my head in the sand and just hoped that I had enough. And oftentimes I didn't. Like, there were times in my early 20s where I would try to buy groceries and my debit card would get declined because I didn't have a credit card. And that was. You would think it would be a wake up call for me, and it just wasn't because I was so avoidant with all of it. And then once I started working at NerdWallet and I realized that there were different ways to approach budgeting, I understood that. Look, I like to know where my money is going. That's why I have all the 10 savings buckets and I have my money Generally mapped out. But I'm not a super granular budgeter. I'm not doing zero based budgeting where I know where every single penny goes, because I'm more of like a big picture kind of guy, if you will. So that's what's worked for me because I set up the system of having my direct deposits into various accounts and it's, it's been fine. You know, as we can see in my numbers here, I have my finances pretty well organized, but it was a process of discovery around, like what would I want to do with my, my budget on a regular basis? How much time do I want to spend thinking my money is going? I'm one of those people that thinks that we should all be trying to get to a place where we don't have to think about our money too much. And budgeting with the system that I have allows me to do that.
- [27:33]
B
Yeah.
- [27:34]
A
And what about you, Elizabeth?
- [27:35]
B
Well, for me, to be honest, it's when I found out I was pregnant with my son. So before then I was kind of just yoloing it, you know, and have.
- [27:43]
A
A wake up call, a bit of.
- [27:45]
B
A wake up call. So I was just like, well, I guess my expenses are about to double and I guess I got to figure out how to pay, you know, for another human. And I just remember I started saving aggressively and lowering my expenses, but I didn't really have a formal way of doing it. That's just what I was doing, saving.
- [28:01]
A
What were you doing in your life at this time? You Weren't working at NerdWallet?
- [28:04]
B
No.
- [28:05]
A
Seven years ago, right?
- [28:05]
B
Oh my gosh. I was writing. Yep, I was writing and I was freelancing and I was in a content mill and I was writing about 10 articles a day and they were paying me $8 per article.
- [28:17]
A
That sounds miserable. Yeah, just you weren't making quite as much as you were making now.
- [28:21]
B
No. So it's been, it's been a journey for sure. But even with that, I was, yeah, the motivation was I have to take care of a child. So yeah, so that's basically when I started budgeting and as I started learning more about money, I guess would refine my budget and realize, okay, aside from putting money in a savings account, I didn't know anything about retirement back then. But when I joined NerdWallet, of course I learned a lot more about it and started putting my money into different buckets, if that makes sense.
- [28:44]
A
So, so, so how do you approach it now? You're also not like a zero based budgeter Right.
- [28:50]
B
Well, you know, we are twins, you know. Hey, twin. So no, I am not a zero based budgeter, but I will say sometime last year when my budget got a little out of whack, I did do zero base budgeting for a couple of months just to see where all my money is going.
- [29:05]
A
What do you mean?
- [29:06]
B
Oh, overspending. So I just found. I kept overspending. So I was still saving a lot. Well, it was around the time I moved, so I had just huge expenses. I think I had almost like $20,000 saved for my move. And don't ask me how I blew through that. Buying new furniture.
- [29:20]
A
Deposits are expensive. Yeah, deposits, that'll really do it.
- [29:23]
B
Put my son in private school. So just all these big expenses came up.
- [29:26]
A
We had to move the fish for listeners. Moved fish from Florida to Texas in the trunk of a car. U Haul and in the U haul. And what? Two out of three survived?
- [29:37]
B
One out of two survives.
- [29:38]
A
Okay, okay. Well, I guess 50% success rate isn't maybe the best.
- [29:43]
B
Well.
- [29:43]
A
Well, the fact that a single fish could make it that far. I mean, you're putting your money in an important place keeping that fish alive.
- [29:49]
B
Exactly. And not to throw my son's godfather under the bus, but the second you are. I am. Hey, if you're listening, the second might have survived if he listened to me and didn't put both of the fish in the back of the U Haul where it was so hot.
- [30:01]
A
Oh, no.
- [30:02]
B
So the one that survived was such a fighter because it survived all those hours in the back of the U Haul.
- [30:06]
A
Is it still alive?
- [30:07]
B
Yeah, it's still in there.
- [30:08]
A
What's its?
- [30:09]
B
Oh, he doesn't have one. Maybe. Oh, he deserves.
- [30:11]
A
Or they, they deserve a name.
- [30:13]
B
You're right.
- [30:14]
A
Me and I are so much.
- [30:15]
B
We're gonna work on that when we get home, we're gonna choose a name.
- [30:17]
A
And how much are you paying a month for this fish?
- [30:19]
B
Oh, they're so low maintenance. I love them for that.
- [30:21]
A
There you go.
- [30:22]
B
I buy fish food and it's about, I don't know, 15 bucks, maybe every three or four.
- [30:26]
A
And that's under your needs?
- [30:27]
B
Yeah, that's under my needs, exactly. But low needs.
- [30:30]
A
Yeah. One thing I want to ask you about too is what would you change about your budget if you could?
- [30:36]
B
What I would change. I know I'm a little chaotic. Right. So I'm not perfect with my budget is that I do not really plan for those maybe one time annual expenses.
- [30:45]
A
Yeah, the credit card annual fees.
- [30:47]
B
Yeah, exactly.
- [30:49]
A
Okay. Also, how do you justify all those expenses because I have a really hard time paying credit card annual fees. I just got my second credit card with an annual fee. I'm now at around $600 a year total in fees and I'm thinking I might nix my older card that has a fee because what is it? Is it worth it? For me sometimes? No.
- [31:06]
B
So what's interesting is I more recently got, I guess two of my higher fee cards within the past year or year and a half. So I'm in the process of testing out whether it's worth it. I am most likely going to cancel my Chase Sapphire reserve since they increased that price because so far I can't.
- [31:25]
A
Justify it's so expensive and you have to work really hard to make it break even. And for me, I'm a lazy credit card person, so I'm not about that game. But. But you are still kind of trying out different products and that's how you make it worth it for your budget.
- [31:38]
B
Exactly. And luckily the travel gals on the Travel podcast at NerdWallet Travel. Thank you. Are going to help me think through or talk through whether all of those cards are worth it and the fees are worth it. But if not, I guess I'll just chalk it up to my wants bucket.
- [31:53]
A
Okay, well, maybe we can both, both commit because we mentioned that we both struggle with these like one off annual expenses to putting aside a pot of money to cover that expense. No, first of all, we need to know exactly how much we have coming up because I have the same thing. I have a magazine subscription that hits every spring and it's like $250.
- [32:12]
B
What magazine are you paying 250 for, Sean?
- [32:14]
A
It's the New Yorker. It's probably not 250. It might even be more. Who knows? By the time this goes live, the prices raise every year. But it's worth it for the journalism that I'm getting. However, it's always a shock and I hate that kind of unexpected expected expense. So that plus my pet's insurance and that's. That's what's harder to account for when you are doing like kind of loosey goosey budgeting sometimes.
- [32:31]
B
Exactly. So I think maybe you have convinced me to open another account because why not savings account for those expenses so I can just pull from there and it doesn't feel so awesome or long.
- [32:41]
A
You'll have 10 savings accounts just like me.
- [32:43]
B
Oh my gosh, probably not. You know, I'm all over the place, so I probably wouldn't be able to manage all at once. But another one won't hurt.
- [32:49]
A
Okay. So I love how you share your financial journey with your son. If there is one thing about how you have gone through your budgeting journey, you would like him to learn the easy way through you, not the hard way by going through it himself. What would that be?
- [33:01]
B
Oh, I know, I know everyone's probably sick of hearing this, but I think a huge part of budgeting really is needs versus wants. And also not just that, having a financial goal. Because I think when I started having financial goals like fire and early retirement, or just even incremental goals like wanting to get my savings from 0 to $50,000 in my 401k, it helps me to say no to some needs that I might want to do in the moment because I'm working towards a goal. So I think teaching him to have goals that motivate him, that align with his values and also fit in with his lifestyle would be the foundation of him choosing whatever budgeting system works for him.
- [33:38]
A
I love that.
- [33:39]
B
Yeah.
- [33:40]
A
Yeah. I find for a lot of people, they don't know their numbers. And that's something that I encounter talking with clients for my firm where I try to get a grip on where their budget is first and foremost. And it's such a journey of self discovery. And a lot of folks don't realize that they are spending so much on discretionary expenses. And look, we all have to live. There's no guarantee of tomorrow. I'm not saying just live in a hole in the dark or anything, but. But you have to know what you're working with so you can make those changes, so you can have those goals and put away the money so that you can achieve what you want in life.
- [34:09]
B
And it's empowering. You know, I think it's really empowering to look at your numbers, even though it might feel scary at first. So.
- [34:15]
A
Yeah. Well, this has been so informative. I don't think we rehabbed anything about our finances, but we did commit to one change, which is going to be getting a grip on our once a year unexpected expenses. But I'm proud of us for being so vulnerable and open with each other. So thank you for sharing that.
- [34:30]
B
Thank you for sharing too, Sean. We're having a kumbaya moment.
- [34:34]
A
That's all we have for this episode. Remember, listener, that we're here to answer your money questions. So send them our way. You can call or text us on the Nerd hotline at 901 6373. That's 901-730-Nerd or email us@podcasterdwallet.com and of.
- [34:48]
B
Course, we want you to join us next time to hear about when it's better to trade in your car than fix it up. Follow Smart Money on your favorite podcast app that includes Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.
- [35:02]
A
Here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
- [35:12]
B
This episode was produced by Tess Vigland and Anna Helhoske. Hillary Georgie helps with editing, and Nick Krisimi mixed our audio. We want to give a huge thank you to NerdWallet's editors for all the ways they help us.
- [35:23]
A
And with that said, until next time, turn to the nerds.