Money Donuts® Episode 4: Don't Be Scared Of Budgeting

Steve:
Tell me if this joke is funny for you guys. Where does a snowman go to get his money?

Cooper:
The snow bank.

Steve:
No, a credit union because he gets better rates.

James:
What?

Cooper:
That was such a dad joke. Was the actual answer supposed to be snowbanks?

James:
Yes, yes it is.

Cooper:
Okay. I got it. I love jokes.

Steve:
I love good jokes. I wish we had some.

Cooper:
Have I ever told you my number zero joke?

Steve:
Yeah. The last podcast.

Cooper:
It's a good joke. So let's be clear about that.

James:
I Think that should be in every episode. Cooper is asking, "Hey, did I tell you my number is zero joke again?" Its just an ongoing thing. No Cooper, we haven't heard that.

Steve:
Yes he's wearing a belt and he likes it. We get it.

Cooper:
Well welcome to Monday Donuts. I think this is how we introduce the podcast. We're going to be talking about budgeting today. Today's donut is going to be a powdered sugar donut. Now powdered sugar donuts are delicious. They're pretty basic, but they're a little bit messy. So I think that scares people from picking that doughnut up when the box of donuts comes to the office.

Steve:
I don't like it when you have to eat the powdered donut and then all the powder gets on the table and you have to grab special napkins to make sure that all the powder gets picked up. Is that just me, or are you guys cleaner than I am?

James:
I'm just thinking of the experience where you're eating the powder doughnut and someone comes over to talk to you, and you breathe in and you get the powder in the back of your throat. And you're just like [inaudible 00:01:53] nothing good. Just don't pick it up. Don't even pick a powder and sugar covered donut, don't do it.

Steve:
That's why you just have to have coffee with it. Right?

Cooper:
Did you read my mind because that's what I was going to say. It's the perfect coffee donut, it's so sweet and sugary. You have to eat it with coffee and then it's worth it. Then the mess it's worth it when you have a cup of coffee with this doughnut.

Steve:
So how does the power of doughnut relate to budgeting?

Cooper:
I think that the powder doughnut relates to budgeting because kind of like you said, a lot of people avoid the powdered sugar donut because it's messy and they just don't want to deal with it. People do the same thing with budgeting all the time.

James:
Exactly

Steve:
When you said budgeting, I felt like this should be a Halloween episode because I'm a little scared going into this, to be honest with you.

Cooper:
Budgeting can be scary.

James:
You said budgeting, I said [inaudible 00:02:42]

Cooper:
James, I'm a little concerned that you are inhaling doughnuts.

James:
We've all been there. Come on. Why are we talking about budgeting? Why is this important topic to talk about?

Cooper:
Because budgeting is the base for gaining control of your finances. We talk about cash flows a lot, budgeting is a great example of gaining control and knowing where your cash is going. If you don't know where your cash is going and what you're spending your money on. Well, you're probably overspending or underspending, which is a weird concept, but budgeting is important.

James:
In addition to that foundation piece of it, there's also the future element too, right? So if you don't know where your cash is going each month, you can't save for something in the future, and you can't get out of debt faster. There's that whole antagonist view of it where it's like, you have to change. It's too much of this, too much of that. And then there's the protagonist side of the coin where you're like, we can do so much more with this. There's an opportunity here for your budget to improve things, if you want to get a new car, let's sketch out a path to get to that or something, whatever your goal is.

Cooper:
You have to get into the mindset that it's personal. And for you. I think there are so many people out there that are like, no, this is what you do. You can't have debt, you can't do this, you can't do that, and that's not true. You can use credit cards and be financially smart. You can buy coffee everyday if that's what makes you happy, you just got to make it work.

Steve:
I guess I just want to start with, if somebody who's listening to this and thinks, "well, I think I have a budget", how would we define what a budget is?

Cooper:
So, the basic is budgeting is having a plan for your money. It's having a plan for savings spending and all the other things.

Steve:
And I guess if I have a, if I have a plan, do I just set it and forget it? Or is a budget have to be something that you have to keep going back to and looking at?

Cooper:
Yep. Budgets are, you know, they're fluid, they're constantly changing. They're constantly available for adjusting. You know, I would say you don't have to check it. Well, it depends, you know, you can evaluate it every month. You could evaluate it every week. You kind of have to do what works for you, but budgets are not something you should set it, forget it because things in our life change, you know, those emergencies come up and we get bonuses maybe, or we get a smaller paycheck and then we kind of have to figure out what, what do we do with that money?

Steve:
Maybe we should all start talking about, do we all budget? I'll go first. I feel like since I asked the question, I'll be brave. I work in marketing. So take that for what it is, because I am not the greatest budget actual in the world. I need to get better. I think about it. But I think it's just, it's overwhelming and it's hard to, I mean, we have a rough budget, but I really want to get down in the details and really itemize what's coming in and coming out. And I just, I don't have the energy to do that. So that was me, that was me getting that off my chest. Now I feel like, you know, you know where I'm coming from.

James:
But I think that's, that's exactly the experience that most people have when they go through the budgeting process. Right? They're like, this is so hard. This is awful. I do not like this. But then at the end of the day, it's like, you can breathe a little bit. You just get it off your chest and get on with the good stuff. I think that's perfect.

Cooper:
I will say that feel good feeling of getting that off your chest is often how budgeting can make you feel once you put the work in and kind of have your parameters set. It can really take a lot of that stress out of life and actually can kind of get you excited about what you're doing with your money. So I, do have a budget shocking, right? I work in the financial education department. So yes, I have a budget. Is my budget perfect? Absolutely not. I may make mistakes monthly when budgeting, I am constantly re-evaluating and trying to figure out what works for me. That's the kind of mindset that everyone needs to have when they are budgeting, that it's okay to be imperfect.

James:
Yeah. I'll say my personal budget, it's definitely not perfect either. I have a tendency to set it and forget it. Like we talked about and not come back to it until I realized like, oh, I'm a little off track and this or that. To me as a huge nerd, that setting up like a granular budget in a spreadsheet is so satisfying. So it's dumb, but like if you're not breaking it down by auto registration fees versus your auto payment versus your tires versus other stuff.

Steve:
So you actually do that? You're down to that type of line item budget?

James:
It's really not. Registration fees, they're not going to change. It's basically an annual expense or whatever. So it's not hard to budget for that stuff. Just throw it in as an extra line, or you could do it different ways.

Cooper:
See, but I think some people hear that and are like, oh my gosh, that's how I'm supposed to be budgeting. Okay. It's great, James, you're great. Don't think you're not, but that can be a little.

James:
It's intimidating to think that like, oh, I have to, even if you use a pre-made template, right? You're like looking at this big, long list of stuff and you're like, what am I doing? Like, I don't have half of this stuff, doesn't apply to me. What am I supposed to do? And so I think maybe there's like a clumping method or a grouping method.

Cooper:
We call that one the 50, 30, 20 budget. If you want to get technical. So 50% is need. So that's, your mortgage payment, your rent payment, your car, your needs. 30% is your wants. So clothing, eating out, all those random expenses that you don't need to be spending money on, but you like to spend money on them. Same like subscriptions can go in there. Ooh, that's a good point. Don't let me forget to talk about that. 20% is savings. So savings accounts that's your emergency fund, it can be your 401k, it can be retirement. You could have a different budget for that, but paying yourself first. It's 20% of that budget, which gives you a little room to wiggle.

James:
Do you actually, do you actually have to start tracking your spending? Or can I just go back and look at like what I did last month? Can I just add up a bunch of receipts.

Cooper:
You can do either.

James:
Will that work?

Cooper:
You can, absolutely. Yeah. You need to track your spending somehow. So you either, if you are not someone that gets receipts or if

James:
I am going through the drive-through a couple times a week, whatever, I don't get a receipt with that purchase. Like how do I account for that? Maybe I need to look in online banking and look at my account history. I can do that. Or I can look at my statement.

Cooper:
You can definitely look at your statement. You could use the money management tool built into your online banking account. If you are at Royal, it'll categorize it for you. You could get an app.

James:
So before your before you were even setting limits, the first thing you're doing is making sure that you track what's coming, what's going out, and what's coming in.

Cooper:
If you don't have a budget and you're trying to make a budget, you have to figure out what you earn. Okay? So you have to account for your paycheck. You have to account for another paycheck, if you have one. If you consistently get money, from your parents or grandparents or something like that, you need to account for all those things. Okay. And then you have to take a hard look at your average spending before you try and budget. Because if you, if you don't look at your spending, how you are spending already, you're not going to get it an accurate picture of if you're overspending or if you're under spending or really where that money is going. So that's kind of the foundation. You have to figure out what your total income is. And then you have to figure out what you're actually spending. And then you have to subtract them and see where you're at. That's baseline rule number one.

James:
I think income is a place where a lot of people get tripped up too, because there's like how much income you actually get from your employer. And then there's how much income you get to take home and how much comes into your bank account. Right?

Cooper:
Yep. So you, we are talking about your net income.

James:
So let's call your, take home pay, right? That's why you get to take home.

Cooper:
Yes. So it's your earnings minus all of those things that come out with taxes, insurance, whatever you have coming out of that paycheck, the net pay is what is actually being deposited in your account. Or if you still get checks, it's what your track is written out for.

James:
So I can find that in my account statement too, actually, right. Or in my account history.

Cooper:
Yep, absolutely.

James:
Yeah. That'd be a good spot to look for that.

Steve:
All right. What's the biggest mistake that people make when setting a budget.

James:
I'm starting to think it's getting too complicated. If you're looking at things or maybe you're not quite understanding where to start and you just never even start. That's probably a huge mistake.

Cooper:
Getting frustrated, when you start to get so detailed and then you run out of money or you overspend people tend to just give up. Don't give up. Budgets are like, we kind of said, they're constantly changing. So it's okay. It's going to take awhile for you to get the hang of it and get your flow down.

Steve:
So, but If the word budgeting scares people, what, what could we call it? Instead of budgeting to make people feel better about it.

James:
Something must something friendlier than the word budget. I don't know.

Cooper:
What about like a money plan, a money plan. A plan for your dollars.

Steve:
And if you Want to sponsor us, it could be, it could be your money donut plan.

Cooper:
Oh, do you guys want to know a fun fact? So apparently I lied to you. My mom loves donuts, but here's a twist. She was a professional donut maker at one point in her life. I didn't know that. So if you ever want to view of what it's like to be a professional donut maker.

Steve:
It's awesome.

Cooper:
I got the hookup.

Steve:
How angry was she that you were spreading these hateful rumors that she hates donuts? I mean, I was really like, I was like, I don't want to meet this lady, cause she doesn't like donuts and we're just not going to gel. We're not going to be jelly.

Cooper:
She was very confused because she loves, she is like a sugar addict, loves sweets and stuff. And so she was like, I don't understand what you think I couldn't like about a fried piece of dough covered in sugar. Like it's my dream. And I was like, I know that you told me you don't like donuts. And she was like, no, I love them. So she was just genuinely very confused why I thought that.

James:
So we talked a little bit about budgets. What am I supposed to do now? Like I kind of thought I had a budget and I'm starting to wonder if I need to come back and think about it some more. Do I just do a pencil and paper and start writing stuff down and add up the numbers and see where it goes, kind of?

Cooper:
Well, it depends. Does that work for you?

James:
I don't know. It feels like there's something I'm supposed to accomplish or achieve. Like do I just need to make sure that at the end of the day, my numbers not going down.

Cooper:
You know, there's a zero based budget where you account for every single dollar you earn. And ideally that number should be zero. It's not positive. It's not negative. It's zero. You're even, that can be really hard because it's really hard to account for every single penny. And then what do you do at the end of the month, if you have $5 left over? So you need to track your spending. You need to know how much you're earning, how much you're spending. Then you need to put it in place. Okay. So you look at that and figure out. When you're looking at what you're spending, you're figuring out essentially what you're spending money on.

Cooper:
So is it a trip to the coffee shop every single day? Is it too many dinners out with your friends? Is it too many new pairs of shoes? Okay. That's what you essentially are doing. And then you have to figure out if that's okay. So ,is it okay to spend that amount of money on those things? Do you want to cut back? Are you not putting enough in savings are you not saving anything? Budgeting is such a big thing because then you have to think of how you spend your money and do you have multiple accounts? Do you use cash? Are you just writing it down? Are you moving your money?

Cooper:
A really hard high level topic for me.

James:
I think that's what gets me, because there's that too much of this too much of that. Not enough of this. I think maybe it's really just finding opportunities to do things differently, right? If I choose to buy three pairs of shoes a month, I just need to fit that in. I just need to budget on that. Or if I think I need to save more, let's look at opportunities to save. I don't think that there needs to be that sort of, it's almost like you have to judge yourself and it's very hard to do that sometimes, especially for me. But there's like this budget baggage that it's like baggage that comes along when you're trying to make a budget. And you're like, why? Of course I have a subscription to this subscription service because I like that. So I just need to figure out how that fits in. Right?

Cooper:
Exactly. Can you afford it? But if you can't, you can't have it.

James:
But is there an opportunity to trade something else for it? I think if I stopped getting coffee every day, then I could have it.

Cooper:
Absolutely. What is, what is worth the trade? If you want that subscription, yeah. Well, that's exactly what it is though. Is it, eating out one less time per month. Is it making coffee at home. You have to make the choices with your budget because it's for you. That makes sense. For me I love going out to eat or ordering takeout. So that's not something I would be willing to compromise if I want a subscription to Netflix.

Steve:
Are we talking about two different things? I feel like there's finding your what's coming in and coming out and setting, this is what usually happens. And then there's a whole second part of the budget. That means kind of what you guys are talking about. I can't afford this, so to do that, I need to take, I need to adjust things. So at first, are you just trying to figure out this is what's coming in and coming out? And that's what my current budget quotation marks, that's where my current budget is. And then the second step is playing that give and take game.

Cooper:
So yes and no. I'll tell you how I teach budgeting, and then you can tell me if that helps or not. So first step is that you have to figure out your income and we talk about what is income and you have to figure out your spending, okay? What is spending? So we do that. Okay. That's rule number one. And then we figure out if we're over or under, okay. Then we actually take our budget and we write down all those things. So we need to write down what our basic stuff is. Like I have to pay for rent. I have to pay for my car. I have to pay for my insurance. I have to pay for utilities. Okay. So you write all that down. What's leftover? So then that leftover stuff is going to be your savings and it's going to be all those want things.

Cooper:
Okay. So then you have to figure out like a goal. So then we talk about a savings goal to figure out how much you're putting towards savings. And then we also talk about those wants and how you can compromise. Okay? After that, we make that plan. We put all of our stuff together and then you put your budget into practice and then you reevaluate. You try that budget. You keep track your spending. You make sure you're not doing this. And then you reevaluate, if it was really hard to stay in that a hundred dollar eating out budget. You evaluate if you spent more on groceries than you planned for. Because you don't really, you can get a good picture. But when you're actually trying to think about it, you have to figure out if that's actually working and then we talk about, okay, now you reevaluate. And then we move into the whole debt part of budgeting, which is a whole different donut.

Steve:
You ended that. Perfect.

Steve:
I want to talk, I want to talk.

James:
No, you go ahead.

Steve:
No, I was just joking.

James:
Go ahead.

Steve:
You go.

James:
So it's really like our powdered sugar donut has three bites to it, maybe right by number one or step number one, finding out what's going on. Sort of like looking at your history, stuff like that. Step number two, finding opportunities for changes. And step number three, putting it into practice or evaluating it again in the future.

Cooper:
Yes. Rock on.

Steve:
The next step is going back into the, the donut shop and doing it all over again.

James:
[inaudible 00:19:40]

Cooper:
You figure out what you're making you figure out what you're spending. You figure out if that's a positive or negative, you make a plan for that money. And then you track it. See if you're within those means for the month. And then you'd go back and change it if you need to.

Cooper:
There's the people, who are not budgeting that need to go back to exactly what you're talking about and fall in that three donut bite. And then my next question is for people who are budgeting, what tips do you have to, to play that whole budgeting game? Like what, what are some of those things that we can look into doing to, to be better at budgeting?

James:
I think it's really just spending more time on that third piece of the process where you're reevaluating and looking at, putting it into practice.

Steve:
Because yeah, cause kind of how we, how we started this podcast is I'm not a very good budgeter. James is, down to the line item, but he even stated that. He's not doing that third step of going back and evaluating and he's more of the set and forget it. So it's more about if you are budgeting, when's the last time you looked at your budget, when's the last time you evaluated it? Is that a good, is that a good tip?

Cooper:
You have to figure out when you need to evaluate it. Because some people are weekly, some people are monthly, sometimes it's quarterly. It kind of just depends on you. If there's not a lot of fluctuation in your finances, totally let it be. If you have you have to really know what your values are because some people will save all year for vacation. Some people will figure out six months before they go on vacation. What they need to start saving for that trip. It's really based on your values. The base of budgeting is not complicated, but making it work for you can be because there's just so much. There's so much, if this works for me, it might not work for you. Do I budget for coffee? Yeah. If you hate coffee, are you going to budget for it? No. I budget for hockey games, not everyone budgets to go to hockey games.

Steve:
It's like playing the settlers of Catan, settlers of Catan. Has anybody played that game?

James:
Oh yeah.

Steve:
Easy to learn. Hard to master. I think.

James:
No, it's all about luck.

Cooper:
I am really only good at Go Fish.

Steve:
Surprisingly. I'm really good at monopoly.

Cooper:
Who has ever finished monopoly and been able to say that?

James:
Are you just playing with your kids?

Cooper:
Have you ever played the one where you collect cows?

James:
Oh, Cal collector?

Cooper:
No, I like Farm-Opoloy. I think you collect cows and pay with things in cows. I don't know. I like cows.

Steve:
I was thinking that next time that we can all get together and record a podcast that we should, we should do it while playing Monopoly.

Cooper:
I am so competitive.

James:
Or settlers

James:
It could be okay though, I don't know. All right. I like that idea.

Steve:
So competitive. So, so you're saying that you accept my challenge.

James:
I would pick up the gauntlet. Absolutely.

Cooper:
I accept the challenge. I would also though my favorite board game is Candy Land. So could we play Candy Land?

James:
Sure.

James:
The only reason that that's your favorite is because you don't have kids. Let me just set the record straight about Candy Land. Okay. There are no other games where you get almost to the end and you draw a card and you have to go back to the beginning. That doesn't happen in any other game.

Steve:
Kids, if you are listening your dad loves playing candy land with you. All right. Don't let him trick you he's just grandstanding right now. He loves Candy Land.

James:
So that's exactly what budgeting is not like.

Cooper:
It's not like candy land.

James:
So if you're really just not sure about where to start with budgeting, the free financial reviews are a resource that you can sign up for from rcu.org. And that's where you can sit down with a professional who can look at your budget or help you even start a budget or help refine that budget to get to your goals. That's a really cool service and it doesn't cost anything.

Cooper:
Don't be scared. Budgeting is not scary. Goodbye.

Steve:
You can tell a Cooper's very passionate about the subject.

Cooper:
I'm really am passionate about any of these education topics, because it's what I do. And I want people to be successful.

James:
The passion is for the success. It's for your success.

Cooper:
Yep.

Steve:
Passion for your success. Oh, Hey, that's a good tagline for this podcast.

James:
No, I think the tagline was you just got to make it work.

James:
That's what I heard.

Steve:
Since we don't have a guest on this week. Should we go back to our, our singing? I think people really liked it.

Cooper:
Did they? Did they Like it?

Steve:
James is going to, we've been working on this money donuts jingle and James said he was going to take a crack at it this week. So

James:
Yeah, it wasn't quite ready to reveal yet, but I can show you what we've been coming up with so far. Steve, if you want to start with the beat box.

Steve:
Yep. Sure. Here we go. Ooh.

James:
I'm talking about money donuts. I'm talking about money donuts. Oh, that's what it was, just that first line.

Steve:
Cooper you missed your part though.

Cooper:
I didn't have a part.

Steve:
I'm talking about money donuts. I'm talking about money donuts.

James:
I feel like we needed to say something about budgeting to wrap it up. Don't we?

Steve:
Wait, wait, wait, wait, wait, wait, wait, wait, wait. You don't want just all that nonsense. All right, go look.

James:
Let's bring it back to budgeting.

Cooper:
Budgeting is not as bad as our singing, so figure it out.

James:
All right. So what did we learn today? Budgets can be a challenging topic to address even with people that you know and love. And instead of having a budget, making you feel like [inaudible 00:25:59] maybe it's time to get in on unwrapping a budget for yourself. Sharpen your pencils and dive into it. I think that's your challenge.

Cooper:
And reach out for help. Don't be afraid. Don't be afraid to ask for help.

James:
Especially from your mom, because she knows best anyway.

Cooper:
Some people's moms.

James:
Love you, mom.