She's On The Money - Summer Starter Series: Budgeting and Cash Flow

Starting point is 00:00:00 My name is Natasha Bamblett, I'm a proud First Nations woman, and I'm here to acknowledge country. Hello beautiful friends. We gather on the lands of the Aboriginal people. we thank acknowledge and respect the aboriginal people's land that we're gathering on today take pleasure in all the land and respect all that you see she's on the money podcast acknowledges culture country community and connections bringing you the tools knowledge and resources for you to thrive she's on the money she's on the money Hello and welcome to She's on the Money, the podcast that's here to help you get your finances on track this year. This is something different we are doing this year and I'm so excited about

Starting point is 00:01:14 it because this time of year is when motivation is high, you're feeling pretty fresh and you're finally ready to get your finances on track. If you listened to the episode yesterday, you'll know we are dangerously close to 1,000 episodes, which to me is absolutely wild, but it also means we've covered a lot. And instead of overwhelming you with everything all at once, I wanted to put together the true foundations, the first steps, the stuff that actually works, no matter who you are, how much you earn, or where you're starting from. Because here's the thing, the foundations of money, they actually don't really change. Trends come and go, apps, they come and go and the basics, they always, always, always stay the same. And if you get

Starting point is 00:01:56 those right, my friend, everything else gets easier. So every Saturday in January, I'm going to be dropping these as bonus episodes. And I'm starting this series with budgeting, not because it's the most exciting topic, I'm really sorry, but because to me, it is the most important. It is the foundation of getting your finances in order. To me, getting a budget sorted is step one. It's the thing that lets you clearly see your four most important numbers, what you earn, what you spend, what you own, and what you owe. Without giving yourself that clarity, it's very hard to make confident decisions about what am I going to do with savings?

Starting point is 00:02:33 What am I going to do with debt? Or like, how do I even start my investing journey? I also adore this episode because it's one from the vault. The OGs are going to know Miss Georgia King. She moved to London. We lost her from the show, but this episode is kind of reviving it. It's back from when she was on the show and it's such a good reminder that all of this advice my friends it still holds up. The lessons are timeless. Budgeting is not about restriction

Starting point is 00:02:57 or punishment. It's about understanding your money so that you can actually use it to build the life that you deserve. I've also popped the link to our budgeting and debt hub in the show notes and that page has a whole range of free resources we've built including a free budget template to help you take action right after listening. My friends this one was pulled together for you. Let's do the summer series and let's get on track together. This episode is where that all begins. So let's dive straight in. So Victoria, to kick us off today, let's start with the basics. Can you please talk us through what budgeting and what cash flow are, including the differences between the two? Because I didn't know before we kind of started chatting

Starting point is 00:03:38 about this show today. Absolutely, I can. And for those of you who have done an hour of power with me or someone from my team, you know that I am obsessed with budgeting cashflow because they are essentially the bread and butter of creating financial freedom. If we have a budget and we have a cashflow, we're actually able to create wealth. And without having that in place, it's kind of like having a plan without a map and without knowing where your final destination is or where you're actually heading. So you could be heading towards Canberra instead of heading towards Adelaide where you wanted to be. For me, this is the thing that I want you guys to understand the most. Yes, investing is important.

Starting point is 00:04:14 yes, saving is important, but without understanding what your budget is and what your cash flow looks like, you don't know how much you're allocating each and every single week or month towards those goals. A cash flow and a budget are two different things as well, which I think people get a little bit confused about. So let's start with budget. I've spoken about it on the pod before, but this episode, I am honestly so excited to talk about budgeting because budgeting is absolutely not what a lot of people think it is. So often people will say, oh, I'm sorry, Victoria, I can't do it. I'm on a budget. Like they treat a budget like a restrictive thing. It is not a restrictive thing at all. It's actually a document that helps you understand your money, what's coming in,

Starting point is 00:04:57 what's going out, where it's going, how it works, what you actually spend your money on, so that you have a tool to identify your income and expenses. It's not to say, okay, Victoria, I've done a budget and I'm only going to be spending $50 on groceries moving forward like that feels restrictive how about we actually put in place a budget that's actually reflective of your spending so that you can live the life you want while also being really reasonable about how much money you have coming in so Georgia a budget is going to really help to show you if you are spending more or less than you can actually afford and it can help to determine your capacity to save for future goals, which obviously I am a massive fan of. When you have a budget, and I'm going to

Starting point is 00:05:39 rant about this so much this episode, so I do apologize, buckle in. But when you have a budget, you can see where you're spending your money and create goals in line with your spending and your cash flow. It is so easy to get disheartened if you set a goal for yourself that is actually completely unachievable. And an example of this is when I hear people saying, oh my gosh, Victoria, this year I am going to save $10,000 and I say fantastic that's so exciting really proud of you do you have $833 per month to save and they go no okay no problems so how are you planning on achieving that goal if you don't have the money to actually achieve that goal they're like oh I'll work it out later I've been saving as much as I possibly can like it is good to save as much as

Starting point is 00:06:23 you possibly can. But if you don't have an outcome that you're working towards with a tangible plan that you've worked backwards from, you're not actually going to be able to achieve that goal. And what happens when we don't achieve goals? We feel upset. We feel flat. We feel as though we aren't achieving things. And we get this mentality, which is, oh, I couldn't do it. It's not that you can't do it. It's that the goal you set yourself was unrealistic for your cash flow and your personal situation and what we actually have to do is create goals that are in line with your personal situation you can save ten thousand dollars i promise you it just might be on a larger time frame and we need to account for that so that we feel like we are actually

Starting point is 00:07:05 achieving things um i was going to ask you then about how it's kind of like a diet like if it's unsustainable then you're not exactly keep up with it is it worth saying that it's exactly like a budget it's exactly like saying one day you wake up and you're like I'm going vegan like cool I'm really excited for you but is it sustainable to go cold turkey on something is it sustainable to commit to a crash diet absolutely not there is a reason people fall off the bandwagon what we need to do is actually create goals in line with your lifestyle create a budget that is actually reflective of what you're spending don't judge yourself just put it all down on a piece of paper and go awesome this is what I am spending end of story it's just what I'm spending and it gives you

Starting point is 00:07:48 then ability to reflect and say well is that actually what I want to spend like it puts the numbers in front of you so that you can take time to consider each of them maybe you are spending $200 a week on groceries but you're actually single and live alone well in that case maybe you want to be spending less so you need to have a think about it instead of just cutting that number in half maybe have a think of the strategy behind that why are you spending $200 a week on groceries is it because you love really fancy food and that's aligned to your values well maybe we look to save in other places so you can continue the things that you love or maybe you are just being a little bit lazy let's be honest and buying takeaway all the time and that's where your cash

Starting point is 00:08:30 flow is going and you don't actually want to do that so we have to make a little change but small changes and small steps are still steps in the right direction. And I think that when it comes to budgeting, it's just so we know where we stand. I feel like we'll talk about how to actually create a budget in a little while. Absolutely. Amazing. Before we get there, can you talk to me a little bit about what cashflow means? Okay. So cashflow is essentially the next step in budgeting. So if we write down how much we are spending and how much we are saving and how much we have coming in and out of our account. And if you guys have listened to the first episode ever of the She's On The Money podcast, I talk about these four figures, which is earn, spend,

Starting point is 00:09:14 own, and owe. And those are the four figures that I always, always, always want you to be in control of. Because if you know how much you earn, you know how much you spend, you're going to know if you are actually spending in line with your income or if you're spending more or if you're spending less, and that will tell you how much power you have to save and invest. And then your own and your owe these figures obviously we just want to keep track of at different periods in your life you're going to owe different amounts like you might get a mortgage so you owe a heap but I think it's important to work out when it comes to that like is that actually productive debt or is it personal debt that you need to get out of ASAP so for me cash flow is how your money flows through

Starting point is 00:09:55 your bank accounts so where does it come into where does it go how does it work and how much money do you have each and every single month left over to create wealth with or to save or to put towards debt reduction? So, this is going to be your power and this is going to be the thing that tells you how you can create wealth and how you can get out of debt. But if you don't know your cash flow and you don't know how much you have left over, it's really hard because it will always feel overwhelming. Because too many times do I see people who come to me and they're like, victory out. I'm trying really hard to save and I put $500 every single month into my savings account. But then at the end of the month or when the end of the month is coming, I go back into my

Starting point is 00:10:37 savings and I pull some money out because I've got extra expenses. Well, that's obviously not sustainable. You're not actually saving $500 a month. You've allocated $500 to your savings, but you actually have expenses that outweigh that. So we actually need to work out what is reasonable to save. And cashflow is going to tell us that. And I feel like you've kind of gone over it, but why is it so important that we stay on top of our budget and our cashflow? Because if we are all creating budgets, we are all putting ourselves in a position where we are making our money work for us and we can feel in control. We can be on top of our money story. We can be on top of what's going to happen moving forward. And it will help us avoid going into bad debt. Or if we are already

Starting point is 00:11:19 in bad debt, it will help us understand our power to get out of that bad debt, when we can do it, how we can do it and what that actually looks like. So how do we actually set up a budget and a cash flow system? So there are so many different ways. I obviously have my own way, Georgia, and I'm pretty passionate about it in the She's On The Money Facebook group. And I'll probably link it below too. We actually have a budget that you guys can use to fill in so that you understand your spending but also excitingly obviously to plug my own product Georgia at the start of October we have a budgeting and cash flow she's on the money course coming out which honestly I can see you dancing on the screen like you could maybe vocalize this this is a podcast

Starting point is 00:12:02 don't want to interrupt we've got a course coming out which I'm so excited for I did two full days of filming videos for this I've tried to absolutely jam pack it full of value so that when you watch it. And when you go through it, it's me holding your hand throughout the entire thing to get your budget done, then get your cashflow done, then go through your goals and then set all of those up so that you can achieve success. And honestly, I couldn't be more excited about that. But in saying that, a budget is what you want to make it. So it could be on the back of an envelope. I really don't mind. It is whatever works for you. Some people use apps. Some people like to sit down and write it in a notebook. Some people like to use a spreadsheet. There are so many different

Starting point is 00:12:45 weighs, but essentially a budget is going to include a list of all of your expenses broken down, all of your income broken down, and then how that weighs out at the end of the year. Now, I work in my budgets to a final average annual goal because I feel like that's more motivating knowing entirely what you can save in a 12-month period as opposed to, oh, you can save $833 a month. You'll go, oh, okay, like that's not enough to achieve my goal. Whereas if I say, Georgia, $833 a month is $10,000 in your savings. You are more likely to commit to that when you can see the bigger goal. So it like creates short-term motivation and long-term commitment for me. Sorry Bea, so you said your course is coming out in October, just to recap on that.

Starting point is 00:13:31 It is. I mean, we're not meant to be plugging this, but I'm actually so excited about it. I have spent honestly probably 30 hours over the last three days trying to make the online course system work. I promise you it is now stunning. And that is what matters. I'm not biased though. Not at all. How would you say we can use a budgeting and cash flow system to help get us out of debt, which we know is a huge issue right now, obviously. Look, it's a massive issue now, but it's been a massive issue for years and years and years. And essentially, if you are in debt, stop judging yourself. Like I know that that sounds really flippant, but I know that debt can carry a lot of stigma and it can carry a lot of guilt and you feel bad and you maybe don't want

Starting point is 00:14:10 to tell your friends or family about it. You don't have to do that. But the one thing I want you to do if you are in debt is stop feeling bad about it because it doesn't help you at all. It does not help you in the slightest to feel guilty about this. And Georgia, I work literally every week with people in large amounts of debt. And we do these cash flow systems and we talk about budgeting and it is honestly the same thing every single time. We sit down and I say, why haven't you done this before? Like, you know, why now? And they just say, feel really overwhelmed. I've never wanted to tackle it head on. And now I am. And I say, okay, no problems. And by the end of the session, and we have a clear budget and we have a clear cashflow and we have a plan and we can

Starting point is 00:14:51 articulate, okay, Georgia, by the end of 2021, that person is going to be out of debt. She'll make her final payment at the start of November 2021 and that will be it. That is so motivating and that clarity is going to help you immensely, both obviously in getting out of debt, but also mentally. And to me, that is so, so important. So for me, budgeting in cashflow one helps you get out of debt because we can work out your power and we can actually go, all right, cool. If you pulled the reins in a little bit on this spending for the next six months, we'll be out of debt quicker. And the same goes for every type of debt, right, Georgia? Like it could be your mortgage and working out how to get out of debt with that because, you know, obviously a mortgage

Starting point is 00:15:35 is often a 30-year plan. But working out what your repayments look like and maybe working out how much additional you can contribute to that each month to maybe wipe literally years off your mortgage so that you're out of debt sooner and that money can be used to create wealth. And I think I said this to you, Georgia, when we were planning the episode and talking about the things that I really wanted to share on this ep, I really wanted to point out that if you're in debt and you're paying off that debt, that is so exciting. One, because you're getting out of debt, but two, because you're creating these positive habits for yourself. You are putting yourself in a position where you are proving to yourself that each and every single month you can contribute a certain

Starting point is 00:16:16 amount to that debt. And you know what? When it's done and when the debt is over, you then have that amount of money to create wealth. So back to our $10,000 example. If you're in $10,000 worth of debt and you're paying it off at $833 a month, continue that the year after and you now have $10,000 worth of savings or $10,000 in an investment. And to me, that's so exciting. So for me, look at your getting out of debt process as a process that you are proving to yourself that you can create wealth. It's like the trial run. It's like the practice. It's saying, okay, well, I did that. Why can't I create wealth after this? I don't have to be in debt anymore. This doesn't have to be a cycle for me. And it's an active choice to essentially not put your heads

Starting point is 00:16:58 in the sand about it and instead feel really empowered about it. As you said, there's a lot of shame that comes with having debt, I think. And we just need to get rid of that shame so you can face it head on, right? Absolutely, Georgia. And there's only one thing that personal debt means. and that just means that you've spent more than you've earned. That's it. It doesn't make you a bad person. It doesn't make you silly. It doesn't make you dumb. It doesn't mean that you are less than, which I hear all the time. It literally just means you have spent more than you have earned and now we just need to rectify that. We need to pay back that surplus that you've overspent by and then we can create wealth and we can actually have a budget and cash flow system that puts us

Starting point is 00:17:36 in a place of power so that we feel like we can achieve everything because we actually are able to achieve everything we set our minds to. 100%. And just because you're in 20K of debt now doesn't mean you will be forever. Like there's so many things we can do to get you out of that debt. Which leads me to my next question, Victoria.

Starting point is 00:17:53 Yes. We know the snowball and the avalanche theories from old mate Dave Ramsey. Yes. What other methods are there that we can use to get out of debt? What little hacks? So there are a fair few other little hacks.

Starting point is 00:18:06 Obviously, making sure that you're looking at your debt, having a look at whether your interest rate is too high. If you're in a massive amount of credit card debt, I would genuinely be having a look at whether you need to consolidate your debt into a personal loan, because it could take you a really long time to get out of that. And if you're going to be in debt for a couple of more years, getting out of a credit card debt, then I would be looking at consolidating it into a personal loan, which will most likely have a lower interest rate. But that's not available for everybody because some debts can't be consolidated because they just are simply too much and you just need to buckle down and get it done. Something that I do see a

Starting point is 00:18:44 lot of people doing is getting a side hustle or earning a little more to supplement your primary income. It could be an extra shift at work. It could be, you know, an online survey that you're doing. It could be, you know, obviously during COVID, this isn't as good. I've got clients who went and got Uber and started being Uber drivers so that they could smash down their debt because any additional income that you are bringing in can go straight to debt because it's not your primary income, which is super exciting. So if you know you're bringing in extra $100 each time you do something, awesome, that's $100 off your debt and that's really exciting. I think that spending less and making compromises in another way is also a really good but really obvious one.

Starting point is 00:19:25 These could be temporary changes so that you can get out of debt quicker. If you've got a $65 a week gym membership, but you're trying to get out of debt, maybe you could suspend it until you're out of debt so that you can really make the most of your cashflow and really allocate it towards that. And then once you're out of debt, go back to the things that you love. I think that it's important to remember that compromise doesn't have to be forever. It can be for a short period of time. We can compromise something for the short term, like not having Netflix and Stan, so that we can allocate those funds to something different. And I think that that's a really good point for this point in time as well, Georgia. So it's more about saying, okay, cool. We're all

Starting point is 00:20:06 going through this absolute mess of COVID and we're not sure what's going on with our finances. What can we compromise in the short term so that we can be successful in the long term and maybe breathe a little bit easier? Maybe you don't need Netflix and Stan. Maybe you don't need your Spotify account. Maybe you've got some subscriptions that you can just suspend temporarily so that you can increase your cashflow during a time where money is tight and we can go back to it later. So it's not saying, get rid of it. You don't need it. It's saying, okay, well, maybe not right now. And another good one is to make the most of amazing apps out there. And I know that this is a sponsored episode, but I kid you not when I say that my favorite app at the moment is an app

Starting point is 00:20:45 called Wiser. And I know that not a heap of people are going to have heard of this before, but I do know that there are a fair few people in our community using it. And if you guys love Roundup apps like I obviously do, I use Raise, I also use Shopback and you've heard me talk about these guys before. Wiser is exactly like those. It is a Roundup app that takes your spare change and actually puts it towards paying off your debt. Like how good is that? I can't think of a better use for a Roundup app for people in debt. Like every single transaction that you have is contributing to you paying down debt. Now, I don't mean to say go and transact more so that you can put more money towards your debt. But I just think it's cool that your everyday

Starting point is 00:21:26 expenses and your roundups and buying dinner will mean that you actually save money. But we're obviously going to have a plug about them later. But honestly, there are apps out there. You can use budgeting apps, you can use cashflow apps, and then apps like Wiser. Honestly, if you start looking, you'll find things that actually help you in a really constructive, but really motivating way. Okay. Well, obviously you're a fan of Wiser, but if our listeners had to take just one thing away from today's show, what do you think it would be? Obviously, budgeting and cashflow is really important. I want every single one of you to have a budget and have a cashflow plan. But I think the one thing that I want people to get out of this episode is that if you're in debt,

Starting point is 00:22:06 stop beating yourself up about it and work out what you can do about it. There are so many resources and plans and budgets and apps and things out there and people that actually help you and that are there and that are on your team that are going to get you out of this position. You don't actually have to do it alone. So for me, it would be one, have a budget and actually take charge of that. You'll feel incredibly empowered, I promise. But then two, know that if you are in a situation where you are in debt, there are people that can help you. And there are people that are genuinely so excited about doing that. And they're not there to judge you. They're just there to get you in a better position because they get a whole heap of gratification out of it,

Starting point is 00:22:47 I promise. Hi there, you've reached the She's on the Money mailbox. Do you have a money problem you want help solving? Do you have a money dilemma you just want to chat about? Victoria is here to help. Every week, we'll be playing your questions to help make sense of a money mess you may have found yourself in. Make a quick recording on your phone and send it through to podcast at cheersonthemoney.com.au and you might even find yourself on the show. But for now here's today's listener question. Hello lovely ladies I just have a quick one for you. So I've been lucky enough to get a promotion at work and will be earning $25,000 more than I was in my previous role which is I know pretty exciting but I'm actually pretty conscious of not falling into

Starting point is 00:23:34 the habits of like lifestyle creep because since listening to the podcast and joining the she's on the money facebook group i've become really conscious of my spending um and i've been getting my savings together and taking control of my finances so i'm just wondering if you have any i don't know budgeting tips or even words of wisdom to kind of help me make the most of this extra money and manage it um because i definitely don't want to be wasting it uh thanks bye okay Victoria so how does she avoid falling victim to lifestyle creep I really like this question because I get so excited obviously that's a massive increase in her salary like congratulations that's honestly so incredible exactly like actually amazing but I feel like this is such

Starting point is 00:24:20 a common one and it's so easy to see that $25,000 as all right cool I can get a new car I can do this. I can do that. For me, the important thing is before you even get a promotion, before you even increase the amount of money that you have is to have a reasonable budget and cashflow plan in place. And I know that I jump up and down about this all the time, but that is your power because if you've got your cashflow plan and you know that your expenses are, you know, maybe $16,000 a year and in your personal spending, you're spending, you know, maybe like $250 a week, I think it's really important to then say, okay, no problems. Now I have an additional $25,000 coming in. Well, maybe not obviously tax super, whatever else, but let's just say it's

Starting point is 00:25:03 $25,000 coming in. Awesome. How am I going to allocate that to my preexisting goals to turbo charge them, if that makes sense? So instead of achieving that goal in three years, maybe you'll achieve it in one because you've obviously got so much more to save. So for me, it's important to have a list of goals. It's important to have a cashflow and budgeting system that works for you. As I said, I don't care how you do it as long as you are doing it so that when a new amount of money actually comes into your account, you've already got goals that can be allocated to. And all you do is update how much you're allocating towards that goal each month or week or fortnight or however often you're contributing. So for me, my biggest tip would actually be sit down and make

Starting point is 00:25:46 a budget, make a plan, work out how much you want to save because otherwise it does get wasted because it is so easy with lifestyle creep to just see that money come straight in and go straight back out because often you'll have a mentality of, okay, well, I'm going to treat myself. I'm going to, you know, buy those new shoes. I'm going to go out for lunch more often. I can afford it. I earn more money now. Like to me, that's a detrimental mindset when in reality, what we want them to be doing is actually allocating those funds towards goals and towards creating wealth and whether that's savings or investments, or, you know, maybe you've got a trip that you've been planning for that you can now save more to so that when you come home, you've got a surplus.

Starting point is 00:26:25 Like to me, what can you actually contribute that to and divide that 25 grand by 12 months, work out how much that is per month so that you're not missing any of it. And then make sure that amount is going into an account that helps you build wealth instead of losing it. Do you think a financial advisor is necessary for this situation or just kind of depends on how she's feeling. Absolutely not. I think that budgeting in cash flow is something that you guys can take control of yourself. You don't need a financial advisor to do that for you. Obviously, there are financial advisors that will do it. Obviously, I work with my clients to do that and there are money coaches out there, but I genuinely feel like if you have the tools in

Starting point is 00:27:05 front of you and you have been given the guidance to do that, and Georgia, that's actually why I've created the course that I've created. It's purely because you can actually go and do it yourself. and go through the framework and go through a PDF and go through, you know, just different tools that you can do to one, work out your goals, work out your cashflow, work out your savings, work out what that actually means and go from there. So for me, no, you don't need a financial advisor for spending. You don't need a financial advisor to tell you what your budgeting and cashflow should be because you are smart, like you're an intelligent human being and we can all work

Starting point is 00:27:39 that out ourselves. It might just be a little bit sticky at the very start because it can feel overwhelming, but hopefully you can sit down and go you know what i'm just going to do it small steps are still steps in the right direction and i'm just going to work it out it's trial and error at the start i promise the advice shared on she's on the money is general in nature and does not consider your individual circumstances she's on the money exists purely for educational purposes and should not be relied upon to make an investment or financial decision if you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards

Starting point is 00:28:16 your needs. Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN 321 649 27708 AFSL 451 289.

She's On The Money - Summer Starter Series: Budgeting and Cash Flow

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