Time Stamped Show Notes
[02:45] Saving is hard because there are more pressing responsibilities that need attention. Most people feel like there is nothing left after to save after clearing their bills. People need to find a way to start saving now instead of waiting for the day they will have more money because that day never comes. There are also a lot of distractions that prevent people from saving unplanned purchases which may seem small but cumulatively end up pulling you back on your goals.
[03:08] Nick and Angie went through their expenses for the last three months and realized that they eat out a lot. They mostly eat out when they are together. That’s where their excess spending lies. Angie says that the reason they eat out a lot is because after cooking, Nick does not take any food to work the next day and she ends throwing out a lot of food. Nick says that he does not like eating leftover food. Both Nick and Angie feel that they need to save more at the expense of their splurge accounts, which are high. While going through their expenses, Nick had an idea of where his excess spending was. Nicks likes to splurge in electrical appliances like cell phone and Xbox games. He however admits that he needs to cut back on those things. Once Nick and Angie have a solid understanding of where their money goes, then they can easily think of ways to save.
[08:22] Angie feels that she needs at least $20,000 in personal savings in order to be able to start taking the risks in other aspects of her life. Nick on the other hand needs $5,000 in personal savings in order to feel comfortable. They both want their joint savings to be at least $4,500. Nick did not include his student loan in the debt work sheet because it is subsidized and no interest is charged.
[11:42] There are different ways to implement a budget. One way is by having different bank accounts. This is whereby the operating expenses would be in their joint accounts. They would also have a separate account for savings and debts. There would also be an income account where all the money would go into and from there it would distributed accordingly to the other accounts. When everything is under one account it’s hard to understand where things are going.
Dave Ramsey in his book The Total Money Makeover talks about another way. According to Dave, one should have the budget of how much they need to spend on a particular product in a week. After budgeting out, one takes that much cash out of the bank and puts them in their wallet. Once your grocery budget is out of the wallet, that’s it for the week. Nick has been trying to run separate accounts as well as operating of his credit card which he says has low limits.
[16:32] People need to do analysis to determine to figure out how much money they have, how much money they need, and where there is room for change. Nick and Angela prefer using a budget to assist them. For Angela, spending only cash helps her budget while Nick on the hand prefers a savings account to which he will automatically transfer money to. Angela wants to open an account with another bank because she sometimes withdraws beyond her budget due to the app being there in her phone. It is much better if she does not see it in her total balance.