Podcast Ep. 10: The 5 Minute Way to Calculate Your Expenses
Invest In Your Life Podcast
Ep. 10: The 5 Minute Way to Calculate Your Expenses
One of the biggest hurdles I run into when working with clients on their retirement planning is figuring out how much they spend each year. Sounds like something that folks would have a handle on, right? But not so much, especially with higher-earning clients.
Forget the budgeting apps, spreadsheets and credit card statements. In this episode, I walk you through the way to figure this out in 5 minutes.
00:00 Welcome to the Invest In Your Life Podcast, the show where we explore the connection between personal growth and personal finance. My name is Patrick King, and in each episode we'll talk about what you can do to live a life that's truly rich. Don't take this the wrong way, but I am not giving you advice. I only give advice to clients who have hired me to be their fiduciary financial advisor. If you're not one of those folks, then just consider this to be helpful tips and information and be sure to consult with your financial advisor, your attorney, your CPA, your witch doctor, or your mom before you try this at home.
01:01 Hey there folks. Welcome to the show. My Name's Patrick King and I’m the host of the Invest In Your Life Podcast. Thank you for being here today. I've got a good show for you. Forget about doing a budget today. In this episode, I'm going to show you the quick and easy – most importantly – the easy way to figure out how much you spend every year. Now, why would you want to do this? This tends to be the number one hurdle that folks deal with when I start working with them and figuring out exactly what their retirement savings can buy them. They have no idea how much they spend in a lot of cases. But before we get into all of that, I want to let you know that I've got a new ebook called the Five Secrets of the Ultra Wealthy. You can access that on my website, www.investinyourlifepodcast.com. You know, over the years I've worked with CEOs all start athletes, grammy winning, recording artists, and then dozens and dozens of ultra-high net worth families. And I've seen firsthand how they invest their time and money. And if you've ever been curious about what that level of wealth looks like, how they think and what they do, go to www.investinyourlifepodcast.com and download that today. So that's that. So yeah, let's get into it. Gratitude for today.
02:37 So, gratitude for today. One thing that I'm very, very grateful of right now is, and this is something that was just brought to my attention, just kind of out of the blue, is I'm just so grateful that I am healthy enough that I can get out and just walk three miles for me, like a three mile walk. It's just a normal walk. But I realize that for some, walking for three miles is a bit much even for healthy people in some cases. So some very, very grateful that it's something that I can do. I've always been able – even running, being able to just roll out of bed and run for three miles with relative ease. So that's something that I realized that not a lot of people have access to. And so I'm grateful for that. And then there are people who can't walk at all. So I'm very, very grateful for that ability. So that's my gratitude for today.
03:33 All right, let's get into the topic of the day. Do you know how much you're spending each year? That's all. Like I said, it's a big roadblock for a lot of the folks that I’ve worked with when it comes to retirement planning. You know, we have to figure out how much you need to spend every year in order to do all that math. Right? And people just don't know. And it's not just folks who, you know, maybe are struggling to save. In most cases it's actually the folks who make a lot of money and have no idea where it goes. So, the quick and easy way to do this is a first grab your tax return. If you grab your tax return and a look at your adjusted, uh, easy for me to say, adjusted gross income.
04:22 So for this is 2019. So last year's taxes were for 2018. On the 2018, 1040 Form, it would be Line 7, Adjusted Gross Income. So, take that number and then from that, subtract your total tax. In 2018, that would have been Line 15. That would have been everything that you've already paid and everything you owed when you finished your tax return (like most of us in 2018). So, subtract the total taxes. And then after that, subtract everything that you saved last year. Now, as far as 401k or qualified plans, the stuff that would have gone pre-tax – that's already baked into your W2, but anything outside of that, subtract that number. Then finally, subtract everything that you gave away to charity. So there you go. Everything that's left over should be what you spent in 2018, assuming that that's the tax return that you're looking at.
05:29 So, when it comes to the things that you can do with your money, there's only a handful of things that you can do. You can spend it, you can pay your taxes, you can save or invest it, or you can give it away. And there you go. So, if it's not one of those things, if it's not a paying taxes saving or giving it to charity, it's got to be spending. So, that is the quick and dirty way to figure out how much that you spend every year. And believe me, this is why I ask for tax returns. One of the many reasons that I ask for tax returns from clients is so I can get a double check on exactly what they're doing as far as expenses every year. So, it's the quick and easy way and I hope you enjoyed that.
06:17 All right, so for the ordering off the menu segment this week, this is kind of a quick and easy one. One of the things that – you know, I'm just, I'm not really that much of a TV fan to be honest with you. But it's easy to get into the routine of, at night, trying to decompress and throwing on the television, especially if you've worked super hard during the day. But something that my girlfriend and I have started, that we have done over the last couple of nights is working a puzzle. And it sounds super, super simple and old school, but I have to say it's been a lot of fun. It's been super engaging. I haven't really talked to a lot of folks who have worked a puzzle recently, but it's – I love it. And it's, I think, a great a change-up from watching television or as an alternative to watching television. So that's ordering off the menu this week.
07:18 So Q&A this week comes from a young man in Atlanta. He wants to know what is the best way to invest if you're just starting out. So, this is a question I get quite a lot from young folks who may not be a good fit for me to work with them as their financial planner or invest their money. A lot of times it just wouldn't make sense for my fee to come out of a smaller portfolio. So, it's easy. There are lot of, um – it's easy in principle, right? But there are a lot of resources out there for folks who might want to do, like a target date fund is always a good example or a good way to start out. You can Google resources about a one, two or like a three or four fund to portfolio.
08:12 And then finally, because I get this question so much, I actually put together a free course, it's called the No B.S Guide to Investing and it'll walk you through a simple way to invest your money. If you're just starting out and you don't need a lot of guidance that you feel like paying for – at least for someone at my level that who isn't always the cheapest. So to get the guide, go to www.investinyourlifepodcast.com and click on the free resources link there in the menu. So, it's called the No B.S Guide to Investing. It’s in the free resources section. It'll walk you through everything you need to do as far as understanding what the heck you're doing. An example portfolio, how to open an account and trade funds in there as well. So check that out. I've got a paid version of the course to a, if you want a little bit more detail, it's also there in the resources section, so check it out.
09:23 Okay. Pura Vida time. Pura Vida. I just lost my Spanish accent. Not that I really had it to begin with, but Pura Vida. So today, going back to the whole optimizing the diet thing. Wow. Update for you. So, I did that food allergy tests, the ELISA/ACT Test, along with another one. And Jeez, it turns out that, and I got a nice little card there for those of you that are watching this on YouTube, you can see it. I'm allergic to, I guess, black pepper, green grapes, clarified butter, a couple of food colorings and have moderate reaction to pork. So yeah. Good luck with that one. Right?
10:18 I've done my best to avoid all of those things since I got my test results back. But at the same time it was like, geez dude, I mean if I go out to eat, they're going to put pepper on it and then half of the world is made out of bacon. So, that's what's up. So I'm doing my best to abide by that and go by that. But at the same time, it's probably going to be an 80/20 thing for me on that. So that's an interesting update on the diet optimization for me. I am starting intermittent fasting this week, which I think has really helped a lot. I found that I've gotten a lot more energy after doing that for even a couple of days and a lot more mental focus too. So those of you out there who are doing intermittent fasting, you know what I'm talking about. And if you've got questions about any of this, like who I went to get all this food allergy testing and stuff done, hit me up, firstname.lastname@example.org and I’d be happy to put you in touch with those folks.
11:21 Okay. That's the episode for today. Thank you for tuning in. Thank you for sticking with me until this point. I'd love to hear your feedback. What would you like to hear more of? What would you like to hear less of? Email me email@example.com and always you can get in touch with me through the website as well. www.investinyourlifepodcast.com Access me there. Hit up those free resources if you're interested as well. And until next time I will see you later. Cheers.
12:11The thoughts and opinions expressed here are my own and or for general information only. They are not intended to be recommendations or specific advice for anybody. I'm not a doctor or a licensed therapist, so please consult with your healthcare provider if you had any issues regarding your physical or mental health. Any investment performance that's referenced here is historical and of course has no guarantee of future results. Last, but not least, the Easter Bunny isn’t real.