5 Ways to Improve Your Budget

In this week's episode, Josh and Austin are sharing the secrets to improving your budget. Join them as they unveil 5 strategies that will transform your financial landscape. Get ready to set your sights on consistent spending for your goals. Tune in now and revolutionize your budget with actionable insights and expert advice.

For the full transcript, show notes, and resources, visit theinvesteddads.com/186

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Transcript

Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.

Austin Wilson:

All right. Hey. Hey. Welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. I'm Austin Wilson, Co-Portfolio manager at Hixon Zuercher Capital Management.

Josh Robb:

I'm Josh Robb, Director of Wealth Management at Hixon, Zuercher Capital Management. Austin, how can people help us with our podcast?

Austin Wilson:

Please, please, please, please pretty please subscribe if you're not subscribed, because that means you'll get new episodes when they drop each and every Thursday. And visit our website, sign up for our weekly newsletter, and then you'll get a nice little direct link to the episode, as well as some good show notes to help you understand each Thursday what we are going to be talking about. And today,

Josh Robb:

Yes.

Austin Wilson:

We are going to be talking about five ways to improve your budget.

Josh Robb:

Yeah, I put this one together. Unlike Austin's weird, 11 ways to -

Austin Wilson:

11 ways to do X, Y, Z. Josh picked a nice round number-

Josh Robb:

Pick a good number.

Austin Wilson:

Five. Everyone does good with five.

[1:08] - How Does the Average Person Budget?

Josh Robb:

So there was an article on CNBC a little while back, and they wrote, and we'll link it in the show notes. They said 73% of Americans say they don't regularly follow a budget, and this was a survey by OppLoans. It's a loan servicing company. Of that survey, one in 10 say they don't keep any sort of budget at all. It's three out of every four, roughly say they don't regularly follow a budget and one out of 10 or 10% say they don't do a budget at all.

Austin Wilson:

Yeah.

Josh Robb:

All right.

Austin Wilson:

And that was a decent sized survey. It was 1000 some people.

Josh Robb:

Yeah. Yeah. Was that good or bad?

Austin Wilson:

Yes, probably. I think it just shows that most people don't have a handle on where their money's coming or going.

Josh Robb:

Yep.

Austin Wilson:

That's really what your budget is, and most people probably don't know.

Josh Robb:

Yep. Jessica Hinks, she works here at Hixon, Zuercher Capital Management. She has a blog, The Everyday Advisor, great blog.

Austin Wilson:

You should go subscribe,

Josh Robb:

Great blog.

Austin Wilson:

Right now.

Josh Robb:

She did an article a little while back, we'll link in the show notes, but pretty much saying, I'm the advisor that doesn't budget. And the article, which I encourage you to read, pretty much said if you're mindful of your spending and aware of it, tracking it on a daily or weekly basis isn't necessary. I would argue that's still budgeting because you're aware and conscious of your spending.

Austin Wilson:

Right.

Josh Robb:

So I'm wondering that 73% say they don't regularly follow a budget. Maybe those are some of those people that,

Austin Wilson:

They're conscious spenders.

Josh Robb:

Yeah. So I guess my thought is, I don't know yet if it's good or bad signed, but I do know that if you are at the end of the month scrapping for extra money, you probably need to be budgeting.

Austin Wilson:

Right.

Josh Robb:

If at the end of the month you say, oh, I got some extra leftover, you're in a sense doing a good job of budgeting. You're living below your means, which is the only reason for budgeting is to make sure you're living below your means. That's just what it's there for.

Austin Wilson:

All you need is your outs to be lower than your ends.

Josh Robb:

Yes.

Austin Wilson:

Or equal to.

Josh Robb:

Yeah. So pretty easy. So for all those people out there that are currently following a budget or thinking of starting one and just saying, I don't know, it seems like a lot, five tips -

Austin Wilson:

Five.

Josh Robb:

To help improve your budgeting process. All right.

[3:02] - Budgeting Tip #1: Have a Consistent Process

Austin Wilson:

Number one, Josh.

Josh Robb:

Number one, and I was just thinking through this saying, okay, what are some things that over my life have helped me as well as things that I think would help my budgeting get better? The first one is have a consistent process. The first part of that is find something that works for you and stick with it. Don't keep jumping from one thing to another because it's going to be hard to actually track progress. So if you're saying, I'm using this, oh, here's a good app, I'm going to switch over to that. Oh no, what I'm going to use an Excel sheet. I'm going back to paper. If you keep moving around, it's going to be a hard time keeping track. For a good budget you need to see is a couple months worth of expenses to kind of actually figure out what you're doing.

Austin Wilson:

You want to see the changes.

Josh Robb:

Yeah. Because for instance, in the winter, maybe your entertainment budget is different than what it is in the summer. So if you just base everything off of one month and go from there, it may not be right.

Austin Wilson:

Right.

Josh Robb:

Or if you didn't look at December with Christmas spending versus some random month in April where you don't have that, you got to have a consistent process. You need to be sticking to something, and I don't care what it is as long as it works for you. All right. You also need to have goals. All right. So a consistent process says, this is what I'm going to do and I need to set that and try to keep it for a little while. So if I say, Hey, I spend a $1000 on groceries, I'm going to try to stick to that $1000. If you then next month say, I'm going to go to 1200, and then the month after that, you're going to say, I'm going to go to 900. You're moving all over the place. Get a target. Stick with it for a couple months, see if that averages out. Because there again, there may be 4th of July you have people over, maybe I spend a little more, but if I was lower the following month, we're all good.

Austin Wilson:

Right.

Josh Robb:

But give it some time to play out. Stick to your budget to see if it actually works. And then with a consistent process too, there are ideas that I'm a fan of doing something to build a habit. I've talked about this a lot. The habit's the key, and you can't do that until you've given it time to develop into that habit. So stick to it.

Austin Wilson:

And I also just think it can't be too complicated.

Josh Robb:

No.

Austin Wilson:

It really should not be as complicated as fretting over making sure you record 99 cent thing. It has to be repeatable. It has to be consistent. It has to be something that's not a stressful thing to be doing. So if you find a great process and it encompasses everything,

Josh Robb:

Yep.

Austin Wilson:

But it's a lot of work, it really doesn't have to be.

Josh Robb:

Yep.

Austin Wilson:

We are more unlikely to stick with it, if it's really complicated.

Josh Robb:

Yes. And you really only need two themes in a budget, you need a target that you're trying for and some way of looking what you actually did,

Austin Wilson:

Yep.

Josh Robb:

And then you compare those two. That's all budget is.

Austin Wilson:

That's it.

Josh Robb:

And so first you need a target. You need to say, okay, this is what I'm trying to do. And to get a target, a realistic target, you need to know what have I done? Again, going back to your grocery budget, if I have over the last three months averaged $1000 a month, and then now I'm actually going to get a budget going, I can't set that at 500 and think realistically, I'm okay.

Austin Wilson:

You're going to make your family eat ramen.

Josh Robb:

Yeah. It's going to be unrealistic. And so you need realistic target. You need to say, okay, this is where I'm trying to achieve, and then I need to know at the end of that budget period, did I actually do it.

Austin Wilson:

Right.

Josh Robb:

There's no point in having target if you don't track what you actually did. If you say, I'm going to do $1000 of grocery spending, but you never track what you actually did, and then at the end of month you're like, why am I out of money? I had a budget. You had a budget, but did you follow it?

Austin Wilson:

That's exactly it.

Josh Robb:

Did you actually track it?

Austin Wilson:

Yep.

Josh Robb:

So you need both. You need tracking your actual spending and a target that you're trying to achieve.

[6:35] - Budgeting Tip #2: Leaving Room for Emergencies

Austin Wilson:

All right, Josh. Number two.

Josh Robb:

Number two, and this is where sometimes I disagree with certain people, zero base budgeting.

Austin Wilson:

Yep.

Josh Robb:

And so the number two thing is leave room or budget for emergencies. Okay.

Austin Wilson:

Correct.

Josh Robb:

So zero based budgeting says every dollar has to have something that it's doing. In other words, every dollar is allocated to a portion of your budget. Now, I'm okay with zero based budgeting if a piece of your budget has an emergency thing built into it.

Austin Wilson:

It's like a buffer piece.

Josh Robb:

Yes. But the truth is, in any given week or month, however you're looking at your budget, things happen. Right. You could have a flat tire, you could have your refrigerator go out, which happened to us. Our refrigerator broke.

Austin Wilson:

Right.

Josh Robb:

I didn't budget for that budget.

Austin Wilson:

That wasn't in the budget.

Josh Robb:

I didn't know it was coming. But we talked about emergency fund and that's to cover those large expenses. But any given time, things come right? Oh no, my kid got invited to a birthday party. I didn't know that was coming when I set the budget. Every dollar's accounted for, I can't buy a present for this kid. Have a little wiggle room in there. I'm a big fan of having a piece of your budget or just having an allocation that says this is just to cover the difference, shortfalls that I don't know that are going to happen this month.

Austin Wilson:

Right.

Josh Robb:

So I think that's important.

Austin Wilson:

So before we do the remaining five.

Josh Robb:

Yep. Three.

[7:46] - Dad Joke of the Week

Austin Wilson:

Oh, you picked a nice round number. That's right. We're only doing five. So we've already done two. There's three more coming, but I have a dad joke of the week -

Josh Robb:

Yes.

Austin Wilson:

- To interrupt. What do you call an illegally parked frog?

Josh Robb:

Oh, man, I don't know, but it's getting towed.

Austin Wilson:

Toad.

Josh Robb:

Oh, yes.

Austin Wilson:

Toad.

Josh Robb:

Yes.

Austin Wilson:

Josh has heard this. Something,

Josh Robb:

Got that one.

Austin Wilson:

Related to a toad.

Josh Robb:

I figured toad. Had to do it. Had to do it.

Austin Wilson:

All right, we're going to come back. We got three more. And these are some good ones. These are ones I'm excited about.

Josh Robb:

Yeah.

[8:12] - Budgeting Tip #3: Utilize Technology

Austin Wilson:

So number three, Josh.

Josh Robb:

Use technology.

Austin Wilson:

Use it.

Josh Robb:

Use technology. And you kind of referenced this too when we were talking about have a consistent process.

Austin Wilson:

Yeah.

Josh Robb:

One of the easiest way to make a consistent process is to take some of the manual work that you have to do and pass it over. Right. Right. Budgeting can be time-consuming. It can take a while, especially if you wait till end of the month.

Austin Wilson:

Right.

Josh Robb:

If you're like my family, there's these transactions that happen all the time. Right. You got to put money in for the kids' lunches at school, and then you grocery shop every week and then you go to the park or you, all that stuff. If you wait till the end and you're going back through, oh, that would just be exhausting.

Austin Wilson:

Right.

Josh Robb:

So use technology. They have ways to automate pulling it in.

Austin Wilson:

Yeah, so you can link your checking account.

Josh Robb:

Yes.

Austin Wilson:

Link your credit card, debit card, whatever. And then yeah, the algorithms are going to know, oh, you spent something at Kroger. That's probably groceries. We're going to put that in the grocery category or McDonald's. That's probably eating out.

Josh Robb:

And when you tell it something, it remembers if it's,

Austin Wilson:

Exactly.

Josh Robb:

Is this what you want to call it? Yeah. Okay. From now on, every time we see that, we're going to call it that.

Austin Wilson:

Absolutely. So,

Josh Robb:

Helps you budget, pulling in the expenses. If you are also apt to put it off or brush it aside, one of your excuses is probably this just takes, I don't have time for this.

Austin Wilson:

Yeah.

Josh Robb:

Get rid of that excuse, right?

Austin Wilson:

Yeah.

Josh Robb:

Mint. You need a budget, personal capital, I don't care. There's a lot of free apps out there.

Austin Wilson:

Yep.

Josh Robb:

There's some you could pay for that offer additional services. Find one that works. Goes back to that top one.

Austin Wilson:

Stick with it.

Josh Robb:

Consistent. Stick with one. Try it out for a little while. There's a learning curve to these and it'll take a while before that software learns how you like to expense things.

Austin Wilson:

Right.

Josh Robb:

For instance, I don't care to separate between fast food and restaurants. Some of these apps kind of separate those.

Austin Wilson:

Yeah.

Josh Robb:

I don't care. They're all just one bucket to me.

Austin Wilson:

Yeah.

Josh Robb:

I don't care where we eat, we ate out.

Austin Wilson:

Yes. It's overpriced food,

Josh Robb:

Yeah.

Austin Wilson:

For everything.

Josh Robb:

It took a while for the budgeting app I used to learn that it doesn't matter between those two, just all one bucket.

Austin Wilson:

Yep.

Josh Robb:

I just had to tell it each time and then it started learning. So use technology.

Austin Wilson:

Use it.

Josh Robb:

Use it, even to the point on your phone where you can check your balances and all that stuff. Just makes you more mindful.

Austin Wilson:

Absolutely. And the fact that nowadays you link your accounts, it's a secure link, but you don't have to log in every time. You don't have to input the transactions. It knows it as it happens. So it's a wonderful thing.

Josh Robb:

Yep.

[10:32] - Budgeting Tip #4: Review & Update Regularly

Austin Wilson:

Number four, Josh.

Josh Robb:

Set a consistent time to review and update your budget. All right.

Austin Wilson:

Consistency again.

Josh Robb:

This is habits. It's all about habits. Right. So if you're new to budgeting, I would say maybe once a week. So you don't let it to get too far out of whack while you're learning your spending habits. Right. I've always said the first month or two, don't even set a budget. Just track. Don't change any, just track.

Austin Wilson:

Yeah. Now you know where things are going and when.

Josh Robb:

Track it. And then after you have a couple months of that, you can say, okay, now I have good numbers. I'm going to then fine tune what I'm doing and be more conscious of it. Once you're kind of set in your habits and you're kind of on a routine, maybe once a month or every payday, if you get paid twice a month sometime there's a significant event. That's why I like to use payday as a way of triggering, I got new money coming in, let me review where I'm expecting it to go.

Austin Wilson:

Yep.

Josh Robb:

If you procrastinate and tend to put this off, not only setting it like a timeframe, but actually putting it on the calendar saying this time, this time I'm doing it. This is it.

Austin Wilson:

Make it happen.

Josh Robb:

Don't put anything else on there. This is what it is. You can even maybe add a little reward saying, I will budget at the coffee shop. That way I can get myself a cup of coffee, enjoy it, make it a little more fun. Those type of things around it. Or I will do it while I am watching my favorite sports team in the afternoon. That way I have something to entertain me while I'm going through this process because this doesn't need your full focus. You could budget while you're doing something else. And so there's those ways of just saying, I'm going to make it a little more fun if I tend to push it off because I don't see it as fun. I guess some people don't see budgeting as fun, so I have to throw that in.

Austin Wilson:

You do.

Josh Robb:

I do. I love it.

Austin Wilson:

Yeah.

Josh Robb:

It's great.

Austin Wilson:

You do. Why don't you,

Josh Robb:

Why don't you do it every day?

Austin Wilson:

Want to do this? Do it every day. All right. Fifth and final item,

Josh Robb:

Yes.

Austin Wilson:

Of how you can improve your budget. Josh, go.

[12:14] - Budgeting Tip #5: Practice Mindful Spending

Josh Robb:

Yes. And this is one that is good for everyone. No matter where you're at on the process of budgeting first time or you've been doing it for a while is practice mindful spending.

Austin Wilson:

Mindful spending. You kind of hit on this earlier.

Josh Robb:

Yes. And it's really just saying, Hey, is what I'm spending worth it? You kind of get to the point where I don't care so much about the numbers. I know the numbers, but I'm thinking as I'm making purchases, how is this going to impact my budget? If I'm buying shoes today, okay, that's fine. I need shoes. Good. I have a budget for it. Good. And then a week later, I find myself at the store again looking at a coat, but I already bought shoes this month. Do I need that coat right now? Or is that something that can wait? Mindful spending is just being aware of the impact on whatever you're purchasing on how it'll impact or flow through your budget. Doesn't mean you have to stop doing anything.

Austin Wilson:

Right.

Josh Robb:

You're just aware of it. And that's what I think Jess was talking about in her blog is just getting to the point where as you're transacting throughout the month, you're aware of where that's going to be. If I'm at the grocery store for the third week out of the month, and I know I spend X amount of dollars per week, I kind of know where my budget is, kind of know where I'm at spending wise. And if I'm planning a party, I kind of know what I need to do to tweak so that I don't go over budget.

Austin Wilson:

Yeah.

Josh Robb:

And then differentiate between wants and needs. And so there are wants, there are needs. The needs take top priority.

Austin Wilson:

They should.

Josh Robb:

You can't put those off. Right. I need electricity at my home.

Austin Wilson:

Yep.

Josh Robb:

I need water, I need shelter, I need my transportation.

Austin Wilson:

Insurance.

Josh Robb:

Yes. So those needs are very important. And if you get so caught up on, Hey, I really want these shoes, and then at the end of the month I can't pay my electrical bill, that's a problem. So you got to make sure your needs are taken care of and you got to be able to separate the two. Do I need shoes? I need a pair of shoes, but do I need this pair of shoes? How's my other pair of shoes? Am I just buying it because it's new and exciting or what? So.

Austin Wilson:

I just think of the compounding effect.

Josh Robb:

Yes,

Austin Wilson:

If you're willing to delay gratification -

Josh Robb:

That's the key.

Austin Wilson:

Even a day or two days or if you're always willing to do that for everything that's more than a, set your own threshold, 1500 bucks, whatever it is. Then over 30 years of always delaying these things, you've pushed back and essentially probably eliminated some of thousands of dollars of purchases,

Josh Robb:

Yes.

Austin Wilson:

Which is great.

Josh Robb:

Yeah. And again, budgeting, I want to say this as we wrap up and I want to get your thoughts on any additional tips, budgeting should not be constrictive. It should actually be freeing.

Austin Wilson:

Yeah.

Josh Robb:

Because part of your budget is giving you permission to spend within those categories. So for instance, we have a budget for entertainment. I don't care what we use it for. We could use it for anything that's fun as long as we're in that budget. It's freeing to not say, Ooh, can we actually do that? It's already budgeted. There's no guilt in spending.

Austin Wilson:

Right.

Josh Robb:

Right. Same as like clothes. It's like, I don't care what you buy. It's in that budget. You could buy anything you want as long as it fits. It's freeing in that you're giving yourself permission to spend. Don't look at budgeting as a, now I'm telling myself not to do things. No, you're telling yourself you're free to spend, but here's the parameters so that you're happier when you're spending.

Austin Wilson:

Right.

Josh Robb:

So I like budgeting. I think sometimes it gets a bad rap because of, again, it is time-consuming. Early on it takes work and it can be frustrating, but in the long run, it benefits you to the point where it allows you to do more with your money than you could if you weren't a aware and mindful of what you were spending your money on.

Austin Wilson:

Absolutely. I would just add that, like you said, it takes time to figure out what works for you. And if you want to listen to the episode where we actually had our wives on, you can kind of see a little bit of how we do things. My wife and I tend to fall, because we've been at this a while, more into the mindful spending approach. I mean, I always know what our balances are and at the end of the day, I know what we're spending and what's coming in. So at the end of the day, we're good to go, but it took us many years to get here. Right. But I think something that's super important is its similar to the way that you handle your dieting approach. Right. If you are so restrictive and prescribe every little line item on your budget or whatever, just like you would a diet and don't allow for any flexibility or any fun,

Josh Robb:

Yes.

Austin Wilson:

A good piece of pizza or whatever, a beer or whatever you want to do, you're probably going to fail.

Josh Robb:

Yes.

Austin Wilson:

You're probably going to fail your diet and you're probably going to fail your budget and get really frustrated because you have no room for enjoyment, something that makes you happy. So I would say when you're putting together your budget, always leave a corner for things that truly bring you joy,

Josh Robb:

Right.

Austin Wilson:

But put it into your budget. Then you can enjoy guilt free. Yeah. You can enjoy it guilt free and accomplish everything else you want to do, but don't make your budget so strict that your pinching pennies on every single thing and not willing to do what you actually brings you joy. Otherwise, you're not going to stick with it. Just like that diet.

Josh Robb:

Not only do we not stick with it, but there's no guarantee for the future.

Austin Wilson:

Yeah.

Josh Robb:

And it's a balance between enjoying life now and taking advantage of those opportunities and being a good steward and preparing for the future to help yourself and your family, whoever you're responsible for. It's a balance between those two. And that's where a budget comes in because you can balance those two out. How much do I want to allocate towards my future? How much do I want to allocate towards my needs now and my wants now? And that's really what a budget is.

Austin Wilson:

And it shifts over time.

Josh Robb:

It does. Oh yeah.

Austin Wilson:

What you put most emphasis on for sure. And as your income flexes up and down, you'll be able to move those around as well. So,

Josh Robb:

All right.

Austin Wilson:

Thanks for that, Josh. That was a really helpful bunch of tips on budgeting and hopefully we helped improve your budgets or the way that you think of your process around budgeting. And just thank you for being here and thank you for listening. As a reminder, we would just love it if you'd share this episode with people you had asking questions about budgeting, because hopefully we can help them out.

Josh Robb:

Yeah. And if you have tips or thoughts on your own budgeting experience, shoot us an email, go to our website, go hello@theinvesteddads.com, let us know. We'd love to hear about it.

Austin Wilson:

Or shoot us a tweet.

Josh Robb:

That's right.

Austin Wilson:

Because you can follow us on Instagram, Twitter, Facebook, get ahold of us on there. We'd also love it again, if you'd subscribe or leave us a review on Apple Podcast or Spotify so that more people can find us and we can help more people out to improve their financial situation. All right, well, until next week, have a great week.

Josh Robb:

Talk to you later.

Austin Wilson:

Bye.

Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn't have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today's show. If you enjoyed this episode and we had a positive impact on your life, leave us a review. Click subscribe and don't miss the next episode.

Josh Robb and Austin Wilson, work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.