Money Rehab with Nicole Lapin - How Can I Budget When My Income Is Inconsistent? (Listener Intervention)

Episode Date: September 10, 2021

Today’s Money Rehabber Kevin wants to provide for his family. But he’s struggled to make a budget because his income relies mostly on inconsistent tips from delivering pizza and sporadic commission from real estate gigs. In Kevin’s Listener Intervention, Nicole creates a budget that will stick. .

I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start, or even too complicated, if, say, you want to put your summer home in Maine on Airbnb, but you live full-time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you.

I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself.

Find a co-host at Airbnb.com slash host. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. Are you ready for some money rehab? Wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Making a budget sucks. Trust me, I know this all too well.

That's why when I talk about making a budget, I call it a spending plan because the word budget has a lot of emotional baggage and we want to shed that baggage so we can continue on this money rehab journey with a lighter carry on. Today, we have a listener who has been struggling to make a spending plan. He wrote to me asking for help finding a budgeting app that was right for him. But if you read between the lines, I think his issue is actually rooted in the process of making a realistic spending plan and not actually about an app. But let's get into it. Kevin, welcome to Money Rehab. Tell me a little bit about what's going on. I've pretty much done everything job-wise. Okay. I kind of have a similar background to you. You

know, my dad was in the military, but it was back in the seventies and eighties when they didn't make, well, they still don't make a lot of money, but they made even less. So luck, you know, we had to watch what we eat. Of course I was this huge garbage pit. My mom, I don't know how she afforded me for food. All boys are. I've learned a thing of instant gratification instead of budgeting. Okay. Because I was always like, because I started out one of my first major careers was in the

oil field. So I was making pretty decent money. So I never really got super purposeful on having a budget. Now that brings me to, I'm kind of analytical. So I start looking at these things like Mint or some of these other programs. I look at them and I'm just like, they have all these options. And I'm just like, okay. And I just start going down rabbit holes, one rabbit hole after another going, I should become a professional rabbit hunter because I go down so many of them. And so like I said, in my email, I become paralyzed by all my analysis. If that were a profession, I would also be a professional rabbit hole hunter.

It is one of my most favorite pastimes as well. So you're definitely not alone. On a positive note, since I've been listening to your podcast and stuff like that, my wife and I are talking more financially about things that we ever did in the past. So it was more like me just saying, no, babe, we can't afford that. And not given a reason why, but now we're having actual financial conversations. So that is a positive note. That's amazing. How are those conversations going? Tricky, you know, kind of uncomfortable. They always are.

Yeah. This morning, she's just like, well, I get paid on Monday, so I'm not going to pay the eye doctor till then because we have to, because my daughter needs a snack, the class snack. So she's like, okay, we'll buy the class snack today and then we'll pay the doctor on Monday. So, I mean, it's just like that type of conversation never happened before. Do you think it's made your relationship better now that she does know a little bit more about it and is participating? Yeah. I know that didn't sound very convincing, but, you know, yeah, it makes things a little tougher too, but it's better. So I need to get better at budgeting. But when you look at like Quicken or QuickBooks or whatever it is, or your bank, it's just a pie

chart saying, okay, you spent $1,200 in mortgage, or you spent X number of dollars in groceries or what they consider groceries. But it doesn't really say whether you're on track or off track or anything like that. You need to get better at setting saying, okay, we're going to spend $200 a week. And it sounds to me like you have run a P&L or you've run a budget for a company. You know a lot about these concepts from having your own MBA, from having, it sounds like, two homes that you've purchased for providing for your family without debt. This is an issue that a lot of people face because it seems very overwhelming. The good news is that once you take an overwhelming topic like budgeting or anything else in finance,

for that matter, and you break it down into baby steps, it doesn't feel as scary. So perhaps it might be a good exercise to reverse engineer what your goals are and then figure out how to get the inputs to get to that goal. So what ultimately are you hoping for in your financial life? I want to be able to take a vacation. I want to be able to, you know, my son wants a new computer game or a new book for him to read or, you know, he's into swimming now, so he wants better fins or whatever it is. I want to be able to go, okay, yeah, not a problem because I have a budget. I can look at it and say, so basically, that's my financial goals.

This is stressing you out and overwhelming you, and it doesn't need to be. So let's figure it out. Hold on to your wallets, boys and girls. Money Rehab will be right back. I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start or even too complicated if, say, you want to put your summer home in Maine on Airbnb, but you live full time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network,

which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble. So I don't end up making time to make my house look guest friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at

Airbnb.com slash host. Now for some more money rehab. How much money are you bringing in? Now for some more money rehab. How much money are you bringing in? I'm not bringing in a lot for my real estate yet because initially it was a delivering pizzas at night and turn around and spend more time at real estate during the daytime when I can talk to a lot more people. And so I've made that change. And so pretty much in the 100% commission field with real estate, whatever I do today, I see money in 90 days. So you have to do this whole pipeline thing to keep people in. And so you always have a consistent paycheck instead of hot and cold spurts. So right now I'm still in the extreme

cold spurt as I'm trying to gain database and people and stuff like that. So I'm only really living off of the tips from delivering pizzas at night. So it's still about the same. I'm not quite because we're going into the off season, so I won't make as much. So I'll probably end up around 35, not too far off. So that concerns me trying to budget off of that and run a business because right now everything is still cost money. My P&L is pure L right now. I think that some of the anxiety is coming from the idea that your income is precarious. So you keep referring back to your oil days where it sounds like it was more consistent. Right now,

you are going through what a lot of freelancers go through, what a lot of folks in real estate go through, models, people that have income that goes in hot and cold spurts, as you note. And so it's really, really hard to budget that way. So please try not to be hard on my new friend, Kevin, because it is really hard to budget when you don't have a consistent amount that you're bringing in. So let's just give ourselves some grace with that. What would you say is your average take-home pay? $750 a week. So do you feel like that's a conservative estimate or a generous estimate?

That's fairly accurate because, I mean, sometimes I pull over That's fairly accurate because I mean, sometimes I pull over $250 in tips. I mean, I don't count my hourly wage. I always figure everything out by my tips because that's where I'm getting most of my money. I would say let's work off something like $2,750 or $2,500 to be more conservative because it sounds like you and I are cut from the same cloth where we worry a lot about not having enough. And so if we work with lower numbers, but we have more, that is just an extra added surprise and not a disappointment. Yeah, let's be conservative, 27. So right now it sounds like you don't have rent that you're paying or a mortgage. No, I don't have a mortgage anymore because I sold the place.

Right now, like I said, we're making modifications to the house to pay, but we will start paying rent again. So how much do you think approximately that is costing you? 500 bucks? It'll be just under 10 grand to replace all the windows. Okay. And how long have you been staying in her house? About a year.

So, I mean, it's pretty close. I'll have to do the math to see if it's completely equals to what is owed. Okay. So, let's amortize that for the year. Let's round up to 10, as did divided by 12 months. If you say you're staying there for a year, that's $834. You want to round up to $850? That's fine. Okay. So let's say you're paying $850 essentially for rent. So you have $1075 to pay for all the other essentials. So your food, your transportation, any medical bills, anything you need to live on. What's going on with your car?

Well, we have two car payments. Okay. And how much are those? Are there 500 bucks each? Basically, yeah. Do you need those both cars? 500 bucks each? Basically, yeah. Do you need those both cars? Well, now, because my wife is starting delivering, so she will be bringing in some money. We're just not sure exactly what that money is going to be at this moment. I mean, because she was taking care of the kids while

I was working. So you're on a lease or is that a car note? It's a car note. Is there any way to renegotiate? I mean, I haven't looked into to see what the car interest rates are right now for used or anything like that to see if just a simple refinancing would work. So the first order of homework is to negotiate both your car payment and your wife's car payment to try and get that lower because we're already done with the 1925 that I tried to allocate for housing, transportation, and food, and utilities, and other bills. And we haven't even gotten to food or utilities and other bills. So we have $825 left in that budget. My original agreement with my sister, and that was before the pandemic, we were living there and we were paying rent, was that it covered the utilities. That was part of it.

And it looks like my estimate, because we were paying $1,000 to cover her mortgage and utilities. Okay. So we're being generous, of course. Yeah. You got to eat. Your family's got to eat. So in this generous estimation, we have $825 left. Let's say we realistically probably have more than that.

But we have $825 left for the rest of the month. Normally, I would suggest to put about half of that into your emergency fund if that's not covered yet, which is three to six months or six to nine months of savings in the bank or retirements or investment accounts. It sounds like we might need that money, but let's keep it on the side for right now. So 413, which would be half of 825 towards some of the extras. So toward your son's swimming fins or whatever you guys want to do or that vacation that you were talking about. So I would still love to have you get to a place where you're going to be putting at least $400 toward some of those extras and toward some of your vacation. And a foolproof way to do that is to set up an automatic transfer. So you can set this up with your bank. You can put it into

a separate sub-savings account. So within your savings account, you can create littler savings accounts and name them. So you can say Kevin's vacation fund or whatever. And if you want to even break that down further to $100 a week, that would give you $400 a month and have that automatically transferred into that account. So you don't see it in your bank account and you're not tempted to spend it. I've done stuff like that before where I would, I would had the intention of, okay, every paycheck, I'm going to put a hundred dollars in my savings account and then not touch it. But then something always comes up and I raid the account and it's not always quote a real emergency. account. And it's not always, quote, a real emergency. Yeah, well, I would. I get it.

It is tempting. I would put some safeguards on yourself. You know, sometimes we have to safeguard ourselves from ourselves. Sometimes we are our own biggest enemy. So I would set it up with your bank bank now that you're having conversations with your wife. Maybe you keep a separate password for that account or you keep an extra safeguard on that account and maybe you put it in a safe or maybe you put it somewhere else where it takes you several steps to actually do it and it gives you some space to really think about it. I have a client who literally froze her credit cards in her freezer because when she wanted to spend it, she would have to go through the act of defrosting. And during that time, it was almost like a literal cooling off period for when she would want to spend that. So I think it's really in your most lucid moments,

that. So I think it's really in your most lucid moments, you want to set this up in a way that's not too stringent. That's something that's sustainable, but also that is safeguarded from any whims or any, you know, things that you may tell yourself are emergencies, but actually aren't. So you don't touch that. So since we're not in the oil field, we can set something similar up for ourselves where you have an extra step. I'm not going to tell you what that extra step is, Kevin. I am not your mama. But I'm going to put that as number two on your homework list to set up a safeguard for your emergency fund and set up an automatic transfer to a place you are not going to touch readily. So I would aim for $400 a month into that account. Now, that account could be for fun stuff, for stuff your kids want, for vacations, for stuff your kids want, for vacations, for you and your wife, whatever.

Right now, it sounds like you might not have a lot of flexibility because food isn't accounted for. How much do you spend on food? I would say probably around $200 a week because I have access to the military base so I can get food without paying taxes and stuff like that. So it's reduced my expenditures. Okay. So I go to the commissary to shop. Okay. Okay. So let's say $200 a week. That's $800 right now. So that's the 30% that I was hoping we could put toward your fund money and toward your end game or your savings. Are you going over budget with that food money? food money? I don't think so.

Well, it was during the summertime. So I was actually making more than, you know, I was averaging more a night. So I wasn't going over budget. Or if I did, it didn't matter. It matters because it's not forward thinking

because I could have been using that money now if I would have saved it. Yeah, that's okay. We can go back. We can only move forward. Yeah, and that's the reason why I want to get more purposeful on the budget is because, so instead of thinking, well, it's food, we need to buy it. And then worry about how to pay for it later.

buy it and then worry about how to pay for it later. So if you are finding yourself having a difficulty keeping exactly to that $800, my suggestion was going to be to take out a prepaid account, like a prepaid debit card and put $800 on that. Or you can take, I mean, I don't suggest to buy a lot of things with cash because you're not protected. If, God forbid, somebody steals it, you don't have the purchase protection like you would with a credit card. You're not earning points. You're not racking up credit. But in the beginning, when folks need some training wheels for budgeting, sometimes I say, pull that money out in cash. And when the cash is done, it's over. And so it's more of a visual representation than just swipe, swipe, swiping. This final piece of homework for you is to start plugging that into the spreadsheet that I'll send you. I have, I just have sort of a pre-filled out

spreadsheet around a spending plan for what you can see. I mean, I did a lot of these numbers for you. You're welcome. But you can keep track of what that looks like each month and try to, it sounds like you don't have actually a lot of extra expenses. You just needed a little structure. I've been doing all these little classes and stuff with my real estate job that, you know, it's just like, just try to get 1% better. So that's what I'm trying to do with finances is try to get 1% better. For today's tip, you can take straight to the bank.

Budgeting apps like Mint or Pocket Guard are more similar than they are different. I'd recommend trying a few options until you find your perfect fit. No budgeting app is going to do the work for you if you're not honest about how much you can spend. Use my conversation with Kevin as a template to make your own realistic spending plan based on your income. Like I said to Kev, if you overestimate your income, you're not going to be disappointed later on. So be conservative in projecting what you make and your numbers won't let you down. Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin.

Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.