EP200419 RichOnPlanning - PLANNING MATTERS - CentsAble Chat & Budgeting W Bobbi Olsen

If you fail to plan, plan to fail.

How do you want your future to look? We want you to plan for success. Welcome to Planning Matters Radio. Welcome into the program. This is Rich on Planning, Planning Matters Radio. I am Peter Rishon, founder and CEO of Rishon Planning, North Carolina's financial and retirement planning resource. If you've got questions or concerns, and certainly after everything that we've been through, a lot of people do.

A lot of people's situation has been drastically changed. A lot of people are looking for guidance. We are here to help and assist with any kind of planning decision, consideration, strategy.

We're here to help and provide guidance. Give us a call, 919-300-5886, 919-300-5886. You can also visit us online, richonplanning.com. We do offer a complimentary review evaluation, even capable of doing those virtually.

There's a button right at the top of the website where you can request the time at your convenience for a comprehensive virtual financial retirement and investment review right at richonplanning.com or give us a call, 919-300-5886. Again, we are here to help. Now, I've got a very special guest on the program today. She is the host of another podcast series called Sensible Chat, and that's C-E-N-T-S, like dollars and cents, Sens-able Chat. Her name is Bobbi Olson, and she is a financial and budgeting coach, helping people make ends meet, get a better handle on their budget, and really changing the perspective when it comes to money and finance in people's lives. Privileged to be joined by Bobbi Olson. Bobbi, welcome into the program. Thank you so much. It's a pleasure to be here. A pleasure to have you.

Now, budget coach and host of a program that helps people understand more about breaking the cycle of living paycheck to paycheck and teaching positive money mindsets. The message, I think, resonates with me, certainly, being a Dave Ramsey SmartVestor Pro. I appreciate it, and I hope you're making a difference and touching a lot of people. Oh, I'm trying. That's my goal. I remember having the hopeless feeling, and I just want to take that away from everybody else because for so long, it plagued me, and I know how that feels, and I just want to take that away as much as I can. I think those who have lived through it make the best teachers.

Yeah, that's for sure. Well, you've been a host of the Sensible Chat podcast for quite some time, sensiblechat.com. What is the core message that you are conveying to your listeners there? Basically, that budgeting can change your life. It can relieve your financial stress, and basically, I use sensible because no matter if you just have sense to spare, you are able to change your financial life and really take control of it. Sense with a C, by the way, like dollars and sensible. Yeah, I thought that was cute.

Thanks. So, let's talk about the budget. I know that budgeting can be super helpful in getting better control of our money, but you've talked about the fact that it's also a great emotional assistance, that it can actually help relieve stress.

Yeah, it relieved my stress big time, and that's why I'm such a huge proponent of it, and I have basically five ways that it does so. The first one is that it answers the question, can I afford it? I don't know about you, but that question alone used to stress me out to no end, and having a budget that is up to date all the time because I'm tracking my spending, and I have a plan for how to budget my money, but once it's budgeted, I have a look every single day broken down by categories of how much I have to spend. If you ever ask me if I can afford it, I can honestly answer that question now. Bobby, did you find that in the beginning, the budget answered no a lot, but as you were more disciplined, it started answering yes more and more? Absolutely. I was just going to say I didn't always like the answer, but it was clear what it was, so if I went out and spent anyway, I only had myself to blame.

I couldn't say I didn't know. Right. So, are there any other ways that you find that it helps to relieve stress? Absolutely. It gives you a definitive timeline for reaching your goals. When I was trying to pay off debt, one of the biggest things that kept me motivated was having that timeline and knowing exactly what date. If I followed my plan, this would be the date I was out of debt, and that just really relieved the stress for me because it can be tough sticking to a budget, just like it can be tough sticking to a diet, but if you really keep that why in mind and that motivation, it helps reduce the stress a little bit.

Sure. Another thing that it does is it helps ensure that you don't overspend because there's a lot of us that just go out and spend, and then at the end of the month, we go, how did I go this far over? I'm spending more than I'm making, and I had no idea, and it's so hard to track.

If you just have a bank account and say, do I have money left in my bank account? Well, yeah, of course I do, but does that mean that if I go out with my friends for drinks tonight that I'm going to have gas money tomorrow? Those are the stressful things, so the budget really helps ensure that you don't overspend unless, again, like we talked about before, I mean, you may overspend, but you're going to know you're overspending before you do it.

You know the cause and the problem there is there's only one source to blame. Absolutely, and then another thing is it helps ensure that you pay your bills on time. Before I started budgeting, I just kind of tried to pay the bills when they came in, and first of all, it was stressful to make sure that I had enough money to pay all the bills, but then at the same time, it was like you have so many due dates you have to keep track of and all this stuff, and it gets to be too much, so when I started my budget, I had it for each paycheck, so if I get paid on the 15th, well, all the bills that are due between the 15th and the 1st, I'm just going to pay them all in one shot, and I know I can do it because I budgeted for everything, and it's done in one shot. It's over, no stress for the next two weeks.

I don't even have to think about it. I have told a number of people that the key to beginning financial success and having that budget taken care of is opening your mail. For some reason, I've met people who seem to feel like if they didn't open the mail, then it did not exist.

That bill was not, you know, that is not a great position to be in, but staying on top of it, knowing your budget, how it coordinates and reflects your income, you can then put purpose to your dollars. I was that person who did not open my mail, and yeah, I had late payments and all kinds of stuff, and because I didn't open my mail, I actually had a seatbelt ticket. It was $20, came to me in the mail, didn't pay it, ignored it, never opened the mail. By the time I got done with it, because they sent me, I'm sure they sent me more, and eventually, I had a bench warrant out for my arrest. I had to go to court, and the fine was $600 because I didn't open my mail for a $20 seatbelt ticket. So yeah, it definitely opened your mail. The ostrich approach with the head in the sand still leaves your backside exposed. I don't know why, but it just didn't work.

No. But you have, through that experience and many others, I'm sure, and the lessons that you are now teaching others of this importance, found some surprising ways to save money. Yeah, and these are ones, because I always hear, you know, take your lunch to work, you know, make coffee at home, and that's great, but I got tired of hearing those. I wanted something else because I've never been the kind of person that, you know, buys lunch every day or drinks coffee at Starbucks every day, so I already didn't, you know, those weren't expenses I could cut, so I needed to find something else. And so the things I started doing, my favorite one is to budget high for all your bills and expenses. And the example that I always use is my electricity bill, half of the year it's about $130, the other half of the year it's $65. So I budget $130 every single month, because first of all, I do not like surprises, and I always want to make sure I have enough to cover that bill no matter how much it is.

Sure. So if I've gone 12 months and the highest is $130, that's a pretty good gauge. And so each month that it's not $130, I can save the difference of whatever, you know, so if it's only $65, then there I got $65 that I can save. So it works out well if you're doing that with all of your bills and expenses.

They could be little amounts, but they could really add up, and now those can, if you're paying off debt, that can go to your debt payoff, and if you're not, that can go to getting you ahead, building your emergency fund, whatever you're saving for. Sure. I mean, $65 six times a year adds up.

You're looking at almost $400 there. Absolutely. And, you know, if you can't find a lot in your budget just to save outright, then this is a good alternative to doing that.

I like it. And another thing is, and this is, you know, people a lot of times don't understand this one, but I say that you can save by giving yourself an allowance, and that means establishing an amount in your budget for discretionary spending. So this makes sure that you have plain money every month.

You're not completely cutting your throat, but that's it. You stick to only that amount that you set out for yourself. That way, you don't pillage from the money you could have saved from things like budgeting high from your expenses, right? Because when I, before I started giving myself an allowance, I would just take that extra $65 from the electricity and go squander it on whatever. But I wasn't keeping track. So everything I could have saved was going right out the window. We're going to have some fun regardless.

We're going to play one way or another. It's better to budget for it. Set some parameters there. Exactly. Because the biggest thing about budgeting is just to be intentional. I mean, your budget is a reflection of your own life and you can make it whatever you want. But the problem is when you're unintentional about it, you wonder where your money went. This way, hey, make sure that you've got the money set aside for what you want. Just make sure that that's really what you want to spend it on.

Absolutely. Any other surprising ways to save money? Well, something I just started doing within the last year is raising my rent because I felt like, well, you know, if I honestly, I've gone a long time without a rent increase.

It's been very, very shocking. And so my husband and I were thinking, well, if we, you know, get our rent increase, we're going to have to pay it. I mean, we've got great rent, so we're not going anywhere. So I thought, well, why not just start budgeting for it now and be, you know, so that when it does come, I'm already used to paying it.

It's not a hit to the face. And in the meantime, I can just save that amount. So I just add an extra 50 bucks to my rent budget. And then, of course, after I pay my rent, you know, I've still got the 50 bucks there and I can put that into whatever savings category I want.

I like that. And inflation is going to happen. So, you know, one way or another, we shouldn't be surprised as things become more expensive.

Going ahead and being proactive and planning ahead of time is going to lessen the surprise. We don't want to be surprised with our money. Yeah, I mean, this is just a thing because it's one of those things that, you know, yeah, like you said, inflation happens. And when it does, you have to deal with it. I mean, you find a way to deal with it. So the money is there.

You just have to find it. I mean, who's not going to pay their rent increase? You know, that's pretty much something that you're going to have to deal with. So deal with it ahead of time and, yeah, take the benefit. And then another one that I love is saving the cash back rewards from my credit card. I mean, that's an easy one if you're using a credit card. And, of course, you know, if you're not paying it off at the end of the month and you're not responsible for it and all that stuff, I don't recommend using one.

And I know that there's a lot of people who are against credit completely. But if you are using a credit card, save the cash back rewards instead of, you know, spending them or getting them on a gift card or whatever. And I actually have a Fidelity Rewards card, which allows me to just contribute all of my rewards dollars directly into an IRA, which I love because I don't have a ton to save for retirement. So this is another way to put a little extra money aside for that. Fantastic. I really like that one. I usually just roll those rewards and pay a little extra on the balance from time to time. But making that even more intentional and using it to contribute to an IRA, hey, that's a win win. Yeah, I love it. It's been really great for us, especially during a time when, you know, stocks are on sale so we can look into that aspect and, you know, have a little fun with it and still watch the money grow, hopefully. Well, as you have been not only finding ways to be more more efficient with your money yourself, but also helping others, you have also found some surprising reasons why budgets fail.

Can you share a couple of those? Yeah, I think the biggest reason that budgets fail is because you don't understand the difference between a spending plan and a budget. A lot of people use those terms interchangeably, but here's what I see as the difference. Your budget is a reflection of the money that is in your bank account today, but it's broken up into separate categories like how much you need for rent, how much you need for gas, how much you need for different utilities, things like that. And that amount together is, because I teach on the zero-based budget system, which says that every dollar has a job and so you budget down to zero.

So everything that's in your bank account broken into categories, all those categories are going to add up to the exact amount that's in your bank account. That is the reality today, and if you keep that up to date by tracking your spending, you're always going to know at a glance where you're at with your budget. The spending plan, on the other hand, is a strategy for what you plan to do with your next paycheck or whatever income you are expecting. And so you, again, you plan that out down to the zero, down to the exact amount that you're planning on getting from your paycheck. But if you don't take that spending plan and then execute it into your budget when it actually reaches your account, that's when the fallout happens because the best-laid plan doesn't work unless you execute on it.

Absolutely, yep. I have found that people that I have spoken with have a good handle on that budget. They have what I call the line-item budget, as you described. What's your mortgage? What's your car payment?

What's your electricity? All of their obligations line-itemed out. They know how much those are. And then I say, let's take a look back at your bank account for the last six months. How much did you spend compared to that line-item budget? And a lot of times it's 25 to 50 percent more every month. They have not accounted for lifestyle in that line-item budget, which is it's got to be part of our spending and our budget plan.

Absolutely. And for me, you can't keep track of all those numbers in your head. You can look at your bank account online as much as you want, but that only gives you the total amount of money that you have. What do you have for different things? That's why the cash envelope system worked wonders for me for a long time, except that it was a little hard for me. I kept forgetting to take my cash to the grocery store and things like that. So I looked for a digital budgeting system, like a digital envelope system.

And that's what I love, is that digital envelope system, because then you always know how much you have in each category. Absolutely. Any other reasons why you see budgeting fails people sometimes?

Yeah. My second top one is that they're too restrictive. And you always hear budgeting is restrictive. But what I say is, this is your budget. So if you feel it's too restrictive, then lighten up on yourself. Change some of those. If you've got categories looking at you and you're going, okay, I've got this much in gasoline, this much in eating out, or whatever your categories are, and you feel like there's not enough or too much in one category or another, move it around. Then these things are not, the budget never, you never get it right the first time. It takes time to figure out what works for you.

So have a little grace with yourself. And whatever your main goal is, you want to follow that goal. But that doesn't mean that you have to cut your throat to do it. And if it's not working for you, then change it.

Don't make it that restrictive if you're not ready to be that restrictive with it. Same reason my diet has failed me a few times, I think. Exactly.

It's the exact same idea, yeah. So that's why I always kind of, I encourage people to have a little play money in there if they have the room in their budget because it's important to have that slack in order to keep yourself motivated towards your bigger goals, I believe. How else can we keep ourselves on track and prevent failing in our budget?

Well, another one, this was such a huge one for me. Forgetting about irregular expenses, I cannot tell you how many times, you know, it would be the third month and my husband would be going, OK, we need to get the oil changed. Do we have money for that? And I'm like, darn it, I did it again. I forgot to put an oil change into my budget because it doesn't happen every month.

So we forget about it. And, you know, just, OK, the budget of the oil change is only 60 bucks. But for us at the time, that was major if we didn't budget it in. And so what I discovered along, you know, just reading personal finance stuff here and there was turn everything that's an irregular expense into a monthly expense. So if I get my oil changed every three months and it costs me $60, I need to save $20 each month and then I'll always have that $60 for my oil change. And it's such a simple thing, but just something that had never occurred to me and that really helped my budget be successful. And indeed, there are other big ones that I can think of that come about.

Insurance payments, taxes, the car inspections that we have to do, and then licensing. Those things come up maybe once a year, once every six months. And if we've not prepared for those, those can be pretty major incidents not to be ready to pay.

Definitely. And it goes a long way to have a list of those. I have a list of my irregular expenses and it has the date that they're due and how much it is so that I can always go there and plan my budget for how much I need to save for those expenses. Did you find any myths that are involved with budgeting? Things that people tend to believe but maybe aren't as true as we think?

Yeah. The one that I always hear is budgeting is hard. And I believe that's a myth because, you know, when it comes right down to it, budgeting is easy. Budgeting is just simple math. Sticking to it.

Yes, changing your mindset is what's hard. But if you stick, if you're sick of money controlling you and every decision that you make, then budgeting is an easy way to take back control. And if you can change your mindset and really have that goal in mind and find your why, what is the reason you're doing this and find your motivation, then budgeting becomes actually very simple. Bobby, I help people make the transition into retirement very often.

And that's really the focus of part of our program and part of what I do. I find that a lot of times people who are getting ready to make that transition have been lucky not to have to pinch every penny, not to have to stretch every dollar, and therefore have not stuck to a budget maybe as much as those who do. But they're looking at a time where their paycheck, their income, is about to go away. And I always stress the importance to them that budgeting has come back to be the most important factor in determining your financial success for the next 30 years.

Yeah. So are you seeing that there are some steps? I know that you have talked about surprising ways to save money and reasons that budgets fail. But budgeting our way to financial freedom, are there some simple steps that we can do that so that we can have a more confident financial path looking forward? Well, when I'm talking about budgeting your way towards financial freedom, it really starts with debt payoff. And a lot of people that are going into retirement now, they're finding more and more that that's still an issue. Certainly.

Yeah, it's kind of scary. And so whatever age you're at, the first thing on my list of budgeting your way to financial freedom is really the idea of that, is that budgeting can help with whatever goal financially you're trying to accomplish. So paying off debt is going to certainly be the most important, especially if you're going into retirement, because you need to have as few financial obligations as possible. And budgeting can certainly help with paying off debt. Then when you get done with that, budgeting helps you save for emergencies and the unexpected, which certainly in retirement as well as any other time, that's going to be a huge issue. And especially if you haven't had to, like you said, deal with that before, where maybe you had plenty of money before and never had to give it any second thought. But now you need to make sure that you have money set aside for emergencies and the unexpected, because no matter who you are, these are going to come.

And they just keep coming and coming. And like you and I talked about before, if you have the money for it, then it's a minor irritation that you have to deal with. But if you don't have the money for it, it can turn into a big emergency, and nobody wants that. And then certainly after you get done with, if you have enough money for emergencies and feeling comfortable that you can handle those unexpected things, then budgeting can help you invest for retirement by letting you see how much you have available to put towards investing without upsetting your day-to-day lifestyle.

Yep. I feel like you'll agree with this one, Bobby. But to me, one of the biggest misconceptions with budgeting is people feel like it is an event. They do it once and feel like, OK, I've done that. When in reality, budgeting is a habit. It's a routine. It's a lifestyle. Yeah, yeah.

That's for sure. I mean, because it keeps going. It's a day-to-day thing, and it's a paycheck-to-paycheck thing until you get out of that paycheck-to-paycheck cycle. But, you know, even if you don't have a budget, you still have to keep track of your spending so that you're not overspending in your bank account.

And so for me, it just makes so much more sense to budget instead of just looking and seeing if you have money in your bank account because, again, for me, it just relieves the stress of wondering, you know, what I exactly have money to spend. You know, it's like a toolbox. If you think of your bank account as your toolbox, well, OK, that's fine. But if you put all your money into it, if you put all your tools into a toolbox and didn't separate them, it would be really hard to make sure that you had the right tools for the right job, would it not? Yeah, I've got that toolbox actually at home. I've got to dig through it and sort through it to find the right one sometimes. I've got my common go-to tools pretty well sorted, and I know where they're at. But yeah, the random tools box is always an interesting one.

I have to dig into that. Let me ask you another question here, Bobby. How much time do you dedicate to budgeting now that you are on that routine and have made that part of your lifestyle versus how much time did you spend worrying about your money before you were in the regular habit of budgeting? That is such a great point. I spent so much more time stressing about it. And that's what I always tell people is, yeah, if you think you're going to spend a lot of time budgeting, no. It's nowhere near the time you spend stressing about it. And when you're stressing about something, the stress never goes away because you never deal with it. And so I was stressing about money.

I stressed and stressed. But when I finally budgeted the money and got on a regular routine, yeah, I don't feel that stress anymore because I dealt with it. And the time involved, well, let's see.

In the beginning, it was a little bit more. I actually was really excited about it, so I spent a lot more time than most normal people would. But I think it probably took me three or four hours to get everything together so that you have your financial picture in front of you and know what you're working with. But on a regular basis, I have a budgeting system that allows me to put in my expenses as I make them.

So if I leave a restaurant, I enter my receipt right then. It takes me 30 seconds tops, and I'm done. And once every two weeks, I'll really go over it so that I can pay my bills and budget my new money, and that maybe takes me half an hour.

So there's really not a lot of time spent on a regular basis once you've got the pre-work out of the way. I think it says a lot that you chuckled when you said most normal people wouldn't do this. We need to make this a normal thing.

It needs to become normalized that paying attention to your money is something that we all should be doing. Yeah. And it's a lot of fun. I mean, I did it.

I still do it because it's fun. For me, budgeting is like dreaming. When you look at your budget and you decide what you're going to do with your money, it's exciting because even if you're paying off debt, when I was at the stage where I was paying off debt, it was exciting for me to pay the bills because I could look at the amounts I owed going down. And I knew that when I was done with that, here's where my money is going to go next. And rather than... I mean, I love to daydream, but when you daydream, you're just kind of sitting around wishing that something would happen.

And most of the time, then you kind of shake it off and go, okay, well, back to the real world because that's not going to happen. But no, with the budget, you're dreaming, but you're actually putting a plan in place that can get you to accomplishing that dream, and that's what I love about budgeting. Absolutely. Well, again, she is Bobby Olson, host of the Sensible Chat podcast, focuses on breaking the paycheck-to-paycheck cycle by teaching positive money mindsets how to destroy debt and reduce financial stress. Folks who work with Bobby one-on-one walk away with a clear view of their financial picture and a budget that meets their specific needs, putting them in more control over their financial lives. And, Bobby, if anybody wants more information or would like to be in touch, what's the best way to reach you or find out more?

Sure. They can just go to SensibleChat.com, and that's Sens, as in dollars and cents, able. SensableChat.com.

SensibleChat.com. Bobby, we really appreciate the time. Thank you for being here on the Planning Matters radio podcast. Thank you for having me.

It was an honor. Well, once again, very happy to be joined by Bobby Olson. She is host of the Sensible Chat podcast.

That's C-E-N-T-S, Sens-able Chat podcast. And if you take some time, dedicate your focus and attention and take some of Bobby's advice, you are able to make sense out of your dollars and cents. And that's what we also try to help people do each and every day to the point where they are achieving big financial goals like the ability to stop trading our time for money, enjoy our time, enjoy our money, and relax and move confidently through retirement. If you have questions, concerns, if you would like a planning, a financial, a retirement, or an investment review, an evaluation, if you've got a few questions you just want to talk over with somebody, we are here to help. Feel free to pick up the phone.

Be in touch. 919-300-5886. You can visit us online, richonplanning.com. There is a link right at the top of the website if you would like to request a convenient time for you to do a complete comprehensive financial and retirement planning review and evaluation virtually online.

You can do those for your safety and convenience. Again, just visit richonplanning.com or give us a call, 919-300-5886. Looking forward to hearing from you. Looking forward to helping however we can.

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