Podcast Ep. 14: Why Budgets Don't Work

Podcast Ep. 14: Why Budgets Don't Work

Invest In Your Life Podcast

Episode 14: Why Budgets Don’t Work

Does traditional budgeting ever work? In this week's episode of the Invest In Your Life Podcast, I talk about why people still aren't saving -- and a better way to think about budgeting.

FULL TRANSCRIPT
00:04  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.

00:29  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 than 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.

01:02  Welcome to the Invest In Your Life Podcast. I'm Patrick King, your host. I've got an exciting show for you today. I think it's exciting. It’s about budgeting and why traditional budgeting, I think, doesn't work and what I recommend to do instead. But first I want to let you know about the Five Secrets of the Ultra-Wealthy. You know, over the years I've worked with CEOs, all-star athletes, Grammy-winning, recording artists, and dozens of other ultra-wealthy folks. And through that time I've been able to see how they invest their money and how they invest their time. If you've ever been curious about how those folks operate, go on over to www.investinyourlifepodcast.com and download that free resource today. You may be surprised at how they think about budgeting their time and their money. All right, so, you know, let's get the show started.

02:07  All right. First off, I want to do some gratitude today. I'm very grateful that my financial planning practice has taken off and things are really moving and it's been, uh, coming up on a two years that I've been out of my own. You know, I've been doing this for a while and it's really heartening to see, all of a sudden, the business going in the direction that I want it to go. It's been certainly one of the biggest challenges I think I've ever done in my life, but it's also been one of the most rewarding ones. And so I'm very grateful that I'm at this point right now. Um, yeah, and that's gratitude for today.

02:52  Okay folks, let's talk budgeting – the B word. Everyone loves a good budget. Uh, that's not true. That was sarcasm if you couldn't tell. Um, and then by the way, I'm doing this, I'm testing out some new equipment today. I'm going to take this show on the road and start doing some interviews, out and about in public. So look out for those. It's a beautiful day here in Atlanta. I'm outside enjoying the non-broiling temperatures that we have in June, which is a rarity for us. And if you hear some leaf blowers in the background, those are leaf blowers and uh, I try not to get annoyed by those, but they're here all the time and it is what it is. Anyway, so thanks for bearing with me along with the new equipment issues. I'll get it figured out at some point and I won't let that stop me.

03:42  How about that? All right, back to budgeting. The idea for this week's episode comes from a GQ article that I saw this week called, “The Personal Finance Industry Is a Scam”, which, I think it was a, I of course it caught my attention, you know, being in the personal finance industry. It was really interesting read. So, I encourage you to Google that and read it if you get a chance. The author had a chance to talk with Suze Orman after hearing her speak. During the talk, Suze, you know, she recommended that folks quit their latte habits of paying for the five or seven or whatever dollar latte you get at Starbucks or your favorite coffee house of choice, in order to gain wealth over time. Well, the author being a law school student with over $200,000 in student loans, came up to Suze after the speech, after her speech and asked her what her advice would be for her student loans.

04:52  And she gave her just some flippant advice saying, well, you know, your student loans don't count towards your credit score. And she dismissed her, which I thought was really odd and kind of sad in a lot of ways. So I understand the author’s anger towards Suze and the personal finance industry in general. Um, and yeah, it just wasn't a good answer. So, the author kind of ripped into Suze Orman's mentality around what I call the “cliché of the latté”. This is a great example of, you know, traditional budgeting just not meeting the needs of most people. So, you know, there are plenty of software solutions out there like Mint.com that could help you track your budget to the penny. But is that really going to do you any good? In my experience, no. So, looking at your expenses in that bottom-up fashion where you're going from line-item by line-item to line-item and seeing exactly how much you spend on things can be enlightening, but it doesn't really help you make changes.

06:02  So yeah, and another – all of these software solutions have been out there for a while, but yet people aren't saving significantly more. So, obviously something's not working. So, what I try to encourage people to do instead of that bottom-up method of doing a budget, I recommend that they start from a top-down perspective – and there goes someone's air conditioner unit. I hope this audio is not too terrible for you. We'll see. Fingers crossed. Um, so yeah, top-down. So, you know, starting with the details, is that getting it done? The trick with the top-down way of budgeting is that you need to create a plan first, a.k.a. a “financial plan”, in order to figure out where you want to go to prioritize those budget items first. It's like the old metaphor / story about the professor with the rocks, you know, putting the big rocks in the jar and the smallest smaller rocks in the jar and the sand in the jar and then the can of beer at the very end.

07:11  Right. If you haven't heard that story, shoot me an email. I’ll get it to you at some in some form or fashion. Yeah, you need to figure out what those big rocks are. So, once you decide what your priorities are and what's important to you, it's easier to start moving things around in your budget and letting those things that don't matter fall away, or reprioritizing them to say, “Hey, I'm only going to, I'm actually going to get micro on the budget on these things that don't matter to me,” if that makes sense. Um, yeah, start with the big puzzle pieces and everything starts falling into place a little bit easier. So, here's the trick. Even though this process has less math and takes less time, few people do it. Why? Well, number one, it means that you may have to make big changes in your life that are uncomfortable at times.

08:13  Number two, it means you may have to have uncomfortable conversations with people in your life about those changes. And number three, some people just aren't ready or they don't really want to make the changes in their budget and their finances to get where they want to be. They might talk a bit game, but they're not ready to step up quite yet for whatever reason and no judgment there. But it's the truth. So that's what I've got for you today. Traditional budgets don't work. Skipping your latte isn't going to make the changes nearly as significantly and drastically as, you know, not to get a house or the vacation home or the luxury car that you don't need or whatever it ends up being. Those big decisions are really what's going to drive your success. So, let me know what you think. My email is patrick@investinyourlifepodcast.com. You can find me at www.investinyourlifepodcast.com. I’d love to hear from you. All right, let's go to the next section. That’s Pura Vida today.

09:36  All right. My Pura Vida for today is that it's a beautiful day and I'm outside. It's a Friday and I've gotten a lot of good work done today and I am going to spend the rest of the day working from a patio somewhere watching the U.S. Open and enjoying this beautiful weather that we have. I remember, you know, working at jobs before and having these beautiful days on weekdays and thinking, man, I kind of feel like it's a wasted day that I'm inside. There's no reason that we can't work and do what we need to do and enjoy a little sunshine. So, that's what I'm doing and it’s a little gift to myself today and that's fine.

10:23  All right folks, thank you so much. That's the episode for today. Thanks for hanging with me on the new AV set up. Hopefully this works out. I hope I don't have to scrap this episode and do it again, but thanks for joining me and if you've got questions, email me at patrick@investinyourlifepodcast.com. You can find me on the web at www.investinyourlifepodcast.com. Until next time, cheers.

10:57  Thank you for joining me today to find out more and get access to my free financial resources visit www.investinyourlifepodcast.com. The 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 this referenced here is historical and of course has no guarantee of future results. Last but not least, the Easter Bunny isn’t real.

Pocast Ep. 15: Lifestyle Creep

Pocast Ep. 15: Lifestyle Creep

Podcast Ep. 13: Taking Action

Podcast Ep. 13: Taking Action