Shownotes
Creating a budget can often feel restrictive, but with the right approach, it can ensure you have the freedom to spend on what you want while still being confident you can reach your money goals.
Sydney helped Kristen create her budget and they share the process in this episode.
Tune in to see:
- How to get out of feelings of anxiety around money
- How to find the right person where you feel fully comfortable to be open about your full business and personal financial situations
- How to get a snapshot of your realistic spending habits to best plan your budget
- Using an Over/Under system to contribute more to your Sexy Money Goals
- The Credit Card Payoff Calculator template in Excel and Google Sheets to help you create a payoff plan for credit card debt
- The value of automatic savings and investing (plus a suggested app to use to keep it simple)
- Why you should set up a separate saving account at your bank
📈 UNDERSTANDING YOUR PROFIT AND LOSS GUIDE
❓TAX PLANNING QUESTIONS TO ASK YOUR ACCOUNTANT
Get the Tax Planning Questions Guide
🛍 75+ TAX WRITE OFFS
✅ BOOKKEEPING CHECKLIST
Get the Book Keeping Checklist
💵 BOOKKEEPING AND FINANCIAL ANALYSIS SERVICES FOR BUSINESS OWNERS
Apply for Bookkeeping or Financial Analysis Services
👋 CONNECT WITH SYDNEY & KRISTEN
Website: https://knowyourworthpgh.com/
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YouTube: https://www.youtube.com/channel/UC3wzOVSDSC-xsmLg8JJ8MJg/
Transcripts
If you have an issue with your money and you are asking a trusted advisor
Speaker:for help, That's what you're doing.
Speaker:You're asking a trusted advisor for help.
Speaker:You're not asking to be scolded.
Speaker:You know you did something wrong.
Speaker:You know you're in a bad spot.
Speaker:And so find someone that can give you grace.
Speaker:Welcome to the Know Your Worth Show, where we teach you how to think about
Speaker:your money differently so that you can achieve your sexy money goals.
Speaker:I'm Sydnee your money Maven and owner of Know Your Worth.
Speaker:And I'm Kristen Sid's Dimepiece bestie team member and busy mama
Speaker:twins here to make sure that those of us without a financial degree can
Speaker:still level up with each episode.
Speaker:Let's get started on reaching your next goal.
Speaker:Hello.
Speaker:Welcome to episode seven of the Know Your Worth podcast.
Speaker:Hi, I'm your host, Sydney, your money maven.
Speaker:And I'm her dime piece bestie, Kristen.
Speaker:You're doing a Know Your Worth at night podcast.
Speaker:Absolutely.
Speaker:My shirt glows in the dark.
Speaker:We should turn off.
Speaker:We should.
Speaker:Oh, that's a great idea.
Speaker:That's a great idea.
Speaker:You wouldn't even see me I'm like in stealth mode right now For
Speaker:your money ninjas for tonight.
Speaker:That's a good one, too.
Speaker:Yeah
Speaker:So today we are going to dive a little bit deeper into some of the
Speaker:fears surrounding your own personal budgeting, moving forward, and
Speaker:just taking that first step to feel confident in your own Financial journey.
Speaker:Yeah.
Speaker:How do you feel about today's episode?
Speaker:I feel good about it because we just, like, in real life did this.
Speaker:Sydney just helped me organize my budget.
Speaker:I didn't have a budget.
Speaker:I feel like a confession.
Speaker:It's totally fine.
Speaker:Totally fine.
Speaker:My name is Kristen and I'm 42 and I didn't have a budget.
Speaker:But I do have a budget now.
Speaker:So she helped me create a budget.
Speaker:She helped me look at my taxes because I thought maybe we
Speaker:had some quarterly taxes due.
Speaker:Turns out I don't.
Speaker:Yay!
Speaker:Woop!
Speaker:And we looked at my debt and so made that look a little less scary.
Speaker:But, honestly, leading up to this, real drama, real dramatic mess.
Speaker:So I think we just wanted to talk about what that looks like and I was kind of
Speaker:curious, Because this is your job and you do this with people on the regular,
Speaker:what does it look like when a business owner comes to you and they are anxious?
Speaker:Yeah, absolutely.
Speaker:I think you did a great job with going through everything today.
Speaker:I know it's really hard to go through that stuff.
Speaker:It's hard to pick apart your own finances and especially
Speaker:have somebody else look at them.
Speaker:It feels like you're like, Just gutted it open for everybody.
Speaker:It feels like you're naked in your middle school cafeteria.
Speaker:Yeah, it's, I know it's not a fun feeling.
Speaker:It's not, I don't get enjoyment out of seeing other people uncomfortable
Speaker:talking about their finances.
Speaker:I get enjoyment knowing that by the time we're done talking about it, I
Speaker:know they're going to feel so much better because to me, the biggest
Speaker:anxiety I get is from not feeling like I have control of a situation.
Speaker:And I know that's not everybody, but I get serious anxiety about not having
Speaker:control of a situation and my finances, if they ever felt like they're not
Speaker:in my control or I'm feeling like I'm going off the rails a little bit
Speaker:and I don't know what's going on.
Speaker:That's when my anxiety really skyrockets.
Speaker:For me, one of the easiest ways to get that back in control pretty much
Speaker:every time is Just do like a finance check, like how I said, Alex and I do
Speaker:that, we do like a finance check in or a finance date where we'll go through
Speaker:and we'll realign our budget, make sure we're on track, kind of see where some
Speaker:of our flub ups have been in the past maybe month or two, and then how are we
Speaker:going to correct them or stay on track.
Speaker:So I know that for me, that's what I need to do is just check in, get
Speaker:it back on track, see where I'm at.
Speaker:And then I feel so much betterbecause I know I have a plan.
Speaker:I know for a lot of the people that I get to talk to about this one, we're
Speaker:similar in a way already where we're in the same room having this conversation.
Speaker:When people are coming to me, my clients and my friends are coming to
Speaker:me about these conversations, I know that they are already in a mindset to
Speaker:be Helped with it or to be, they like, they want to talk about it in a way.
Speaker:Right, right.
Speaker:And they're excited about the potential of moving forward.
Speaker:it might not feel exciting, but they know that this is what
Speaker:they have to do to feel better.
Speaker:So that really helps me be able to have these conversations.
Speaker:But whenever I have clients or, other business owners
Speaker:that will come to me for this.
Speaker:I know it's a vulnerable conversation.
Speaker:And I think for a lot of people it sometimes can feel like a therapy almost.
Speaker:It's not always I'm your bookkeeper and this is like the service
Speaker:that you have signed up and are paying me month to month for.
Speaker:This is like, now I feel like you trust me enough to get my insight
Speaker:on it, and I feel like I can really help you and make a difference,
Speaker:even just with your mental state.
Speaker:If I can't help with the finance side right away, and I can give you a plan,
Speaker:I can give you some hope for your mental state, and that to me is really big.
Speaker:That means a lot to me, and I really love that aspect of my job because I
Speaker:know it's always been so helpful for me whenever that plan and can move forward.
Speaker:Yeah.
Speaker:So I can feel from you that you actually care and I know I'm your
Speaker:best friend and I'm going to get that feeling from you no matter what.
Speaker:But I've also watched you.
Speaker:I mean, My desk is over here.
Speaker:Your desk is right there.
Speaker:I've watched you have calls with people where you do create an environment
Speaker:where people can like take a breath.
Speaker:This is important to whenever you are picking somebody.
Speaker:To lay out your embarrassing every target purchase you've made in front
Speaker:of, pick somebody that is open minded and has created a safe space for you.
Speaker:Yeah, because it can be a really hard conversation and accountants
Speaker:absolutely get the reputation that they're not necessarily people, people,
Speaker:they're really into the numbers and into the spreadsheets and they are.
Speaker:But that doesn't mean that it can't be a warm and friendly conversation.
Speaker:You shouldn't ever feel intimidated by someone that is helping
Speaker:you with this conversation.
Speaker:And when I say intimidated, I mean like, fearful of sharing this with
Speaker:them in a way that they will make you feel inadequate, or put you down, or
Speaker:shame you for anything that you have.
Speaker:Even if it's something as severe as you've avoided taxes, you have been misfiling,
Speaker:you have been making late payments, you have been increasing your debt
Speaker:when you know you should be decreasing your debt, you've made poor financial
Speaker:decisions, you've spent too much money, you've wasted money, you've lost money.
Speaker:If you have an issue with your money and you are asking a trusted advisor
Speaker:for help, That's what you're doing.
Speaker:You're asking a trusted advisor for help.
Speaker:You're not asking to be scolded.
Speaker:You know you did something wrong.
Speaker:You know you're in a bad spot.
Speaker:And so find someone that can give you grace.
Speaker:And I think that's important whenever you're finding, really any, I think,
Speaker:professional service provider.
Speaker:you know, If you need to go and ask a lawyer for help.
Speaker:They need to be on your side.
Speaker:You can't have someone that doesn't feel like they can support you.
Speaker:That's like 101.
Speaker:You need to have somebody that can defend you and support you.
Speaker:And it's the same thing with your tax accountant.
Speaker:Same thing with your bookkeepers.
Speaker:And I really believe the same thing with any of the professional service
Speaker:providers that you work with.
Speaker:But money is really sensitive.
Speaker:It's a really tough topic, so absolutely you should have someone that makes
Speaker:you feel comfortable being there.
Speaker:I think too, like you said, I always say, because I have a therapy background,
Speaker:like shop around for a therapist.
Speaker:If you meet with somebody and you start talking to them and you aren't
Speaker:at ease and you don't feel like you can tell the truth or be yourself,
Speaker:you're in the wrong atmosphere.
Speaker:So if you find yourself like fudging the truth to your bookkeeper or your
Speaker:tax accountant or just skirting around what the actual issue is, like you
Speaker:got to find somebody that you can just lay it out because this isn't
Speaker:something that you're going to get an accurate picture if you're lying about.
Speaker:Or not feeling comfortable enough to tell the truth.
Speaker:Absolutely.
Speaker:And if you're a business owner listening to this and you're not
Speaker:telling your bookkeeper the truth and they're categorizing your
Speaker:numbers inaccurately know that on your taxes does come back on you.
Speaker:It does come, it doesn't go back on your bookkeeper.
Speaker:It goes back on you.
Speaker:So if you are being dishonest with your bookkeeper because you're
Speaker:trying to hide something, that's something that you need to...
Speaker:deal with yourself and you need to confront that right away because
Speaker:that legality comes on you.
Speaker:If you are talking to your bookkeeper or your friend or someone about your
Speaker:personal financial situation and you're not being honest with them, then evaluate
Speaker:whether that's a comfortable situation.
Speaker:But if you are Having business expenses that you're not being accurate with your
Speaker:bookkeeper on that's a separate thing here that You should always be truthful
Speaker:in terms of your business expenses and where they're coming from But in terms
Speaker:of getting your budget squared away and what your personal expenses look like
Speaker:if you can't share that information Absolutely, you should be shopping
Speaker:around so that you feel comfortable with someone that can help you.
Speaker:Yeah So we talked about, finding the right person and how uncomfortable
Speaker:it can be to look at it.
Speaker:So do you want to kind of talk about what we did tonight?
Speaker:Yeah.
Speaker:Yeah, absolutely.
Speaker:So what we did tonight was kind of what I walk through as a
Speaker:baseline with most of the clients that I've worked with this too.
Speaker:And I try to do it in a very simplified approach.
Speaker:I don't right away recommend a software like right off the bat because to me
Speaker:that requires a certain personality.
Speaker:If you're someone that you know, you're going to.
Speaker:Check in on an app all the time.
Speaker:And if you are someone that really needs like day to day assistance, an app is
Speaker:going to be a great way to do it because that's a live bank feed coming through.
Speaker:But if you're someone that maybe just needs to like, Hey, I need a picture
Speaker:of where I'm at for the past three months or the past year, the approach
Speaker:I recommend is just using Excel so that you don't have to pay for an app.
Speaker:so what we do is we go into your bank accounts and we export all of
Speaker:the data that we want to look at.
Speaker:So we did three months of data and we export that into Excel.
Speaker:And so you just export to CSV and copy and paste into Excel so
Speaker:that you can manipulate the data.
Speaker:And then from there, we do that with every account that you have.
Speaker:So if you have a bank account, a savings account, a credit card account,
Speaker:however many accounts you have, we export all that data, we import it
Speaker:and just copy and paste it into Excel.
Speaker:And then what we do from there is we kind of categorize every line.
Speaker:Sometimes your bank does this for you too, where it's going to try to categorize
Speaker:it as meals and entertainment, or office supplies, software, things like that.
Speaker:But that's what you'll categorize for however you want to visualize your budget.
Speaker:So make all the categories that you feel like is necessary.
Speaker:So you have travel, you have rent, you have Insurance.
Speaker:Exactly.
Speaker:Insurance medical school.
Speaker:Really any category that you want to break out.
Speaker:If you want to break out your utilities all separate.
Speaker:You can have electric, you can have water, you can have gas.
Speaker:You can put them all separately or you can combine them into just utilities.
Speaker:But you break out all the categories that you really want to evaluate.
Speaker:And then you put that in a column next to.
Speaker:All of your expenses.
Speaker:So you'd go through and you'd say, okay if you're from Western
Speaker:Pennsylvania and sheets, that's, typically gas, it's travel expense.
Speaker:So you would put gas next to that.
Speaker:And then if you are a little bit Excel savvy, you could make a pivot table
Speaker:that would just right away categorize and sort based on those expenses.
Speaker:So for the past three months, your total and all of those categories
Speaker:were automatically categorized.
Speaker:If that's not something that you are savvy with, you can reach out to us
Speaker:and we have this template ready to go that we could send to any of the
Speaker:listeners if that was something that you would, or you're looking for.
Speaker:You can email us at info at KnowYourWorthPGH ask for that kind of just
Speaker:expense budget spreadsheet that we have.
Speaker:And it's sorcery.
Speaker:It's Excel.
Speaker:I was watching her do all this thing and a little freak in the spreadsheet.
Speaker:Lots of some if formulas and yeah, mostly just some ifs.
Speaker:So if any of my Excel friends are out there, Just a lot of SUMIFs.
Speaker:We put some data validation in there, so we got some lists, some
Speaker:drop down lists that's very sexy.
Speaker:We did a formula for the, for what month we're looking at, and then
Speaker:we did a bunch of SUMIF formulas to, you know, auto populate.
Speaker:What your expenses are.
Speaker:And we created a budget.
Speaker:So one tab was a budget.
Speaker:The next tab is actual.
Speaker:So it's laid out the exact same way, but it compares what you expected
Speaker:it to be to what it actually is.
Speaker:And so every month you add in those expenses, it auto
Speaker:populates into your actual tab.
Speaker:And then we did one more that was an over under tab.
Speaker:So it would subtract.
Speaker:Basically, what's was our budget and then what we've pulled from that
Speaker:budget and we did that for income and expense So that way you can see okay
Speaker:if in meals, I expected to spend, 400 this month in meals this month I spent
Speaker:600 in meals on that over under tab.
Speaker:You'd show up as you went over 200
Speaker:It's a really neat tool and I really recommend Looking at
Speaker:that because one, it's free.
Speaker:You don't have to spend any money on it.
Speaker:It gives you a very clear picture.
Speaker:There is nothing missing.
Speaker:If you are downloading all of your bank transactions,because
Speaker:it's true cash in cash out.
Speaker:And it forces you to sit down and really manipulate your numbers yourself.
Speaker:I do think there is something to be said for.
Speaker:at this in Excel as well because you really can get a feel for
Speaker:how many transactions there are.
Speaker:So it kind of magnifies the detail where in the app it's very easy to
Speaker:just like get your summarized number.
Speaker:You don't necessarily have to categorize everything because
Speaker:the app kind of learns for you.
Speaker:And that's really wonderful.
Speaker:I think as a constant check in, if that's something that you are interested in.
Speaker:I use an app and I love it, But I'm not good at checking it every
Speaker:day, so every time we need a big refresh, I'll either do Excel or
Speaker:I'll do the app, kind of depending on where my brain's at that day.
Speaker:Yeah, sometimes I just like manipulating in Excel and sometimes I just want to
Speaker:see an app with a chart that's already done and I know it's in real time.
Speaker:So it kind of just depends on what you're feeling, but again, the Excel
Speaker:version is free and it really gives you that more detail, like how people
Speaker:say, you know, when you hand write notes, it helps you remember them.
Speaker:I think when you're the one that's really manipulating the detail,
Speaker:it sticks a little bit more.
Speaker:So from there, what I would recommend doing is
Speaker:underestimating all of your income.
Speaker:If that's possible, if you just have your straight w two and your income is set
Speaker:every month, then that is what it is.
Speaker:But if you are a contractor or you have your own business that's
Speaker:seasonal or you just take projects.
Speaker:to project and your monthly income can fluctuate.
Speaker:Take a very conservative approach to that and then from there, divvy up that
Speaker:budget for what you know is coming out every month to the point where there
Speaker:is nothing left over at the bottom and why there's nothing left over is
Speaker:because you have a savings line item and you have a emergency line item.
Speaker:You have a shopping line item.
Speaker:You have a fun and entertainment.
Speaker:You have a travel, you really build this up.
Speaker:And this part is similar to the YNAB system.
Speaker:You need a budget system is that you're putting everything into an envelope
Speaker:that they're all the money that you have earned is being allocated somewhere.
Speaker:And why that's helpful is because if there's money left over, that money
Speaker:should be going towards whatever goals you have for your life.
Speaker:And that means if your goal for your life and your sexy money goal is investing,
Speaker:then that extra money goes to investing.
Speaker:If your sexy money goal is to travel, then it goes to travel.
Speaker:If your sexy money goal is to be debt free, then it goes to paying
Speaker:off that debt and it can change every month where that extra amount goes.
Speaker:But if you know, you're hitting all of your goals in your budget before
Speaker:you get to that extra amount, then you should feel no shame around spending
Speaker:that money to align with your goals.
Speaker:If you already have folders and kind of lines in your budget set aside for
Speaker:saving, for investing, for an emergency fund, for the, home renovation projects
Speaker:that you have to do for the gifts you have to buy for Christmas, whatever
Speaker:it is that you know you have to cover.
Speaker:If you've covered all of those lines, And you're saving, you're
Speaker:investing, you're paying off debt.
Speaker:That extra money should be spent guilt free.
Speaker:There's no reason why you shouldn't be able to spend that money guilt free.
Speaker:Because you've hit every goal you need to do.
Speaker:So then now, where do you want to feel that attention go to?
Speaker:What lights you up about spending that money?
Speaker:Is it the pair of shoes that you have just been eyeing up for months?
Speaker:Then buy them.
Speaker:If that's what is covering that, and you've hit every other envelope, buy
Speaker:yourself the shoes guilt free and then the next month it might be I want this month
Speaker:to invest that two hundred dollars more So we put that to investing the next month
Speaker:maybe an unexpected expense came up that you had to put on a credit card then maybe
Speaker:the next month it's a real priority to pay that back down So that's where you really
Speaker:want to allocate every single dollar that's in your budget so that you don't
Speaker:just think you have leftover money and you're kind of spending it willy nilly.
Speaker:If you can reduce your budget, if you see every month, okay, my meals
Speaker:and entertainment expense, I budgeted 500 and I'm consistently at 400.
Speaker:Great, you don't need it.
Speaker:You can be building it up if you want or you can be reallocating that.
Speaker:To save for a different goal or to pay off debt, or if you have a big meal and
Speaker:entertainment expense that you want to build up for the next month, you can
Speaker:keep it there and then you'll use it the next month if you go to a really
Speaker:fancy dinner and it just can roll over.
Speaker:But really get clear on what your priorities are with that
Speaker:and then just start kind of tracking everything that way.
Speaker:So again, apps are great.
Speaker:If you are not Excel savvy and you don't want to reach out for the spreadsheet.
Speaker:Apps are great.
Speaker:If you are self savvy or you have a friend that is.
Speaker:They can whip this up for you pretty quickly but we also have it for
Speaker:you that we could send it to you.
Speaker:No problem.
Speaker:Yeah.
Speaker:I think the most eye opening part for me was because I wasn't looking and
Speaker:I'm just like going on a wing and a prayer, my brain, when there are holes
Speaker:and the understanding will fill in negativity, like you don't make enough
Speaker:money, you suck, there's not enough for this, there's not enough for that.
Speaker:So looking at it with you, when you were like, I got most of it
Speaker:done and it looks pretty good.
Speaker:Like my anxiety immediately went down.
Speaker:And then when I saw my actual numbers and I was like, Oh, if I tightened up
Speaker:here and here, this is not scary at all.
Speaker:Like I'm actually doing better than I thought it was where I
Speaker:assumed that I was doing worse.
Speaker:Do you think it's true that most people probably assume they're doing worse?
Speaker:Absolutely.
Speaker:There's very few people that think they're doing so great, and they're not.
Speaker:Like, it's totally the other way.
Speaker:Like, it's totally the other way.
Speaker:Most people think that they're doing bad, and they're actually doing well.
Speaker:Yes.
Speaker:Yes, will you talk about without like sharing my personal nightmare?
Speaker:Oh my gosh What did you do to show me the debt stuff?
Speaker:Yeah, so One of the things that I like to utilize and to think about
Speaker:again, it's like the potential.
Speaker:I'm a very forward thinking, like very futuristic thinking person.
Speaker:This was a tool that really helped me and Alex whenever we
Speaker:had and carried credit card debt.
Speaker:Excel already has a template called credit card payoff calculator.
Speaker:And Google sheets has a similar one.
Speaker:Again, if this is something that you want and you can't find it in Excel, you
Speaker:can absolutely reach out to us for it.
Speaker:But all it is is you put in the total amount of the debt that you're carrying.
Speaker:You put in the Interest rate, you put in the suggested minimum payment, and then
Speaker:you put in the proposed minimum payment.
Speaker:So it's truly just four things that you have to enter in, it's a simplified
Speaker:version for sure, but it's perfect.
Speaker:Then they have four bars at the top that will say.
Speaker:This is how many months it would take you to pay off if you did the minimum payment.
Speaker:This is how many months it would take you to pay off if
Speaker:you did your proposed payment.
Speaker:This is how much interest you'll pay at the minimum payment.
Speaker:And this is how much interest you'll pay at the proposed payment.
Speaker:And it's really fun, I think, to see, okay, this is the minimum payment,
Speaker:but if I just add 100 a month, how many months does that payment go down?
Speaker:And interest sucks.
Speaker:It sucks.
Speaker:It really does.
Speaker:So It's a really fun thing to see it drop so dramatically because credit
Speaker:cards are compounding interest.
Speaker:So that means every month you're being assessed interest, it gets
Speaker:added to the full balance, and then the next month you're paying
Speaker:interest on that full balance.
Speaker:So compounding interest is that you are paying interest on the
Speaker:interest that you got last month.
Speaker:So credit cards are compounding interest.
Speaker:Does the interest ever go down?
Speaker:You have to pay more than the interest payment.
Speaker:So typically credit cards are set up that your minimum payment is going
Speaker:to be more than just the interest.
Speaker:So that you can make some progress.
Speaker:So you can make some progress.
Speaker:But not a lot.
Speaker:But not much.
Speaker:But not much.
Speaker:Exactly.
Speaker:Not much.
Speaker:And that's why minimum payments can really be...
Speaker:Not a trap, because you'll eventually get out.
Speaker:It's like a hamster wheel.
Speaker:But it's a hamster wheel.
Speaker:It's a really, it's like one, two steps forward, one step back.
Speaker:Every, every time.
Speaker:It's sickening.
Speaker:It's three forward, two back.
Speaker:It's really like, it's really difficult to get that ahead.
Speaker:If you look at these tools, and especially this credit card
Speaker:calculator it will show you how much quicker you will pay that off.
Speaker:And so then with credit card debt I really like Dave Ramsey for credit card debt.
Speaker:I think it makes a lot of sense.
Speaker:Not all the concepts resonate with me.
Speaker:Not all the concepts resonate with me.
Speaker:But like the debt snowball method is a fantastic way to look at it.
Speaker:And that's one of the things I'll always recommend for debt you have
Speaker:multiple credit cards or multiple debt payments, You should be looking
Speaker:at the interest rates on all of them, but also the total balances.
Speaker:And if there's one with like a crazy high interest rate that's really
Speaker:hurting you, then that might be the one you want to tackle first.
Speaker:But after that, it's really cool to tackle the smallest balance ones first, because
Speaker:right away you get the satisfaction of paying off an account, and then all of
Speaker:that money that was going towards that payment is now rolled into the next debt.
Speaker:Let's say you had three credit cards, and one of them was 5, 000, one of them
Speaker:was 6, 000, one of them was 7, 000.
Speaker:You would be making the minimum payments on all of those cards, and
Speaker:then whenever the 5, 000 one was paid off, all of that, Payment from the 5,
Speaker:000 one, including the payment you were already making on the 6, 000 one, is
Speaker:now your payment on the 6, 000 one.
Speaker:Once the 6, 000 one is paid off, both the one that you made on the 500 and the 600
Speaker:now roll up to pay off the 7, 000 one, including what you were paying before.
Speaker:And so that's called the debt snowball method, to be very, Kind
Speaker:of just general with the concept.
Speaker:So you want to try to make more than the minimum payment on the lowest
Speaker:balance so that it goes down faster.
Speaker:So what's really fun is that if you see you were to make The minimum payment
Speaker:on all of them, and you have an extra 400 bucks a month, or 300 bucks a
Speaker:month because we have three accounts.
Speaker:We'll just keep it easy.
Speaker:And you were to apply 100 to each of those.
Speaker:That's good and it feels good in theory, but it's not going to do the same
Speaker:amount of good as if that whole 300 just funneled to that lowest balance.
Speaker:And then that rolls up and then rolls up.
Speaker:So that's where I would start with whenever you're looking at any kind
Speaker:of debt and using a payoff calculator because then you can kind of see,
Speaker:okay this first account, it says it'll be paid off in four months.
Speaker:Then once that done, this next account will be paid off in 12 months and then
Speaker:this next account will be paid off in.
Speaker:Eight months after that, once that roll up went in.
Speaker:Now, you're making the minimum payments on each of them, so the calculators
Speaker:are going to have a little bit of a leeway for the ones that are
Speaker:just in Excel, because they have a little bit more simplified approach.
Speaker:It won't be that, 12 months will pass and then you'll start
Speaker:applying a heftier payment.
Speaker:You're looking at it like you were applying that heftier
Speaker:payment from the beginning.
Speaker:So technically, from the timeline when you're starting, It's going
Speaker:to be a little bit shorter.
Speaker:So that's just something to think about whenever you're going through them, but
Speaker:it's a really nice tool to look at to see when you can pay off all of that debt.
Speaker:And it's very motivating to have an end in sight.
Speaker:Yes.
Speaker:It's very motivating.
Speaker:Do you think that everyone who carries debt thinks they're the
Speaker:only person who carries debt?
Speaker:Yes.
Speaker:Yes.
Speaker:Absolutely.
Speaker:Yeah.
Speaker:Can you that carries debt thinks they're the only person that carries debt.
Speaker:They think they have the highest debt out of anyone ever.
Speaker:Their shame is the biggest.
Speaker:Yes.
Speaker:Exactly.
Speaker:They're the biggest loser.
Speaker:And it's just not true at all.
Speaker:But yes, all of the people that I have talked to about their debt think that
Speaker:they are in the worst situation possible.
Speaker:I have had really sad stories of people that, like, their
Speaker:loved ones around them...
Speaker:Thought their debt was so high that they like kind of gave up on them.
Speaker:And what was so shocking to me is then they put my client in such
Speaker:a negative mindset that she was afraid to talk to anyone about it.
Speaker:And when she came to me to talk about it, it was not a lot.
Speaker:It was not, it was like nothing.
Speaker:So after she talked to you, was she like a new person?
Speaker:Oh my gosh, I was so sad because to me this was like, She carried it.
Speaker:This was, it was less than my student loans.
Speaker:Like, I mean not even less than my student loans.
Speaker:Like, so it was just not, it was not anything that I felt
Speaker:like, Couldn't be undone.
Speaker:Oh my gosh in a year in one year.
Speaker:It could have been undone and so it was really sad for me to have
Speaker:that conversation to say like This isn't about you, I don't
Speaker:want to say this was for the best.
Speaker:Yeah, but like This person wasn't supporting you.
Speaker:Without even knowing that.
Speaker:Yeah and so I'm so happy you talked to me, but like, you are not alone in this.
Speaker:You are not even in the top ten of the amount of deaths that I've heard.
Speaker:And I feel so sad that this has really been eating you up for so long
Speaker:and affecting you so deeply for so long because you are really going to
Speaker:be fine and it's going to be okay.
Speaker:So that was really sad and that's where it just, it really can be so taxing on you.
Speaker:Yeah.
Speaker:But how free she must've felt too when she left.
Speaker:I hope so.
Speaker:Yeah, I really do.
Speaker:I really hope that, I mean she's doing phenomenally.
Speaker:She's still a client.
Speaker:It's fantastic.
Speaker:And we have a great working relationship.
Speaker:I think she's...
Speaker:Doing great.
Speaker:She's thriving in her business and yeah, so I hope it helped just to get some
Speaker:positive feedback because that was really sad and I do think that's how a lot of
Speaker:people are whenever they come to talk about it is they think that they are
Speaker:the worst that we all have narratives because things through social media and
Speaker:through talking with people and people taking trips and doing all these different
Speaker:things and you're like, they must have such a better financial situation than
Speaker:I have when in reality, like, yeah.
Speaker:It's all smoke and mirrors.
Speaker:Like we're all just, yep.
Speaker:Faking it till we make it.
Speaker:Yep.
Speaker:Absolutely.
Speaker:Not just me.
Speaker:No, not at all.
Speaker:Not at all.
Speaker:Yeah.
Speaker:The last thing I wanted you to tell people about was that little acorn app.
Speaker:Yeah.
Speaker:Yeah.
Speaker:So I'll recommend this to a lot of my clients as like an extra way
Speaker:to save and invest too, because it's an investment tool as well.
Speaker:If you are someone that Just wants to Be kind of mindlessly saving and kind
Speaker:of mindlessly pulling things aside.
Speaker:Acorns is an app that's I think has really helped me just kind of have this
Speaker:like either extra fun money Christmas present money, just really nice.
Speaker:little savings account.
Speaker:Investment account too.
Speaker:So whenever you set it up, you can set it up for automatically
Speaker:weekly, monthly, daily draws.
Speaker:So it'll pull straight from your bank account that you connect it to.
Speaker:And so I just have a 15 a week recurring.
Speaker:And so it goes into my acorns account and that money just grows.
Speaker:They are investing that money for me.
Speaker:I can set whatever my flavor profile is for my risk tolerance for investment.
Speaker:So, For this one, I typically do pretty conservative just because
Speaker:I'm not really looking for this to be a high risk investment account.
Speaker:I just am kind of using it as a personal savings account, even though it is.
Speaker:It's more of an investment account.
Speaker:I love this app just because it makes saving completely mindless.
Speaker:It comes out like it's a coffee.
Speaker:And I don't even notice that it's gone.
Speaker:You can also set roundups through them.
Speaker:So like if you would go to the store and you'd buy something for, 4.
Speaker:50, it would kind of create a bucket for that extra 0.
Speaker:50, and then either when it hits a certain dollar threshold, or at the end
Speaker:of every week, it'll pull those funds from your account to just round up all
Speaker:of your purchases to the next dollar.
Speaker:So again, it's small amounts, but if you think in your head, hey, I just
Speaker:bought, 5 worth of stuff, but it was 4.
Speaker:30, you're already processing in your head.
Speaker:That five dollars is gone.
Speaker:So that's kind of what they're thinking is like you're rounding up typically
Speaker:Yeah, so if you and your head are just thinking you're rounding up
Speaker:to the nearest dollar That's what they're doing on their end as well
Speaker:So what if you built your account up and you saw it was 80
Speaker:bucks and you're going out with friends And you want the 80 bucks.
Speaker:What do you do?
Speaker:Yeah, you can pull it out of there So it is an investment account.
Speaker:So typically it'll take A day or two to get to your account because they sell
Speaker:the investments and then they'll deposit So, if it's something where like it's
Speaker:quickly going out to dinner I would try to plan ahead for that one but also I
Speaker:would think about using this one as more of a like Travel fund account or think
Speaker:about it as like a little bit more than like a month to month think about it Like
Speaker:you're putting this aside for a new car.
Speaker:You're putting this aside for a down payment for a house.
Speaker:You're putting this aside for You know just a little bit more growth where
Speaker:you kind of want to not think about it But you're putting it in that separate
Speaker:account to just kind of let it stack a little bit longer than a month to month.
Speaker:Like almost like forget it's there.
Speaker:Exactly.
Speaker:Exactly.
Speaker:But one of the other easiest ways to also create a separate savings
Speaker:account that's automatic is by opening up another savings account
Speaker:at whatever bank you use currently.
Speaker:They're typically just really easy to add on and then go to your employer
Speaker:or wherever you collect payment from and add another payment method.
Speaker:And so if you're a W 2.
Speaker:employee, your employer, if they offer direct deposit, typically has to, I
Speaker:believe they have to be able to offer you at least two accounts that you can use.
Speaker:I've actually never seen it where you can't have more than two either
Speaker:with any of the clients that we've worked with ADP, Paychex Gusto, any
Speaker:of the typical payroll providers.
Speaker:So if your employer has any of those you can add multiple accounts to your.
Speaker:Payment so that your direct deposit you can set up I want 10 percent of my
Speaker:paycheck every pay going into my savings account Then after that, I want 500
Speaker:going into this account and then I want the remaining going into this account
Speaker:So you can set it up where if you have an automatic bills account You have an
Speaker:investment account and you have your spend account You can have it where 10 percent
Speaker:goes into your retirement or savings Or investment, and then $500 or whatever
Speaker:you set for your bills goes into your automatic bills account, and then the
Speaker:remaining goes into your spend account.
Speaker:And then if that's your debit card, then you know that's all you have.
Speaker:But also, You have all of that, because your savings is going anywhere, your
Speaker:bills are being paid, so that is your money, do what you want with it.
Speaker:Yeah, so it almost takes the self discipline part out.
Speaker:Yep, completely.
Speaker:Because it just is like, this is where it goes, you set it up one day
Speaker:when you were feeling super strong, and it's too annoying to undo it.
Speaker:Absolutely.
Speaker:So just spend the money you have.
Speaker:And when that account is gone for that month, that account
Speaker:is gone for that month.
Speaker:Like, you don't want to put something on a credit card and think, I'll pay it off.
Speaker:Whoa.
Speaker:You can do that, but also it's the same limit, like, start
Speaker:thinking it's the same limit.
Speaker:Because I get getting credit card reward points and travel points,
Speaker:I'm all about that, but you just have to be limited with it.
Speaker:You're not using a credit card that has a 5, 000 limit and saying
Speaker:you can spend 5, 000 a month.
Speaker:You're saying my fund money that's being deposited after my investments
Speaker:and my savings, after my bills, is 450 a pay, so it's 900 a month.
Speaker:If you're putting something on your credit card.
Speaker:That's still your limit.
Speaker:If you want to remain out of debt that's your limit because then every
Speaker:month you pay off the full balance.
Speaker:then you get the positive credit card points and rewards.
Speaker:You're building your credit, you're paying it off and you're still.
Speaker:not going into debt or getting into a cycle that you can't get out of.
Speaker:And spend it guilt free, you're saving already, you're doing
Speaker:all the things you need to do.
Speaker:You're building there, you have your savings growing, your emergency fund
Speaker:set, you know that you have your bills covered, spend that money guilt free.
Speaker:I love how much you focus on like, like I would say like, Oh, that one was, I got
Speaker:my nails done, but I don't do that a lot.
Speaker:And you're like, you're allowed to get your nails done.
Speaker:Absolutely.
Speaker:You work and you have a job and if that's what you want to spend
Speaker:your money on, that's okay.
Speaker:Like, I like how much you focus on your money is your money
Speaker:to live a happy life with.
Speaker:Yep.
Speaker:And I feel like if your person doesn't make you feel like that.
Speaker:Then you might be in the wrong place.
Speaker:Exactly.
Speaker:And everybody likes different things.
Speaker:Everyone likes different things.
Speaker:Someone over here might, be like, Oh wow, they spend their money
Speaker:on getting their nails done.
Speaker:You spend your money on books.
Speaker:And that's great.
Speaker:That's fine.
Speaker:I'm not going to say one's better than the other.
Speaker:My nails being done makes me happy.
Speaker:My reading books makes me happy.
Speaker:It's whatever makes you happy.
Speaker:It doesn't need to be the same thing as, exactly.
Speaker:So never feel bad about spending your money if it's not how
Speaker:your mom would spend her money.
Speaker:If it's not how your sister would spend her money.
Speaker:What they want to spend their money on doesn't necessarily bring you happiness.
Speaker:So you don't need to spend your money the same way.
Speaker:It's always a good idea to save and have those covered.
Speaker:You should absolutely be doing those as much as you can.
Speaker:Once those are covered live your life.
Speaker:Yeah,
Speaker:so to recap if you are not looking at your expenses and you're having
Speaker:anxiety The best thing you can do is take action Yep And sit down with a
Speaker:professional if you have access to one and look at everything Absolutely,
Speaker:not as bad as what you think it is.
Speaker:Probably.
Speaker:If you are starting out, you would say start with Excel or
Speaker:Google Sheets because it's free.
Speaker:Yep.
Speaker:Then dip your toes into the app world if you feel like you need to, and if you need
Speaker:a detailed sheet that's already set up, you can email us at info at KnowYourWorth.
Speaker:Google and Excel both have credit card calculators that can help you
Speaker:figure out, look up the Dave Ramsey Snowball Method, it's Sydney approved,
Speaker:and the Acorns app is really cool, and tell them about your code,
Speaker:Oh yeah, so if you want the code for Acorns, you will just...
Speaker:Just send us an email and we can send you that code so that you guys can,
Speaker:you get I think a little extra five dollars into your investment account.
Speaker:It's not all that much, but don't worry.
Speaker:It's still a little kickstart there.
Speaker:But we can send you a code if that's something you're
Speaker:interested in, let us know.
Speaker:And after that, one of the other things that I just wanted to point out too
Speaker:before is with those savings, if you are self employed or you have to have
Speaker:quarterly estimates, your taxes should also be a separate account there, too.
Speaker:I just wanted to say that.
Speaker:Yeah.
Speaker:That'd be a great idea to have a separate account for your taxes.
Speaker:Or part of your savings that's going aside is an addition, it's maybe 10 percent
Speaker:for investment and savings, and then add an additional, 20 percent for taxes.
Speaker:And so now that account's maybe 30 percent and it's taxes, investments, savings.
Speaker:And you have that all set aside so that way when your quarterly estimates
Speaker:come up, year end payments come up, you're ready to go with that.
Speaker:I just want to make sure I added that in for R.
Speaker:So low pruners and our single member LLCs and contractors out there.
Speaker:Yeah.
Speaker:And if that's something that you want to know more about, that's something you
Speaker:can email us, drop it in our comments just to let us know, like, Hey, can
Speaker:Sydney go more into detail about taxes?
Speaker:And I will sit here quietly and just listen because I still don't get it.
Speaker:Definitely go and.
Speaker:to more depth about taxes.
Speaker:Especially as we come up towards the end of the year.
Speaker:Never better.
Speaker:It's like a skeleton.
Speaker:A person.
Speaker:Yeah.
Speaker:Alright.
Speaker:It's great.
Speaker:Taxes are good.
Speaker:They mean you're making money.
Speaker:I'm just kidding.
Speaker:Taxes stink.
Speaker:We all hate taxes.
Speaker:Absolutely.
Speaker:But, it's good to plan for them, save for them, and then Woop
Speaker:Alright, have a great rest of your day or evening, wherever
Speaker:you're at listening to this.
Speaker:Sounds like I'm a radio host now.
Speaker:Signing off now on KYW BGH.
Speaker:Oh, That was so good.
Speaker:Alright, see you next episode.
