The Rachel Cruze Show - How to Make a Budget That Actually Works for You

Episode Date: January 6, 2020

A lot of people see a budget as something that limits your freedom—I know, because I used to be one of them. But once budgeting becomes part of your everyday life, it actually gives you permission to spend! A budget doesn’t limit your freedom—it gives you freedom.   In this episode of The Rachel Cruze Show, you’ll learn:   Three steps to make budgeting easier for you than it’s ever been How to get your spouse on board with budgeting with you How one couple learned to budget their inconsistent income, and how you can too   Sponsors pay the producer of this show, The Lampo Group, LLC, advertising fees for mentioning their services or products during programming. Advertising fees are not based upon or otherwise tied to any product sale or business transacted between any consumer or sponsor. The following sponsors have paid for the programming you are viewing: Zander Insurance My Favorite Budgeting App Financial Peace University Learn more about your ad choices. Visit megaphone.fm/adchoices

I felt trapped. Like, I had no say in where our money was going. So when you started budgeting again, did you feel the freedom come? It's liberating to have this feeling of control. A budget gives you permission to spend. Because when you see where your money's going, you change where your money's going. Hey, guys, welcome to another episode of the Rachel Cruise Show podcast. Always glad that you're here.

And I just can't believe it. It is 2020. And I don't know about you, but last year it went by. so quickly, probably because once and I had like so many life changes, but it flew by, and I don't think I got everything done that I wanted to last year.

So I want to start off 2020 with a bang with you guys as we hit the ground running talking about our money. Now, if you're like most people, you're trying to get your money in order. So in this episode, we are going to go back to the basics. I'm going to show you how to create a budget that actually works.

And then I'm going to bring a couple on to talk about how they budget on an irregular income because that is a huge issue for a lot of people. So let's get right into the episode. Now, when you look at people's top New Year's resolutions, paying off debt and saving money is always at the top. And here's the good news. We have a proven plan to help you achieve those goals.

So if you follow our plan at all, you probably are familiar with the baby steps. For those of you that are not familiar, there are seven steps that you do in order with your money. So really quickly, baby step one is a starter, $1,000 emergency fund. Baby step two is paying off all of your debt but your house using the debt snowball. Baby step three is saving three to six months' worth of expenses, a huge emergency fund. Baby step four is saving 15% of your income into retirement. Baby step five is funding kids college. Baby step six is paying off the house early.

And then baby step seven is building wealth and being extremely generous. So, those steps in that order. Now, it can seem overwhelming, but again, you just start with the first baby step. But the beautiful thing is, no matter where you are on the baby steps, you have got two budgets. All right, the budget is great. The budget is awesome. I love the budgets. And you may be thinking, yes, I agree with you, Rachel, but my spouse, I have to get them on board. Listen, I get that. because Winston actually had to get me on board to do the budgets. Because here's the thing. You marry your opposite.

And so Winston in our relationship is actually the nerd. He's the one that loves doing the budget. He loves to be organized. He loves details. He can get in it and analyze it and he loves it. And I'm more of the free spirit where I'm like, listen, it's all going to work out. Let's just have some fun. And I'm a spender on top of that.

So I'm like, yeah, we'll just go. It's going to be fine. Don't worry about it. So that's all good. good and dandy when you're on a budget and you have boundaries and restrictions and you're mature and you like take it seriously, which I am now. But 10 years ago, that was not always the case. And so getting your spouse on board is huge. So let me just say out there for all of you nerds that are watching this video. And again, you nerds love doing the budget. So I'm not

worried about you doing the budget because you're probably already budgeting. But when you're talking to your free spirit, a couple of things to remember. Tell them that a budget does not limit their freedom. A budget gives them freedom. In fact, a budget gives you permission to spend. And you actually get to say, hey, this is where we want to spend our money because you get to create your budget. You get to decide where do you want your money to go. And so that's the beautiful thing. Now, will there be sacrifices and boundaries and limits involved? Possibly, yes, depending on where you are financially. But when the free spirit sees the numbers down on paper or visually, wherever that is, it's going to help them see it. And tell them,

hey, we're going to have a lot of grace in this conversation because you nerds out there watching, I'm sorry, sometimes you're just big rule followers and you don't give us a lot of grace. And so you have to chill nerds, chill a little bit and tell your free spirit. Listen, this is not going to be a perfect process, but let's work on it together. So free spirits and nerds unite. It's a beautiful thing when it happens. And it is possible. I'm telling you it is.

All right, coming up next, let's talk about how to actually do a budget. All right. A simple budget, you guys, this is all it is. Are you ready for this? Fifth grade math, your monthly income, minus all of your expenses, should equal zero. So every dollar coming in is assigned to a category. Now, that's easier said than done, okay, because here's the deal. There's a lot of moving parts, and if you've never done a budget before, it's going to be very, very overwhelming. So the first thing you have to do is figure out what do you make a month. Some people, it's different every month, so we'll talk about that later on in the episode. But for most of you, it's like, okay, yeah,

here's your salary. You know exactly what you're going to make. So dig in and figure it out. After taxes, this is take-home pay. What are you bringing in the door every month? Figure out the number. And then you're going to go list out all of your expenses. So this is everything from rent or your mortgage to food, groceries, restaurants, your cell phone, your insurance, pet care. Like, I mean, anything that you spend money on, list it out, and then put dollar amounts next to each of those. categories. Now, your first month doing a budget, go back and look the last like three months and just kind of average out, okay, here's kind of what we're spending on food. Here's kind of what,

you know, this is what our insurance payment looks like. Just get a ballpark to at least get some numbers down. And then what you may realize is, wow, we're spending a lot of money because we have not been purposeful, which means you're going to adjust some of those categories, which is totally fine for that first month. But again, your goal is that income minus all the expenses will equals zero. Every dollar has a name. Okay? And so stick with this because every month is going to look different. So I'm telling you, you have to put it though visually somewhere. This can be on a sheet of paper or you can use every dollar, which is our budgeting app and it's amazing. Seriously, I love every dollar. Every dollar plus connects to your bank account. So when you swipe your debit card,

automatically those transactions come in the app and you can drag and drop them into the correct categories. or if you're taking cash out of the bank, then that'll come up, and you'll be like, okay, yes, you know, $200 went to food here and you can break it out. And, oh, it is like, I'm telling you as a free spirit, even though I'm a free spirit, it's one of the most satisfying things in the world. When you see that little bubble pop up on the Every Dollar app and you get to drag and drop, and it does the math for you.

Then it starts subtracting from catcores. You don't have to do the math. I mean, it is unbelievable. It will change your budgeting game. So, download every dollar, do your first budget. And the great thing is here at Ramsey Solutions, We have solutions for you. We help you.

So even within the app, we have so much there to talk about how to do the budget. So dig in there, look and see, because this is huge. Now, a budget can get complicated because there are a lot of problems that people come up with. So one problem I hear a lot is, well, Rachel, every month is different. So I really can't plan ahead. I'm sorry. Yes, it is different. Welcome to the world.

Yes, everyone's month is different, guys. Like, that is life. And so what you do is you do the best you can. You look ahead and say, okay, we're going on vacation. So we're going to put Nala, our dog, you know, at the vet for seven days. How much is that kind of cost? We're going to put that in every dollar. I mean, you have to actually take the time and intentionally look ahead.

Now, are there things that are going to come up throughout the month that you forget about? Yes, that's why we have a miscellaneous category. Mm-hmm. Your niece's birthday comes up and you forgot that it's a princess tea party and you need a gift. Thank you, Misselanis category. Just put it in there, right? I mean, like, it's all there for you. That's your catch-all, okay?

Now, if you notice that your catch-all things keep being the same thing, that means you need a budget for those. That needs to be its own category then. So it's going to take some time, but yes, you have to plan ahead. And if it's your first time budgeting, it's going to take 90 days for your budget to work. Give yourself some grace, figure out what your months look like, and just say, okay, this is what we're doing. Now, another problem I see is that people that are living paycheck to paycheck and they're

using their credit cards to pay for bills, may not. have enough money in their bank account to plan for the month ahead. So this is going to take a mindset shift, okay, if this is you, because you've been functioning in the past. You've been functioning of saying, okay, I'm going to be paying bills on things that have already happened in the past. But what you have to do is you have to be thinking ahead, which means, yes, you are going to have to have some money in the bank in order to live this way because you're basically living a month ahead. So when your paycheck comes on the 31st or the first, take that amount and say, okay, this is what I have until my next paycheck and can't.

hash flow as much as possible. And maybe you take a month between now and doing your first budget and just save as much as you can to have some buffer there. Now, if you find that you cannot get ahead financially, then you're going to look and say, okay, maybe I have an income problem versus a budgeting problem. And you may have to get your income up, which is really hard. But in the moment, it's going to be so worth it because you're able to function that month ahead by doing the zero-based budget. Another problem I see people have is that a budget is just defeating. Like doing a budget. It's just so hard every single month. And I do see people with this because it's a draining process because they're not making progress.

It's like a budget is not exciting and fun because what it is, it's revealing the problems that they have. And so the problem may be that their income is too low or their lifestyle is just too high. And so there's going to have to be some adjustment there. It's kind of this reality check is what a budget is for some people where they say, wow, we really have been living way beyond our means. And so we're going to have to be uncomfortable for a while and sacrifice our lifestyle things. We're not used to sacrificing in order to get this correct. Because listen, we're not in Congress. Like, we can't just keep spending money, you guys.

Like, we have an income, a set income every single month, each of us does, and you have to budget within that. And that's how you're going to get ahead financially. You will never be able to live above your means and win over the long term. It's just not going to happen. And so it's a hard reality, but I'm telling you, once you get the budget under control, and you say, oh, wow, our income is absolutely funding the lifestyle that we have now, then you start to gain traction, you start to gain control. But a budget isn't easy.

I'll be the first two a minute. It can be really hard. But the beautiful thing is, the more you do it and the more consistent you are, it becomes a habit. In me, I can't believe I'm saying it, but 10 years after doing a budget consistently, the free spirit, I don't know what I would do without a budget. I'm not going to lie to you. My bank account did not connect to every dollar for about two days, two days ago, and I could not track transactions. And I was like, I don't know what's happening.

I don't know what's happening. That would never have been me 10 years ago, you guys, but that's me doing a budget every single month. It becomes a part of who you are, and there's such safety in it. I'm telling you, the best way to get it head financially is to be intentional. All right, coming up next is a couple who had a tough time with budgeting, but they stuck with it, and they're going to share their inspiring story. I felt trapped. Like, I had no say in where our money was going. I mean, I just felt kind of oblivious. You know, we get toward the end of the month, and I'd be like, why do we only have 100 bucks in our bank account? I've always been budget conscious. I've always been aware of the finances. I've always sort of managed the finances,

and it was easier to just do it and not talk about it and avoid any potential fight. So it was just manage it and move on. I was just finally so fed up, and we had started communicating better about it. I think we both knew that a change had to be made, but I think it was a little more reluctant. It's not that I didn't want to budget or to make a difference. It's just like at the time I really didn't think it was necessary. But once we both got on the same track, it really sort of opened the door for us.

Our income can vary up to $7,000 a month. And that's crazy to try to manage. You can't just say, what's my annual gross and divided by 12, and then live that way. It just doesn't work. With our inconsistent income, it felt like we can, we can't do anything about it this month. We can't.

We don't have the income, so we're going to charge it, and then we're going to deal with it when the income comes in. It took us a few months to figure it out, and, I mean, the whole budget was completely crazy. Like, it was not even close to where it needed to be. I had no concept of what we were spending where, but we didn't add to death that month, and that was such a huge win for month one.

Once you change your mindset or even your collective mindset, and you really look at this as like not that you're losing something, but that you're gaining something much bigger, which is like this peace of mind. It's a complete game changer. Now that we're budgeting, I really feel more in control. It's done wonders for our relationship and for our pocketbook, too.

Even though we have an inconsistent income, I feel free. I feel like I have control over where my money is going, and it honestly feels like we have more money to spend because we're telling our money where to go. Thank you guys so much for coming on. Really appreciate it. So when we talk about budgeting, it is a tough topic anyways, but you add inconsistent income on top of it.

And it's really difficult, isn't it? Really difficult. Yeah. So I'm in that boat. You guys are in that boat. So let's talk about it. Yeah. You guys started budgeting.

So I'm curious, just what made you start budgeting in general? So we've always been aware of how we should handle our money. But our most recent get serious moment, um, just came from looking at the numbers and being like, we're done. Like, we're not, we're going to buckle down on this again and we're going to make it happen. Yes. Because we've been debt-free, but then it all came back. It came back.

Yeah. They came back. So. And so you looked and you said, okay, we're done. Yeah. We have to get out again. And the budget is like the main tool, right? Yeah.

To help you do it. So when you started budgeting again, did you feel the freedom come? Not at first. It's hard at first. You fall into the normal traps of, well, with my income. I can't make this budget because this month is a slow month and I don't even have enough for the four walls. But if you look big picture and after a few months, it started to fall into place. Okay, so I just want to interrupt right there where she said it took a few months,

but then things started to fall into place. And that's it, you guys. If you've never budgeted before, you have got to give yourself some time. Okay, we always say on average it's about three months. But if you have an irregular income, it may take you a little bit long. But that's okay. Do not give up because budgeting is going to last you a lifetime. It is going to help you in with money over the course of your entire life. So what's a few months of getting a little frustrated and a little bit like, oh, these numbers aren't working and you're having to change stuff

in the middle of the month? And it gets a little crazy, but stick with it. One of the biggest mistakes people make when it comes to their budget is they just give up. They do it for two months. They say, okay, well, obviously our lifestyle, our income, like a budget just doesn't work for us. and then they give up, and then they look up three years later, and they're like, where did all of our money go for the past three years of our working life? And I'm like, oh, if you had just stuck with the budget, you wouldn't have those questions. So take a few months, keep persevering, because I promise, once you start getting traction and you actually start seeing progress and you start winning with the budget, you're going to keep at it.

So do not give up. What was the biggest hurdle would you say when it comes to having an inconsistent income in budgeting? I mean, it's all like the big changes that have to come, like all the small, you know, no coffee trips in the morning and stuff like that. Just like all the small little lifestyle changes, they tend to be a little annoying at first. Yes. And then, but I mean, I think when you really start to work at it as like a team and focus and be like, hey, we're doing this together, this is, you know, we're making all these big changes now so that we can make bigger, cooler, awesome changes later on. Yes. And just get our family in a more.

financially healthy position. Totally, yes. So when you started budgeting and you realize, okay, the inconsistent income, it's a real thing. Numbers are changing every month. We don't know how to predict it. And it's hard. How many months would you say it took to kind of get a footing

and kind of get your groove? I would say probably about three. Okay. And I don't think we could have done it if we didn't, like, have all of the resources that we had and supportive people around us to help us do it. Yes. So what resources were those?

What did you just use? We started with your 14-day challenge. Oh, yes, the 14-day Money Finder. It was excellent. Yeah, oh, good. That gave us enough to create like a little bump. Okay, I'm going to interrupt again, but I'm doing like a little dance inside my heart because the 14-day Money Finder is so helpful.

Okay, especially for those of you that have never budgeted before or even if you have in budgeting, still sign up for this because it's a 14-day challenge. I give you very small tasks. Some of them take a little bit more time. Some of them are super easy, but it's going to help you find money. So click the link in the show notes and check out the 14-day Money Finder. And then we got the Every Dollar app, got it upgraded, and that has been super useful. Because before that, I was literally writing down everything, like writing it down from our bank account.

And it was ridiculous. Yeah, it's hard, right? And you see the convenience of like, oh, this app. It's so great. Yes. So I know I can speak from Winston and myself because we do this. and it's like some months, you're like, oh, man, it's just lower than you're expecting. You have to go in, change the numbers.

Some months it's bigger, and you're like, oh, that's nice. You like those months. So do you still feel that you have to change it month to month because of not just life changes within your expenses, but also because of your inconsistent income? Yeah. Yeah. I definitely think we have to make a lot of changes and be very aware of not just, like,

what is in this month, but what do we have, like, three or four months down the road that we have to prepare for. Looking at it. So, yeah, and with the income fluctuating, it's a challenge. Yeah. Okay, so how are you doing this? What would you say? Like, what are a few tips?

Like, you look and you say, I'm going to just project as close as I can of what I think we're going to make here. Yeah, so the money we know is coming. Okay. Because sometimes we have freelance jobs or commissions that we know we're going to come in at certain times. And so those are projected out. And then I look forward on the assumption of, okay, there will be more. there will be stuff that we don't know of yet.

You know, so it's more of like saying these are the things that are necessary. These are the things that come next if it comes in. And if not, we roll them to next month. And then these are the things that come after that. And we're in Baby Step 2. So then everything else goes to debt. Yes. So the four walls, you mentioned that earlier.

So food, shelter, utilities, and transportation. But some months still, it's not even enough for the four walls. It's important that I have that, the little bit of bump. already in our checking account so that I'm not going all the way back into our emergency fund or something in the event that we have a slow month. Yeah, I think that's a great point because on those slower months, you have to be able to make sure your bills are paid. So you have to have that cushion. So on the months that are good, setting some of that money aside and making sure you have that cushion is such like, that's such a pro tip. That's so good. What's the number one thing

you would say, you have to do this? Track your expenses. Because when you see where your money's going, you change where your money's going. Like when you see that you're spending too much money at Chick-fil-A every month. Oh, you hurt the heart. You hurt the heart a little bit there. It's always Chick-fil-A. Yes. You say, okay, we need to make Chick-fil-A an occasion situation and not a convenient situation.

Or you say, okay, I need to start making my coffee at home instead of stopping at the gas station or the Starbucks every day. It's liberating to have this feeling of control over what, like, with all of the the income that we just don't know. There's just this feeling of helplessness sometimes, especially when you get in those low months and just being able to grab some of that control back and being like, this is not going to change my mood. I'm not going to, you know, we're not going to argue.

We're over money. Like, you know, understanding that you're not telling me that I can't have coffee in the morning, you're just like showing me that $2 every couple of days, you know, 52 weeks out of the year, Like, that adds up to a lot of money over time. And seeing that I've been doing it for four or five years, I'm like, shoot, that's a vacation at the end of the day.

Or, you know, something important that we need to buy. School supplies, whatever. But, I mean, it's got to be a team. It's got to be a team effort. I love that. And there's usually one spouse that's not always on board. I mean, I get that question all the time. How do I get my spouse on board?

Yeah. And you did one of the things I always tell the spouse that is on board, usually the nerd. To do, though, is to run the numbers and, like, to visually be able to see like this is what's happening. So would you say that that helped you a ton? For sure, 100%. I mean, being able to see the numbers and they may have done some floating and stuff like that, but like when you see the colors help, you know, you should put deficits in red. I'm like, I understand colors. You know, as an illustrator artist, I'm like, this makes sense to me. And there's a lot more red on here than there is green. So that's, you know, I would say in those

three months of getting lined up, getting on the same page was a big part of that. Yes. And so how has that changed your marriage in general? Oh, it's so much more peaceful. I mean, everybody fights about money. It's the number one, what marital dispute is money. Yeah. So, I mean, that's been huge. And the achievements are our achievements.

Their wins together, and that feels good. I love that. You're, like, working towards a goal, and it sounds kind of cheesy, like, set a goal together. But truly, when you are and you hit it, it's like, we did that. Yeah. We did that as a team. Yeah. Oh, you guys, you are like, it is.

It's amazing. It's amazing just seeing people that stick to the plan. They do it, persevere, even when it's hard. And there's months that it's like, what in the heck are we doing? But you stick with it because at the end of the day, you're getting that peace. You're getting that control. And ultimately, you guys together have a stronger marriage because of it. So you're like a living testimony to it.

Really amazing. Seriously, thank you so much for coming on. It was our pleasure. It's just filled with hope. And you're doing exactly what you should be doing. And I love it. And I love it. And I'm glad you're getting the wins.

That's the best part. All right, you guys, we mentioned it like eight times in there, but it's true. Every dollar plus, if you've not checked out that app, make sure you do that. Now, if you sign up for Financial Peace University, you actually get the app for free. So make sure you do that because it's going to help your budgeting journey be so much smoother. And I just love that Sarah and Corey stuck with it. They got their money under control and they figured out how to make their budget work. Now, if you have an irregular or inconsistent income, I have a worksheet in the show notes that will help you budget for it. And don't forget to subscribe to this podcast if you haven't already. And as always, if the spirit leads, you can leave

a review. Well, I really hope that you found this episode helpful because once you get budgeting down, everything else works so much better. All right, you guys, remember, make sure to take control of your money and create a life you love. So if you guys enjoyed this podcast, we have more from the Ramsey Network, like Christy Wright's Business Boutique Podcast. Hey, I'm Christy, and I help women all over the country, take their ideas and passions and hobbies, and turn them into profitable businesses. If you have an idea in your head or a dream in your heart and you've ever wondered if you could make money doing it, I'm here to help. Join us on the Business Boutique podcast where we are equipping women to make money doing what they love. To hear full episodes, just search

Business Boutique, wherever you listen to podcast, or go to businessboutique.com.