2678: Budgets Suck. Do This Instead by FIRECracker of Millennial Revolution on Personal Financial Habits

[00:00:00] [SPEAKER_00]: This is Optimal Health Daily. Budgets Suck. Do This Instead by FIREcracker of Millennial-Revolution.com

[00:00:08] [SPEAKER_00]: and I'm Dr. Neal Malik.

[00:00:10] [SPEAKER_00]: Hey there and welcome to another bonus Sunday episode where I share an article from one of

[00:00:15] [SPEAKER_00]: the other podcasts in our network. Today's post comes from Optimal Finance Daily, where

[00:00:20] [SPEAKER_00]: articles covering all types of information on personal finance are read to you every

[00:00:24] [SPEAKER_00]: day. You can follow or subscribe to Optimal Finance Daily wherever you're hearing

[00:00:29] [SPEAKER_00]: this. Now with that, here's Diana with the post and commentary as we optimize your life.

[00:00:39] [SPEAKER_01]: Budgets Suck. Do This Instead by FIREcracker of Millennial-Revolution.com

[00:00:46] [SPEAKER_01]: There, I said it! And now as I dive under the covers to hide from the combined fury

[00:00:52] [SPEAKER_01]: wrath of Mr. Money Mustache, Budgets are sexy, and Mrs. Frugal Woods, let me tell you why.

[00:00:58] [SPEAKER_01]: Now you're probably thinking what the flair you talking about, FIREcracker? I'm clearly

[00:01:02] [SPEAKER_01]: full of considering how often I wax poetic about my budgeting spreadsheets and those sexy,

[00:01:08] [SPEAKER_01]: sexy, Southeast Asian prices. But hear me out. The reason why I say budgets suck is

[00:01:14] [SPEAKER_01]: because they just don't work. Sure, weirdos like me will get off on tracking every dollar

[00:01:20] [SPEAKER_01]: spent and fawn over frequent flier miles. But for most people, budgets are as fun

[00:01:25] [SPEAKER_01]: as getting a fire ant enema. This is because for regular non-crazy people, budgets

[00:01:31] [SPEAKER_01]: can feel like straight jackets. And even though I think too much freedom can be bad for you,

[00:01:37] [SPEAKER_01]: too little freedom is even worse. Let me explain. Budgets tend to look at your spending and try

[00:01:43] [SPEAKER_01]: to force you to ruthlessly cut back on everything. And it does this by comparing every category of

[00:01:48] [SPEAKER_01]: your spending to an acceptable spending range. But what they don't do is empower you. This

[00:01:54] [SPEAKER_01]: is because they take away your control and force you to conform to restrictions that don't work

[00:01:59] [SPEAKER_01]: for everyone. As much fun as it is to be judgmental, and believe me I know, the reality of the world

[00:02:05] [SPEAKER_01]: is that we're all different. What works for one person won't necessarily work for another.

[00:02:11] [SPEAKER_01]: Travelers don't want to cut back on trips. Homebodies don't want to cut back on furnishings.

[00:02:16] [SPEAKER_01]: Foodies don't want to cut back on food. Fashionistas don't want to cut back on shopping.

[00:02:21] [SPEAKER_01]: Now don't get me wrong. I'm not saying you should just throw caution to the wind

[00:02:24] [SPEAKER_01]: and blow your cash on whatever you want. Becoming financially independent requires a certain amount

[00:02:30] [SPEAKER_01]: of discipline, which means you can't turn your expenses into money inferno. But that doesn't

[00:02:35] [SPEAKER_01]: mean that you have to cut expenses down to the bone. So put away that hatchet and pick up a pen.

[00:02:41] [SPEAKER_01]: Why a pen? Because we're going to figure out the meaning of life. The meaning of life.

[00:02:48] [SPEAKER_01]: Okay I may have oversold that last bullet point just a tad but it's not too far off.

[00:02:53] [SPEAKER_01]: Well I can't tell you about the meaning of life. I can tell you about the meaning of money.

[00:02:58] [SPEAKER_01]: And the big secret is the meaning of money is different for each person. So to start I want

[00:03:03] [SPEAKER_01]: you to write down the three things that are most important to you. Go ahead, I'll wait. Got it?

[00:03:10] [SPEAKER_01]: Okay good. What you've just written down are your top three values. Those are what you

[00:03:15] [SPEAKER_01]: should be spending money on. Everything else can be cut to the bone. But if you cut into

[00:03:20] [SPEAKER_01]: these areas, guess what? You are cutting into your happiness. Take me for example. My top three

[00:03:27] [SPEAKER_01]: values are one, wanderer, two, travel, three, food. So that's why I always leave ample room

[00:03:34] [SPEAKER_01]: in the budget for those things. Remember how we spent $1,800 in one month on food in Boston

[00:03:40] [SPEAKER_01]: because we needed our lobster fix? Or $650 on getting scuba certified? Or $150 on the robot show?

[00:03:48] [SPEAKER_01]: And even though I don't drink because I want wanderer to be happy, I always make room for booze

[00:03:54] [SPEAKER_01]: even though I consider it a waste of money and it's tax like crazy. He tends to help me out by

[00:03:59] [SPEAKER_01]: choosing to buy booze from grocery stores rather than going out to pricey bars but nevertheless

[00:04:04] [SPEAKER_01]: we make room in the budget for what's important to the both of us. As long as we make up for

[00:04:09] [SPEAKER_01]: it by cutting ruthless lean areas we don't care about like cars, houses and clothing,

[00:04:13] [SPEAKER_01]: there's more than enough money to go around. Think of it this way. Picture a glass jar. Next to it

[00:04:20] [SPEAKER_01]: sits a pile of big rocks, pebbles and sand. If you try to dump the sand in first, add the pebbles and

[00:04:26] [SPEAKER_01]: then jam in the pile of rocks, it won't fit. That's because sand and pebbles would take up most

[00:04:31] [SPEAKER_01]: of the empty space leaving little room for the rocks. However if you put in the rocks first,

[00:04:36] [SPEAKER_01]: dump in the pebbles to fill in the empty space between the rocks and then finally

[00:04:40] [SPEAKER_01]: top it off with your sand, you'll find that everything fits. In the example the big rocks

[00:04:45] [SPEAKER_01]: are what you value the most. The leftover room in the jar will be filled by the other stuff,

[00:04:51] [SPEAKER_01]: the stuff you're indifferent about. This is why we're perfectly happy to spend a whopping $1,889

[00:04:58] [SPEAKER_01]: per month in Boston on food and booze because lobsters. $988 on accommodation

[00:05:05] [SPEAKER_01]: and anorexic $211 on transportation and even tinier $86 on clothing. Clearly you know where our priorities

[00:05:15] [SPEAKER_01]: lie. I was willing to take the subway instead of buying a car or taking cabs because I'd rather

[00:05:21] [SPEAKER_01]: use that money for extra lobsters and oysters. I hate driving anyways so buying a car held zero

[00:05:27] [SPEAKER_01]: appeal for me. Maybe a car lover would rather spend $1,000 a month on leasing a car but only

[00:05:33] [SPEAKER_01]: $800 a month on food. Maybe they're not a fan of lobsters anyway so they end up cooking more.

[00:05:39] [SPEAKER_01]: And maybe a homebody would rather spend $2,000 a month on some fancy digs but don't bother

[00:05:44] [SPEAKER_01]: eating out at all and spend almost nothing on transportation because they hate going out.

[00:05:50] [SPEAKER_01]: All are different and all are acceptable. And here's the other thing just because our jar

[00:05:54] [SPEAKER_01]: was $3,200 per month doesn't mean everyone's jar has to be that size. For those willing to

[00:06:01] [SPEAKER_01]: trade off some years of their life to continue working so they can get a bigger portfolio that's

[00:06:05] [SPEAKER_01]: fine too. If you're willing to grind away at the 9-5 for another 5-10 years to expand that jar do it

[00:06:12] [SPEAKER_01]: or for those willing to work after retirement so you can have a second jar to catch the spillover

[00:06:17] [SPEAKER_01]: you can do that too. This is why forcing everyone to have the same jar and the exact same

[00:06:23] [SPEAKER_01]: contents makes no sense. My rocks are not car lovers rocks and homebodies rocks aren't my

[00:06:29] [SPEAKER_01]: rocks. When it comes to budgeting we shouldn't all be budgeting the same way. Everyone's past

[00:06:35] [SPEAKER_01]: of financial independence is unique and uniquely their own so figure out your values and fill that

[00:06:41] [SPEAKER_01]: jar your way with your rocks and screw what anyone else thinks. You just listen to the

[00:06:50] [SPEAKER_01]: post titled budget suck do this instead by firecrackerofmillennial-revolution.com

[00:06:57] [SPEAKER_01]: Now if you've been listening for a while you know that I'm a fan of budgeting but you need

[00:07:02] [SPEAKER_01]: to find a way to budget that isn't painful. I like this quote from Dave Ramsey who said

[00:07:08] [SPEAKER_01]: a budget is simply telling your money where to go instead of wondering where it went. I guess I just

[00:07:14] [SPEAKER_01]: disagree with firecracker here when she says that budgets take away your control and force you to

[00:07:19] [SPEAKER_01]: conform to restrictions but when it comes to restrictions based on an acceptable spending range

[00:07:25] [SPEAKER_01]: this is not coming from an outside force or being forced on you from the budgeting gods.

[00:07:31] [SPEAKER_01]: This is you determining for yourself what an acceptable amount of spending is based on your

[00:07:37] [SPEAKER_01]: income values and financial goals. You are in absolute control of your own budget. I think

[00:07:44] [SPEAKER_01]: if your budget feels like a straight jacket it's probably because it's unrealistic so tweak it and

[00:07:50] [SPEAKER_01]: work towards making tiny 1% improvements each month rather than making yourself feel bad about

[00:07:56] [SPEAKER_01]: the overly restrictive budget that you created and if over time this still doesn't help you reach

[00:08:02] [SPEAKER_01]: your financial goals it's possible that you don't have a spending problem maybe you have an

[00:08:07] [SPEAKER_01]: income problem. Perhaps you need to focus your efforts on increasing your income rather than

[00:08:13] [SPEAKER_01]: reducing your expenses but that doesn't mean that you should give up on your budget. If

[00:08:18] [SPEAKER_01]: you're not engaging with a budget then how will you know if you're moving towards

[00:08:22] [SPEAKER_01]: your financial goals? Given that firecracker demonstrated in this article that she is really

[00:08:28] [SPEAKER_01]: clear on where her money is going and how it aligns with her values and overall financial

[00:08:32] [SPEAKER_01]: goals it sounds to me like she's actually engaging with a budget in a sustainable way.

[00:08:38] [SPEAKER_01]: That should do it for another edition of Optimal Finance Daily. I'll be back tomorrow for the

[00:08:43] [SPEAKER_01]: Wednesday show so I'll see you there where your optimal life awaits.