Budgeting, Retirement, and Checking Yourself: Season 6 Q&A

[00:00:00] Welcome to The More Sense Than Dollars Podcasts, where your host is Nick and Harry.

[00:00:14] Hey listeners, we're here at the end of season 6.

[00:00:20] That means it's time for a Q&A.

[00:00:22] Are you ready for this one Nick?

[00:00:24] As always I am.

[00:00:27] So 9 episodes, this is the 10th of the season and we got some questions from those 9 episodes

[00:00:37] and we're going to take some of the most common or ones that stood out the most and answer

[00:00:44] some of them for you.

[00:00:45] pattern we've been doing I think pretty much since the beginning every every group of

[00:00:50] questions we call the season and then pick out some of the questions we've been getting

[00:00:55] from the listeners.

[00:00:57] You guys make us think of things that we didn't cover in the episode or we didn't think

[00:01:01] to cover so we appreciate the feedback and then close enough but more than happy to clarify

[00:01:07] there are some that do get answered in the episode.

[00:01:10] But okay, let's start with say your piece.

[00:01:14] What are you thinking about?

[00:01:16] I was traveling this past weekend for the Easter holiday to visit my family and I waited

[00:01:21] too long to book as usual but prices went up twice on each direction and bound and

[00:01:29] up on in the time it took me to place the you know to actually book it.

[00:01:34] So I think you're one from like a hundred hundred twenty dollar trip to low over 200.

[00:01:41] Yeah, for nothing basically just right just because I can't I found the trains I want

[00:01:47] to take made sure they worked with my family came back an hour two hours later to book

[00:01:52] they had gone up.

[00:01:53] I'm like fine whatever I go through that process I click the check out button and it says

[00:01:59] one of the items in my cart is no longer available because the prices had gone up again just

[00:02:04] in the time it took me to put them on my cart and check out that was the one that really

[00:02:08] killed me emotionally speaking at least because the first one was a few hour gap I get

[00:02:14] it I guess.

[00:02:15] Amtrak's not doing any favors for themselves here.

[00:02:18] No so I guess still still mostly my fault but sucks when that kind of stuff happens I feel

[00:02:25] like if I was able to put it in my cart they should have honored the price.

[00:02:29] Yeah, that's the price that was a little annoying but is what it is.

[00:02:34] That's a good one.

[00:02:35] My brother had the same problem with Amtrak going from DC to New York so let's see what

[00:02:43] do I got.

[00:02:44] Arizona green tea.

[00:02:46] I think we talked about them in the inflation episode and I think about it but some places

[00:02:52] are starting the cans the big cans are supposed to be 99 cents because it's written on

[00:02:56] the can and some places are selling it for more than that they're like putting a label

[00:03:02] over the 99 cents.

[00:03:04] I'm putting like a dollar 50 a dollar 49 I think that's wrong.

[00:03:10] It is the second wrong because the company wants it to be 99 cents and I did some research

[00:03:18] and they actually did a little marketing campaign hashtag 99 cents equals 99 cents to tell

[00:03:25] retailers to sell it at 99 cents.

[00:03:29] I like it say it's an unusual an usual adversaries or an unusual one right.

[00:03:37] They're trying to side with the conflicts to be happening in a public eye like there's

[00:03:41] always tension between the supplier like distributors and the resellers and things like that

[00:03:46] but to have it to have them try to win that PR battle with consumers is what it hurts

[00:03:52] their brand because they're right.

[00:03:55] Okay, the first question that we got was from the budgeting 2.0 episode where we did

[00:04:04] a sequel to our original budgeting episode to talk about other options besides the 50

[00:04:12] 30 20 rule for your budget allocations of needs wants and goals.

[00:04:18] So the question is does the pre tax money I contribute to my 401k count towards the

[00:04:25] 20 the goals in the 50 30 20 and does the employer match count?

[00:04:30] What do you think?

[00:04:32] What do you think?

[00:04:33] I'm going to take this one.

[00:04:34] Yeah.

[00:04:35] So I guess I'll answer the second question first which is does the employer match count and

[00:04:41] that's just a flat now when you're wearing you doing the 50 30 20 you're definitely not

[00:04:46] counting that free money you get from the employer match.

[00:04:50] Little aside here is that as a reminder that does count towards the 15% of your net income

[00:04:57] that you should be saving for retirement.

[00:05:00] So potential source for confusion there but when we're talking about building your budget

[00:05:06] don't count the employer match.

[00:05:09] There are a couple schools of thought or a few different ways people think about counting

[00:05:14] their 401k towards 50 30 20.

[00:05:18] There are I think this is a little crazy but I'll put it up there just because there

[00:05:22] are people that put this approach forward and you might see it if you're doing research.

[00:05:29] Some people say that it doesn't count, that their pre tax 401k contribution they just

[00:05:37] pretend that money doesn't exist and they still only apply 50 30 20 to their after tax

[00:05:45] income what is actually in the paycheck.

[00:05:48] Wow.

[00:05:49] Interesting.

[00:05:50] That obviously results in you saving a much higher percentage because you're saving 20%

[00:05:57] on top of whatever you're already putting into your 401k.

[00:06:01] If you are in a financial situation where you can do that and maybe if you're in a lower

[00:06:05] cost living area that's something you could do but personally and I think the way that

[00:06:11] makes more sense is I just count the portion of my paycheck that goes into the 401k towards

[00:06:18] that 20%.

[00:06:21] If retiring is a goal I think it's okay to put it towards the goals part of your budget.

[00:06:26] It's a little gravy on top because it's pre tax.

[00:06:31] It counts a little more than it would be if that was counting towards your goals after

[00:06:37] tax.

[00:06:39] I just break down my monthly paycheck and I get T-Pig checks a month, I combine those,

[00:06:44] break it down into the 50 30 20.

[00:06:47] I subtract my 401k contribution from that 20% and that's what I have left over that

[00:06:53] I need to spend on goals.

[00:06:55] Good question.

[00:06:57] I like that one.

[00:06:58] Yeah, that's one that I had myself when I started trying to budget more seriously and

[00:07:03] I think all the time as we've covered this I just sort of took for granted that I had

[00:07:08] answered that or made a decision on that for myself.

[00:07:13] What else do we have?

[00:07:15] Next, people really liked the budgeting tools episode.

[00:07:19] Yeah that's become one of our top 10 episodes listen to.

[00:07:23] Maybe little T's might do some deep dive into probably more to do there.

[00:07:31] This question started using an app and they track everything now but still having trouble

[00:07:36] changing spending habits.

[00:07:38] Really they know how bad their spending is as opposed to it being in the dark before

[00:07:46] they ask how do I actually use a budget that they've established to change behavior?

[00:07:51] Interesting.

[00:07:52] Well, I think one thing we talked about in that episode is that just knowing is great.

[00:07:57] That's a good start.

[00:07:59] The first stop.

[00:08:00] Yeah, we said that was the first step and so if you do that and you know that's really

[00:08:04] good.

[00:08:05] You know where you fall within that 50 30 20 and what's going to what?

[00:08:10] So I think that's great.

[00:08:12] These apps are pretty good at categorizing you can make your own categories and they

[00:08:19] can categorize for you automatically.

[00:08:22] So then the question becomes how do I use that data to make decisions rather than just

[00:08:29] knowing what is going on?

[00:08:32] For me, I think it's using the app to help decide where you can spend rather than I guess

[00:08:42] it's being more proactive than reactive.

[00:08:45] You could use the reactively just to say well, I actually did 40% on once and only 10%

[00:08:54] on goals this month, bummer or you could say well, I did that.

[00:09:01] I've looked at that over the last few months and I did that.

[00:09:04] Now even within my wants category, I need to be looking at am I pulling from one category

[00:09:10] or another and is are my wants creeping up to above the 30% that I have allocated?

[00:09:16] So I guess it's I don't know would it be just looking at the app more often or setting

[00:09:21] alerts and notifications?

[00:09:23] Yeah, I would say all of those things I think like looking at it more often and setting

[00:09:29] those notifications, I think are still post purchase activities.

[00:09:34] Right?

[00:09:35] I think what if you're at that step where you have everything in there and you're tracking

[00:09:39] it but not changing your behavior because of it, what needs to happen is any time you're

[00:09:45] going to spend money, you should be using the app as the decision, the final piece or

[00:09:51] the decision making process.

[00:09:53] Yeah, that's true.

[00:09:55] If you do it, if you do it alerts, it's just going to tell you you went over your wants

[00:09:58] budget.

[00:09:59] That's like to write that way or even, you know, not even this maybe you have your

[00:10:03] needs and your goals locked in but you're spending your wants on stuff that you don't

[00:10:08] actually want it.

[00:10:10] Maybe you want to spend more time doing social activities and you're not because all

[00:10:17] of your spare change is going to door dash something like that.

[00:10:23] And you're just constantly doing that and having to say no to go into the movies or

[00:10:27] something.

[00:10:28] I think what you need to do there and this doesn't have to be a permanent change because

[00:10:34] it's really it's a tool to change your habits but if you're having this problem, anytime

[00:10:41] you're going to spend money, you should be going to your app, going to your tool or

[00:10:45] your paper budget.

[00:10:46] However you've created it, this person mentioned using an app and check, you know, oh, I'm

[00:10:52] going to stop in a CVS grab, I'm going to grab an Arizona IST and bag of chips for

[00:10:57] four bucks on my walk home from the train station.

[00:11:00] Kind of thing.

[00:11:01] You should go to your app and check and see what your situation is going to be after

[00:11:07] spending those $4.

[00:11:09] Maybe you have plenty of money in your wants budget it's not going to ruin you financially

[00:11:12] to do that but maybe you're already tapped out your snacks budget for the month.

[00:11:19] Yep.

[00:11:20] And that forces you to realize, oh okay I'm pulling from one where what other category

[00:11:26] am I going to pull from for these trips and areas.

[00:11:29] And okay maybe you did have a door dash budget and you say okay, well I'm going to get

[00:11:35] the snack.

[00:11:36] I'm okay not getting delivery but maybe all that you have left in your wants budget for

[00:11:41] that month is a trip to the movies.

[00:11:44] And now you have to realize, oh wait a second, it's only four bucks but if I do this

[00:11:50] I don't have money for the movie ticket and then popcorn or whatever.

[00:11:53] Which is okay to do it so you're making that decision.

[00:11:57] Right.

[00:11:58] It's easier to make that if you already make the purchase and then go to your budget

[00:12:02] and you see you overspent, you have to move that money from somewhere.

[00:12:06] There's kind of, there's no, I know on that situation for myself I don't feel as much

[00:12:12] guilt about it because it's like well what are you going to do?

[00:12:14] The money's already spent.

[00:12:15] Got to move it from somewhere where doing it beforehand is harder for me to justify

[00:12:21] That's a good one.

[00:12:23] So congrats to them for taking that first step in tracking and now you can actually use

[00:12:29] all of that to curb your spending.

[00:12:33] We got another one on the budgeting tools which was which budgeting apps are you guys

[00:12:39] using?

[00:12:40] And are there any other new ones you've heard of or others besides the ones you're using

[00:12:46] that you'd recommend?

[00:12:48] I think we talked about or I don't know if I said I was using co-pilot.

[00:12:52] I think I got co-pilot because of that episode when we were doing the research on their

[00:12:57] behalf.

[00:12:58] I think you may have mentioned that you're going to start looking into it.

[00:13:01] So that's what I'm using.

[00:13:03] I got co-pilot and I've been, that was, I don't even know six months ago or something

[00:13:09] and I've been liking it a lot.

[00:13:12] It's very good for tracking.

[00:13:13] It automatically categorizes.

[00:13:16] It's got it only has and it's only on iPhone and Mac right now.

[00:13:22] So not great for Android but for iOS people I would recommend it.

[00:13:30] I'm liking it.

[00:13:31] Nice.

[00:13:32] And you are on, you need a budget, right?

[00:13:35] I'm on, you need a budget.

[00:13:36] I've been on, you need a budget since 2015.

[00:13:41] I think 2016 maybe it's going on, it's going on a while.

[00:13:46] But Monarch money has caught my eye.

[00:13:50] Yeah, that's one of the new popular ones right?

[00:13:54] Looking into it, it's been around for a little bit.

[00:13:57] Forget what I was when I was looking into it.

[00:14:00] I think they had some awards.

[00:14:02] Yeah, like they got best Fintech app or were at least to find it a finalist in 2021.

[00:14:09] You know, so they're not brand new.

[00:14:10] They've been around for a little bit but they've really been making a big push recently

[00:14:15] to absorb the mint users.

[00:14:19] Now that mint is being shut down.

[00:14:21] Yeah.

[00:14:22] So I think it's been making a big marketing push because there's a lot of counts up for

[00:14:28] grabs but that's why I saw them.

[00:14:31] I started looking into them more and I'm going to keep looking into them.

[00:14:36] Is there a way to try it without having to get rid of you need a budget or would you

[00:14:39] just jump in head first and put it all?

[00:14:42] Yeah, or there definitely is a way to try but it's a matter of like, am I going to track

[00:14:49] and categorize the same account into different systems?

[00:14:52] Yeah, you know, it's called Go All-In.

[00:14:55] So I think I got a demo in it and I still have an annual subscription with you to

[00:15:01] budget so I got double check when that runs out.

[00:15:05] But we'll see.

[00:15:06] We'll see.

[00:15:07] So check that one out.

[00:15:08] That might be one worth looking at.

[00:15:09] I'm on arc money.

[00:15:12] Yep, end copilot and you need a budget and there's so many out there but those are the

[00:15:17] ones we use.

[00:15:19] What else?

[00:15:20] All right.

[00:15:21] We have one from the lifestyle creep episode.

[00:15:27] So this is about how do we identify that you are engaging in lifestyle inflation?

[00:15:36] Yeah.

[00:15:37] Well, are there any red flags early warnings?

[00:15:39] Anything you should be on the lookout to catch yourself falling into the lifestyle creep?

[00:15:45] It's tough because it's not.

[00:15:47] Yeah, go ahead.

[00:15:48] I hate to even for reading a question.

[00:15:49] I'll put that up there but I hate describing it as just a trap because you do deserve if

[00:15:55] you're making more money to spend a little more on the wants.

[00:15:58] Yeah.

[00:15:59] But it's all I'll kick it off.

[00:16:01] Well, it's often such a slow thing that it is hard to recognize.

[00:16:06] Maybe if you get a big raise, you buy a new car and you get a whole new wardrobe or

[00:16:12] something but most people aren't that impulsive or doing it all at once like that tends

[00:16:17] to be like I shop at the more gourmet grocery stores.

[00:16:21] I do.

[00:16:22] I get a nicer car than my old one.

[00:16:26] The clothes I get are more expensive, the hotels I'm booking are more expensive.

[00:16:30] Maybe I stretch myself for a nicer apartment, all those things but they happen over time.

[00:16:36] So, the way I've caught myself is by looking at credit card statements and seeing are they

[00:16:43] increasing month over month?

[00:16:45] Are you getting risk risking any sort of credit card debt?

[00:16:50] I think another one would be if you see the percent if you're budgeting correctly, you

[00:16:57] should be able to see what percent's going towards wants and is that getting higher

[00:17:01] is the percentage that you're saving going down even as you're making more money.

[00:17:07] Right.

[00:17:08] I think that's the major thing.

[00:17:10] It's always important to look at things in relative terms.

[00:17:15] So, spending more money on your wants isn't the problem.

[00:17:20] Spending more dollars itself.

[00:17:22] Are the percentages getting out of whack though?

[00:17:24] Are you spending a higher percentage of your income on wants?

[00:17:28] That's an issue, not just spending more because you have more available for your wants.

[00:17:34] It's like comparing you to the you of before or not necessarily to somebody else, right?

[00:17:39] Your own percentages.

[00:17:41] Yeah.

[00:17:42] So, how do you fix that?

[00:17:44] Just reset your percentages or decide am I going to stick to 50, 30, 20?

[00:17:54] I guess that's the way to do it is to fall back to the percentages that you've agreed

[00:18:01] to yourself.

[00:18:02] Yeah, I think it's kind of, there's not a silver bullet here but it's more like stick

[00:18:08] to those principles that we've covered so far and about how do you determine how much

[00:18:14] money you can spend on things?

[00:18:15] Right.

[00:18:16] I think it's using those percentages as targets and making sure that you work with

[00:18:24] and reevaluate your budget when you do have changes in income.

[00:18:30] But we say, didn't we say the best thing is when you do get a raise put the amount of

[00:18:36] the raise into 50, 30, 20?

[00:18:39] In that, right?

[00:18:40] Yeah, exactly.

[00:18:41] So there will be a higher, there will be more to spend on wants and things you like but

[00:18:48] you're not hurting your savings.

[00:18:50] You're a goals budget.

[00:18:51] I even do that with like bonuses and tax returns that split it up across those.

[00:18:59] Yeah, split.

[00:19:00] And then, you know, I don't have to feel guilty about spending more.

[00:19:05] Yeah, I think one, I think kind of one of the other things to be an ill look out for

[00:19:10] and we're kind of covered in this piece but our splurges becoming habitual.

[00:19:15] Yeah, I'm going back to myself.

[00:19:18] Like door to ash delivery food used to be the occasional splurge.

[00:19:24] And you know, as I progressed my career made more money.

[00:19:28] It became more of a regular thing and it was still well within the 30% for a wants but

[00:19:36] at times has crowded out more worthwhile.

[00:19:40] Other parts are that yeah, yeah, yeah, yeah.

[00:19:44] Yeah, that's interesting.

[00:19:46] It's like because the word afford is so weird.

[00:19:51] Like you could say, you could say I can technically afford it.

[00:19:55] Not necessarily going into debt or like going to lose my house because I'm doing it but

[00:20:05] maybe you're not even putting your retirement at.

[00:20:07] Yeah, yeah, yeah.

[00:20:08] You know, everything's fine financially.

[00:20:11] You're just but not respecting your budget categories, I guess.

[00:20:16] Yeah, and that's not respecting yourself.

[00:20:19] Well, but McDonald's delivered to your door.

[00:20:22] I guess if you're not getting sponsored by door dash or amtrak and if you're listening

[00:20:27] to this and feeling attacked it's isn't targeted at you.

[00:20:31] I'm targeting myself.

[00:20:33] It's me.

[00:20:34] Yeah, I'm the problem.

[00:20:37] That was a good question though because it is a slow thing but that's what the apps

[00:20:41] can do is they can tell you, you know, how you're doing according to each category month

[00:20:46] over month.

[00:20:47] Okay, okay, we got one from the keeping financial resolutions episode.

[00:20:56] How do you deal with problems like procrastination or not having motivation when you're going

[00:21:03] for financial goals or resolutions?

[00:21:06] Well, you're asking the choir here a little bit.

[00:21:12] Nick and I know procrastination.

[00:21:14] Yeah, we've had to some of these.

[00:21:17] Yeah, you go ahead.

[00:21:18] I think some of its personality and you're going to have to play around that.

[00:21:21] You're not going to change necessarily who you are as a person.

[00:21:26] You have to work around it.

[00:21:27] But what do you think?

[00:21:29] I think then, yeah, for myself as a professional procrastinator for as long as I can remember,

[00:21:36] it's removing the opportunities for procrastination.

[00:21:39] You have to go against yourself a little bit.

[00:21:44] And so what I find is I'll have these bursts of motivation perhaps to do stuff and so

[00:21:50] I take advantage of those moments of action to try to automate things rather than do the

[00:21:58] things I've been procrastinating if that makes sense.

[00:22:01] Yep, because if I use, I could either use that motivation I have to do a couple bank transfers

[00:22:09] and get caught up or I could use it to set up the automated bank transfer which will

[00:22:14] make sure that I don't get into that situation again.

[00:22:16] Yes.

[00:22:17] And it's perpetual and you know, and that's how you don't have to do everything all at once.

[00:22:21] Just doing things like that when you're feeling up to it, do something that is continuous

[00:22:27] or sets you up for future success and all of that layers on each other.

[00:22:32] Same thing for me, yeah, the automating automatic transfers, auto pay, all the things

[00:22:37] you can do.

[00:22:38] Like paying yourself first takes away that willpower fight you have of well, I really

[00:22:47] want to go on this trip but I know I did also want to save up for a down payment on

[00:22:51] the house but the trips now and I can save later and you know, if you're automatically

[00:22:58] saving that takes those decisions and they'll come up often.

[00:23:03] All of those should I get this or this and you know, can I afford it?

[00:23:07] Right.

[00:23:08] Anytime you're doing that stuff manually, you give yourself an opportunity to also decide

[00:23:11] not to do it.

[00:23:12] Yeah.

[00:23:13] Yeah, that's whereas if it's just an automated process happening in the background, you're

[00:23:17] never making that decision in the moment to use that $600 somewhere else or the $500

[00:23:23] somewhere else.

[00:23:24] Okay, we got one more.

[00:23:28] What's our last one?

[00:23:32] This is, you know, I think we've answered this in the podcast but it's worth repeating.

[00:23:39] How can I, how do you strike a balance between saving for retirement and other financial

[00:23:44] priorities?

[00:23:46] Yeah.

[00:23:47] Like if you have debt or saving for some short term goal, like a house, it's a good one

[00:23:54] because we often say 20 and 20 means goals and saving.

[00:23:58] There's a lot that can go into that 20 of a 50, 30, 20 budget.

[00:24:03] And so how do you rank where should it go?

[00:24:06] Well in the original retirement episode, we talked about the retirement flow chart or

[00:24:12] retirement wrapper, which is a helpful way to just to decide is 57 episodes ago.

[00:24:18] Yeah.

[00:24:19] So it might be time to, it's been updated and I think more details been added.

[00:24:26] There's more we can do there because I think about this all the time, I have to go back

[00:24:30] to those charts to see, you know, okay, I've done this.

[00:24:34] Where should I go from here?

[00:24:36] It's all about optimizing that chart is like, it's mostly going by interest rates.

[00:24:41] So if you have a credit card that you're paying off, that has 20% interest rate or you

[00:24:49] could put that money in an index fund making 10%, you're making more for yourself by paying

[00:24:58] off the 20%, not being charged 20% than you're earning and getting the 10% return.

[00:25:05] That's kind of how all of that math works out on that thing.

[00:25:09] But that's my thought.

[00:25:12] I just follow the flow chart.

[00:25:14] What do you think?

[00:25:15] Yeah, how do you balance short term and long term?

[00:25:20] The wording of it's interesting because I don't personally view it as striking a balance

[00:25:26] because I just follow the flow chart.

[00:25:29] And if you're going through the flow chart, there's not often a point in it where you put

[00:25:35] a little bit of money towards one thing and a little towards the other thing.

[00:25:39] You work at one step.

[00:25:44] If it's paying off debt, you work on that step until you've paid off the debt and then

[00:25:48] you can continue on the flow chart.

[00:25:52] If it's not paying off debt, it may be just a matter of increasing your income before

[00:25:57] you can get to the next step.

[00:25:59] If you don't have enough coming into Maxot your Roth IRA, there's not a trade off that

[00:26:06] you would split your money between.

[00:26:10] I'm assuming there is a different option that has that higher return like you were saying.

[00:26:15] If you can't max your Roth IRA and get the Max employer match, there's no balance to

[00:26:23] strike there.

[00:26:24] You take the employer match because that's a guaranteed return.

[00:26:27] That's 100% whatever.

[00:26:28] That's what I'm saying.

[00:26:31] It's not really a balance because you're not a sea salt, it's more like stacked buckets

[00:26:35] and none of the money goes into the next bucket until you overflow the first one.

[00:26:40] There's probably let's do another, we should probably do more on that.

[00:26:45] There's another episode to be had because it's tricky but it is really helpful because

[00:26:50] when you're following that, you can know that you are being as efficient as possible with

[00:26:55] your money and that you're getting yourself the highest returns on everything that you

[00:26:58] can.

[00:26:59] Going back to the procrastination question, having a tool like that flow chart is one of

[00:27:04] those things at least that helps.

[00:27:06] I can get decision paralysis or get an objective.

[00:27:09] I love making sure I'm making their best decision and I get stuck doing research and all

[00:27:14] that.

[00:27:16] But if you have a tool like that where you can easily answer some questions and follow

[00:27:20] the path, it makes it a lot easier.

[00:27:24] All right, good questions everybody.

[00:27:27] Thank you for listening to another season of more cents than dollars.

[00:27:32] Season seven will be coming next but these were great questions.

[00:27:37] We appreciate the engagement and feedback and all of that and we will see you in the next

[00:27:43] season.

[00:27:44] Bye everybody.

[00:27:46] You've been listening to The More Sense Than Dollars Podcast.