2830: Prioritize Your Budget for Success by Mike Ballew of Egg Stack on Personal Financial Habits

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[00:01:06] [SPEAKER_00]: This is Optimal Finance Daily.

[00:01:09] [SPEAKER_00]: Prioritize your budget for success by mightbelu of x-stack.com

[00:01:14] [SPEAKER_00]: And on your host and personal finance enthusiasts, Diane Amariam.

[00:01:18] [SPEAKER_00]: Now let's get right to it and continue optimizing your life.

[00:01:26] [SPEAKER_00]: Prioritize your budget for success by mightbelu of x-stack.com

[00:01:32] [SPEAKER_00]: Whether consciously or not, we sent priorities based on our values.

[00:01:38] [SPEAKER_00]: Someone who values family over achievement will assign a low priority to working late.

[00:01:44] [SPEAKER_00]: Similarly, our spending habits reflect our values regarding personal finance.

[00:01:49] [SPEAKER_00]: Let's look at how to prioritize your budget for success.

[00:01:53] [SPEAKER_00]: First, we need to define success.

[00:01:56] [SPEAKER_00]: Is it making ends meet?

[00:01:58] [SPEAKER_00]: Is it paying bills on time?

[00:02:00] [SPEAKER_00]: What about setting some money aside for emergencies and retirement?

[00:02:04] [SPEAKER_00]: Everyone needs an emergency fund to deal with life's little surprises.

[00:02:08] [SPEAKER_00]: Without it, you'll be asking your family for help or getting out your credit card.

[00:02:12] [SPEAKER_00]: Relying on credit for unexpected expenses can snowball into a serious debt problem.

[00:02:19] [SPEAKER_00]: Saving for retirement is even more important.

[00:02:22] [SPEAKER_00]: Social security was never meant to be a retiree's sole source of income.

[00:02:27] [SPEAKER_00]: It takes a considerable amount of cash to bridge the gap between social security and the average American lifestyle.

[00:02:35] [SPEAKER_00]: Success is making ends meet, paying bills on time and setting money aside for emergencies and retirement.

[00:02:43] [SPEAKER_00]: Prioritize your budget for success.

[00:02:46] [SPEAKER_00]: Now that we've defined success, how is it achieved?

[00:02:50] [SPEAKER_00]: It requires some introspection into spending habits.

[00:02:54] [SPEAKER_00]: Housing, food and transportation consume the bulk of our resources.

[00:02:59] [SPEAKER_00]: Next is healthcare entertainment, clothing, gifts, faith-based or charitable giving, and numerous ancillary costs.

[00:03:07] [SPEAKER_00]: You might be tempted to focus on the big ticket items, but it's the smaller things that more readily affect change.

[00:03:15] [SPEAKER_00]: Do you stop for coffee on your way to work every morning?

[00:03:19] [SPEAKER_00]: What do you typically do for lunch?

[00:03:21] [SPEAKER_00]: What about your evenings?

[00:03:22] [SPEAKER_00]: How do you spend your time?

[00:03:24] [SPEAKER_00]: What do you do when your car gets dirty?

[00:03:27] [SPEAKER_00]: If you own a home, do you pay someone to mow your lawn?

[00:03:30] [SPEAKER_00]: If something breaks or requires maintenance, do you call somebody to do it?

[00:03:34] [SPEAKER_00]: A recent survey found that one-third of Americans spend more on coffee than they save.

[00:03:41] [SPEAKER_00]: Last year Starbucks broke its previous record with revenues topping 26 billion.

[00:03:47] [SPEAKER_00]: Did you contribute to that?

[00:03:49] [SPEAKER_00]: Coffee doesn't have to be expensive.

[00:03:51] [SPEAKER_00]: You can brew a cup at home for about 20 cents.

[00:03:54] [SPEAKER_00]: Have you ever given any thought to what motivates the typical restaurant tour?

[00:03:59] [SPEAKER_00]: What do you think they value most, your health or your money?

[00:04:03] [SPEAKER_00]: Restaurants make money by looting up your food with salt and grease to make it taste better, so you'll come back for more.

[00:04:10] [SPEAKER_00]: Why spend money to out a lunch when you can bring something from home that's better for you and cost less?

[00:04:16] [SPEAKER_00]: Do you spend your evenings swimming drinks at the bar?

[00:04:20] [SPEAKER_00]: If you're single, you probably think it's a good way to meet someone.

[00:04:24] [SPEAKER_00]: It's really not.

[00:04:25] [SPEAKER_00]: You can have a beer or a glass of wine at home for under a dollar.

[00:04:29] [SPEAKER_00]: How does that compare to your average bar tab?

[00:04:31] [SPEAKER_00]: Once the last time you watched your car, really watched it yourself.

[00:04:37] [SPEAKER_00]: You're wasting money every time you pull into a car wash.

[00:04:40] [SPEAKER_00]: You can watch your car at home for pennies and it probably won't take any longer than waiting in line at a car wash.

[00:04:47] [SPEAKER_00]: Home owners.

[00:04:49] [SPEAKER_00]: If you are relatively young and able-bodied, you don't need to pay someone to mow your lawn.

[00:04:54] [SPEAKER_00]: Chances are you could use the exercise anyway,

[00:04:57] [SPEAKER_00]: and would it kill you to change the filter in your furnace?

[00:05:01] [SPEAKER_00]: You can save hundreds each year by performing your own maintenance on your home and automobile.

[00:05:07] [SPEAKER_00]: If you struggle with your budget, and have little or nothing left over to save for emergencies and retirement,

[00:05:13] [SPEAKER_00]: you don't have a funding issue.

[00:05:14] [SPEAKER_00]: You have a spending problem.

[00:05:17] [SPEAKER_00]: Every day people waste money on frivolous luxuries.

[00:05:20] [SPEAKER_00]: Money they could be saving.

[00:05:22] [SPEAKER_00]: It'll all work out they tell themselves.

[00:05:24] [SPEAKER_00]: Maybe someday, when they're old and destitute,

[00:05:28] [SPEAKER_00]: though question whether all those lattes were worth it.

[00:05:32] [SPEAKER_00]: Retirement savings.

[00:05:34] [SPEAKER_00]: The average retirement period in the US is 18 years.

[00:05:38] [SPEAKER_00]: The average American earns 80 grand per year and has $130,000 in their 401k account.

[00:05:45] [SPEAKER_00]: That's not enough to last 18 years.

[00:05:48] [SPEAKER_00]: If you want to get in the ballpark, the math isn't difficult.

[00:05:51] [SPEAKER_00]: The average social security retirement benefit is $1550 per month,

[00:05:58] [SPEAKER_00]: or $18,600 per year.

[00:06:01] [SPEAKER_00]: $80,000 minus 18,661 is $61,400 per year needed to supplement social security.

[00:06:11] [SPEAKER_00]: 18 years times $61,400 is over a million dollars.

[00:06:17] [SPEAKER_00]: Do you have that kind of money in your retirement account?

[00:06:20] [SPEAKER_00]: Have you ever run a projection to see how much you really need a retirement?

[00:06:25] [SPEAKER_00]: Not one of those free online calculators asking for your age and income in savings.

[00:06:31] [SPEAKER_00]: Those use outdated rules of thumb that don't consider any of your specific circumstances.

[00:06:37] [SPEAKER_00]: You need to sit down with a financial advisor,

[00:06:40] [SPEAKER_00]: or use sophisticated computer software that can evaluate every aspect of your situation.

[00:06:45] [SPEAKER_00]: When you consider the rising cost of healthcare and housing in taxes,

[00:06:50] [SPEAKER_00]: you might be surprised to see how much you really need.

[00:06:57] [SPEAKER_00]: You just listen to the post titled,

[00:06:58] [SPEAKER_00]: Prioritize your budget for success by Mike Ballou of egstack.com

[00:07:04] [SPEAKER_00]: And I'll be right back with my commentary.

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[00:08:08] [SPEAKER_00]: While I agree that introspection on spending habits is important for reaching financial goals,

[00:08:15] [SPEAKER_00]: I find that there's more benefit to optimizing one's largest expenses like housing and transportation.

[00:08:22] [SPEAKER_00]: Focusing solely on cutting small discretionary expenses commonly known as the latte factor

[00:08:28] [SPEAKER_00]: is simply less impactful than addressing larger fixed expenses.

[00:08:34] [SPEAKER_00]: I can see some benefit and starting small to gain some momentum and motivation for the big stuff,

[00:08:41] [SPEAKER_00]: because downsizing your housing, moving to a lower cost of living area or switching to a cheaper car

[00:08:48] [SPEAKER_00]: are lifestyle changes that take a lot more effort.

[00:08:52] [SPEAKER_00]: However, one big change, one time, can have a lasting impact on your budget

[00:08:58] [SPEAKER_00]: that you don't have to revisit constantly like with discretionary spending.

[00:09:03] [SPEAKER_00]: Focusing on larger expenses is not just about immediate savings this month.

[00:09:09] [SPEAKER_00]: These are typically your fixed expenses month to month.

[00:09:13] [SPEAKER_00]: So for example, when I moved from New York City to Cincinnati, my rent went from 1800 to a $600 per month mortgage.

[00:09:23] [SPEAKER_00]: This is a decision I made one time seven years ago and I continue to enjoy the cost savings with no additional effort.

[00:09:32] [SPEAKER_00]: But that should do it for today, have a happy rest of your day and I'll see you on the Thursday show tomorrow

[00:09:38] [SPEAKER_00]: where your optimal life awaits.