Where should I start with my money? | Summer Series

Bryce: [00:00:40] Welcome to the Get Started Investing summer series where over six episodes we're going through six steps to help you set up your finances for 2023 from budgeting and savings habits, emergency funds and superannuation through to common mistakes and how to set up the ultimate core portfolio. This series has something for everyone. Now. While we are licenced, we are not aware of your personal circumstances. All information on this show is for education and entertainment purposes only. Any advice is general advice only. And with that said, let's crack on. My name is Bryce. And as always, I'm joined by my equity buddy, Ren. How you going?

Alec: [00:01:13] I'm very good, Bryce. I am excited for this series. I'm always excited particularly for this. Well, going back to basics and I am going to acknowledge right from the outset that in preparing for this episode, I have made changes to my finances. 

Bryce: [00:01:29] Wow. I love that. 

Alec: [00:01:30] No matter what side of the microphone you're on, no matter how experienced you are, there's always ways to improve. Yes. So this is the very first time you're ever hearing our voices or whether you've been listening to us for five years, we're pretty confident you're going to get something out of this series. 

Bryce: [00:01:44] Absolutely. You've got something out of it. I've got something out of it. We have covered some of this content in previous episodes over the years. But, you know, there is never too many times that you can talk about this. We've seen surveys come out over the last recent weeks of the level of financial literacy here in Australia. And there is always something that can be done, always ways to improve your financial position. And whilst this podcast is focussed on investing, we're going to look at it more broadly Ren across the board finances. 

Alec: [00:02:10] Yeah, I think what we've learnt is that the best way to maximise your investment returns is to get as much money as possible into the market as soon as possible. The best way to get as much money into the market as soon as possible is not spend it on useless shit. 

Bryce: [00:02:24] And that's the series everyone. So the six episodes Ren. We've got Sorting Your Money, Emergency Fund, Seven Steps to Supercharge Your Superannuation, Common Mistakes, How to build the Beginner Portfolio and then get out of your own way. A Case Study on automation. 

Alec: [00:02:41] It's clear that we've only come up with titles for the superannuation app, so that's what we're covering in the six episodes. It should be going you from zero to it if you want to then start picking individual stocks and all that stuff. We're not going to cover that in this six episodes. Look at the rest of the year to talk about that. So let's get started getting your money sorted. Where are we starting today? 

Bryce: [00:03:03] Bryce Today is all about savings habits. It's about budgeting. It's about making sure you've got the right bank account set up to actually be in a good, stable base position to go from there. And we're going to talk about how we do it and let's get stuck in. 

Alec: [00:03:17] Yeah, so well, I want to start with a conversation about budgeting is a conversation about dieting because I think there's a real parallel here and I think it helps people who are new to the world of money conceptualise it, which is that there's every man and his dog will tell you there's is a right way to manage your money, just like every man and his dog will tell you there's a right way to eat. But I think what we've learnt from diet and fitness culture is that at its core the reason that all these different diets works is it's because that's when you're disciplined and you're intentional and you're focussed on what you're doing, and it's the same in the world of budgeting. There's pocket budgeting, there's itemised budgeting, there's a bunch. We'll talk about some of them. But at its core, the reason any of these budgets work is because you're focussed on your money. And so I don't care what budget you use, I don't care if you use a budget or not, just know where your money's going. 

Bryce: [00:04:11] I think that's the key part. If I think you said the right word, there is is intention. Yeah. Be intentional with it. 

Alec: [00:04:17] That was intentional. 

Bryce: [00:04:19] Yeah I Know. I think it perfectly sums it up. Be intentional with it. Be focussed on where it's going. Yeah. And, and get on with it. So there are a few common examples for for budgeting.

Alec: [00:04:31] Yeah. The most common would be an itemised budget. Yeah. Where you have all your different line items, rent, food, going to the movies with Bryce. Yeah. Alcohol. Darts. 

Bryce: [00:04:42] No darts, no dice. 

Alec: [00:04:44] And you put a dollar amount next to it. I have $20 to spend on vapes this week. 

Bryce: [00:04:49] No vapes.

Alec: [00:04:51] That's your Stock standard budget.

Bryce: [00:04:54] Yeah. Yeah. That's pretty, pretty straightforward. We got then there's the barefoot bucket budget and we spoke about something similar in our Get Started investing book. It's where you break up your in-flow or your revenue into three sort of buckets. He calls it blow mojo and Grow. Yes, I think we call it spending, savings and investing something along those lines.

Alec: [00:05:16] I think you wrote that chapter two.

Bryce: [00:05:17] I did write that. And then he splits it beyond that as well. So within the blow account, he has like 60% for daily expenses, 10% for splurge, 10% for smile. And I think you should read the book to find out what all of those means. 

Alec: [00:05:31] A 20% for fire extinguisher. Come on. Let's let's complete. 

Bryce: [00:05:36] Other ways is to break it into. Synergies. So needs, wants, savings and debts. For example, 50% of your budget goes towards everything that you need to live, rent, bills, expenses, all those critical must haves. Then 30% goes to your once and then 20% to saving and paying off debt. 

Alec: [00:05:55] There's a lot that can be said about all of those different things, the least of which is if more than 50% of your income needs to go to your needs, then these 50, 30, 20 ain't gonna work. Similarly with barefoot stuff, you know, if more than 60% needs to go to daily expenses, it needs to go to daily expenses. Anyway, that's beside the point. There's hundreds of free budget planners at the Money Spot website that link money smartcard I use slash budgeting will be in the shownotes. Probably didn't need to write the URL then, did I know? But I think the long and the short of it is however you going to manage your money and we'll talk about how we do it. The main thing is that you manage your money, just know where it's going. 

Bryce: [00:06:40] So let's have a look at actually how this translate into your life. In my life, because I'm sure we do it differently. As you said, right at the top. There is no one size fits all for this. But before we do, we are going to take a quick break. I did mention that our savings buckets are in our book, so you can head to our Equity Mates dot com slash books to get a copy of Get Started Investing. 

Alec: [00:07:00] There's other. Yeah. 

Bryce: [00:07:02] No, but here's the odd. All right, well, let's have a chat about how we do it, because you wanted to start tracking your expenses in more detail. So I'm actually interested to hear if there's been an update on that or not. 

Alec: [00:07:16] A lot of people are finding this podcast for the first time, so that means nothing to them. 

Bryce: [00:07:20] True. If you have just joined us for the first time, welcome. Wren has been talking about his need to track expenses. But how do we do it? 

Alec: [00:07:28] I think you're going to be the textbook example of what you should do. So why don't you kick us off a little later with your best foot forward? 

Bryce: [00:07:35] My budget is quite detailed and it's in Excel and I've been doing it for years. It's the same Excel sheet that I've been tracking since the start of university. 

Alec: [00:07:46] Excel at Google Sheets. 

Bryce: [00:07:47] Google Sheets. 

Alec: [00:07:49] Come on.

Bryce: [00:07:50] It's the same that I've been tracking for. Go with Google Sheets. And it's changed year after year after year. As do you. 

Alec: [00:07:55] Have all the historic years. I do archives. 

Bryce: [00:08:00] And I archive the texts. 

Alec: [00:08:01] Like if I was to say, What did Bryce spend on food in 2017, could you find that? 

Bryce: [00:08:07] I reckon I could tell you that just off the top of my head. 

Alec: [00:08:09] No. All right. Also, 

Bryce: [00:08:12] It wasn't a lot in 2000 in which year. 

Alec: [00:08:14] 2017. 

Bryce: [00:08:15] 2017. 

Alec: [00:08:16] So that would be the second year of your working life? 

Bryce: [00:08:19] Yeah, I think I'd budgeted at about $100 a week. 

Alec: [00:08:22] That's because you were working in-store at Woollies and stealing his Food. 

Bryce: [00:08:25] Not true. But anyway, long story short is I have a budget, I'm intentional with it, I've got it. And it's and the way that I created this budget was very, very simple. It was that I had to do three things. I had to save for my needs. I had to be able to pay all my needs. I then had to be able to save and then I wanted to be able to generate wealth. That's what my budget needed to achieve. So then the first thing was to say, okay, what are all the expenses that if that I have to commit to? That's it. We've got it here. It's the needs. Without fail. I have to do that. 

Alec: [00:08:58] Talk us through. Don't tell us the dollar amounts, but give us percentages, broad percentages on your needs. And so you pay comes in right now.

Bryce: [00:09:09] All right. So broad strokes, what I classify. And now this is going to be see, this is going to be you're going to laugh at this. But I count my golf, for example, as a name. The reason for that is, is because it's a split. It's a payment. So I've committed to an expense. 

Alec: [00:09:27] Yeah. Yeah. Like you sign a contract. 

Bryce: [00:09:29] I've signed a contract. 

Alec: [00:09:29] With the Royal.

Bryce: [00:09:32] That means I have to pay for it. So anything that I want, the. 

Alec: [00:09:34] Percentage of your income goes to golf. 

Bryce: [00:09:37] Now, I'm not saying percentages. No, no, not a lot. A tiny amount. So 14% of my income goes to rent and and then. 

Alec: [00:09:46] Well, that's really good. Yeah, yeah. 

Bryce: [00:09:48] Yeah. 

Alec: [00:09:50] do you get overpaid. 

Bryce: [00:09:51] 40% of my income is needs. 

Alec: [00:09:54] Give us some of the biggest buckets. 

Bryce: [00:09:56] So no doubt the biggest bucket is rent and then all of my bills inclusive. So that includes food, internet, all of my subscriptions, electricity, gas, you name it. It's all bucketed into that, that group. So once I've got that, I go, okay, cool. Then I, then I say, How much have I got left over? And so from there I go, I need to pay myself. I think it's important that you recognise that you need to be able to go out and buy the occasional lunch or you need to go out and have some beer or whatever it may be. So once all of that money goes aside, I then go, Alright, I'm likely to need another hundred dollars a week to enjoy myself and you need to pay yourself. Otherwise what you find yourself doing is transferring from savings account. Every you know I did it at uni heaps. I'd say, oh, I can live off 50 bucks where you go doesn't work. And then the remaining I divide up into savings and investing. Now this is the one that over the years has changed the most because obviously my goals change. One year I might be like, I desperately need to save to go on a holiday. So my cash component. 

Alec: [00:10:59] I think the best example for you is this year you've invested a lot less because you're paying for a wedding. 

Bryce: [00:11:06] Yes. Classic example, in fact. Yeah. Really, really pulled back on investing and decided that the cash component was the most important. 

Alec: [00:11:15] Still the best investment you've ever made. 

Bryce: [00:11:16] Absolutely. Absolutely. So once I've worked out, I've paid myself. I've paid everybody I need to. I've paid myself. How much do I have for spending and savings? Mind you, I have reached my emergency account, which we'll talk about in the next episode. So I don't have money going into there anymore because I've hit what I need. But up to that point, emergency account was prioritised over investing in most part. So that's how I do it. And then every time I get paid up until sort of the last 12 months, I would go in and sort of change all the numbers. But now I've got everything automated that I just know what buckets things need to go into and trust the automation process and then just have a broad strokes. You know, this is generally what's going to be in those accounts over a 12 month period or this is how much I need to pay for X, Y and Z.

Alec: [00:12:02] Yeah. So I think you said 14% of your income is rent. That's really. But people shouldn't be intimidated. There's a I think the general rule, they say, is a 30% rule for rent.

Bryce: [00:12:12] Yeah, yeah, yeah, yeah. 30% of anything. 

Alec: [00:12:16] But 30% or below that is the amount of your income going to your rent. Good. Yes, that's the 3% rule. So prices doing pretty well, by the sounds of it. But my biggest takeaway there is being intentional with your money and knowing where your money is going. Doesn't mean every Monday you've got to print out your bank statement and look at your transactions for the previous week. Or plug your bank account into one of those spend tracking apps and like categorise every transaction. Being intentional with your money means knowing how much you're getting paid. Knowing what you need to spend on. And then setting up automatic transfers to facilitate that. Yeah. And so then you don't have to check it because you know that the money in your spending account is money that you spend. Yeah. And then the money that you need for your other things, like your exorbitant golf memberships and etc., etc., is where it needs to be and will be is taken care of. 

Bryce: [00:13:10] Yes. Yeah. And the beauty of this and why you always do your needs first, in my view, is that when that quarterly electricity bill comes in, when the car insurance comes in, when the unforeseen increase in Netflix prices comes through, you know, you're sorted and you've got your money there. You don't have to go selling shares. You don't have to be taking out of savings when you're trying to save to go overseas for the first time. You don't need to be taking money for an emergency account. You've got it there. You've intentionally put it there and you feel great because it's there. Yeah. So how do you do it then? 

Alec: [00:13:40] So I have similar automatic transfers to talk to the structure of my accounts for a long time. Only ran with one bank, one bank account, and then a savings account. And that caused a whole bunch of headaches when I tried to get it sorted. Put a pin in that because like three episodes from now, we'll talk about the nuts. But right now, so I have money in which is like the account that I get paid into and then, you know, if I if made in money or the account that if like the account that I've got plugged into payment is that account. So any money coming in is going into that account, money in. And then when my pay hits every fortnight, there's a number of automatic transfers that are set up. And so I transfer money to money out, which as you guessed it is spending. So that's where the well, my card is connected to. And then I've got my I've set up three savings accounts and so on with CommBank not, not would take sponsorship and it's literally you can just open savings accounts with like one click. It's pretty easy. So I've got three savings accounts. One is emergency fund and that's got we'll talk about how much but three months of expenses in there just sitting there getting what, 0.02% interest or something. Then I've got travel because I want to travel next year. So I set up a separate bank account to put that money in and then a house deposit account again because it's just longer term. I want to one day, hopefully wishfully own a house. 

Bryce: [00:15:20] Well have you names the accounts that. Yeah. Yeah. And I think that's another thing like you've been intentional with naming those, like you've got a goal. It's sometimes hard to have an account sitting there with cash going in for like you're just like, Why do I need to have this guy in there? 

Alec: [00:15:32] And then I've got one other account which is house rent. And so when I was in a share house way, all the boys would transfer me money and I would pay it and I would also transfer my rent to it as soon as I got paid. So again, an automatic transfer, clear it out, know that it's in the right spot and it's there. And then I set up an automatic transfer to my landlord as well. Similarly now living with my partner, but using that same account. So that's my final account. And so for me I just know money is where it needs to be. I don't worry so much about an itemised budget. Like, I don't know, I'm definitely not as diligent as Bryce. I don't have a spreadsheet, but I know that I've covered what I need to cover and the money's going towards the goals that I want to hit. 

Bryce: [00:16:15] Yeah. Yeah. Intentional. 

Alec: [00:16:17] Intentional. Yes. So, Bryce, in this six part series, we want to end every episode with three key actions. What have we got for this one? 

Bryce: [00:16:25] Think about your accounts and how you've set them up. Do you have at least a spending account and an emergency account or in your position? I think a good way to think about it is a money in and then something else you need. 

Alec: [00:16:37] Do you have money in money? 

Bryce: [00:16:38] Well, I've got everything coming into the same account. Yeah. And then it then gets flung off to various. So there's.

Alec: [00:16:43] But do you spend out of your money in account. 

Bryce: [00:16:47] Yes, I do. That's my as soon as money comes in, it is flung off to other accounts. 

Alec: [00:16:52] And then it's just like leaving whatever the remainder. 

Bryce: [00:16:54] Is. Yeah. Whatever is remaining. 

Alec: [00:16:55] Yeah. So my big challenge to myself, like what I challenge myself to do is have more money than I need sitting in that money. An account at the end of a pay cycle. Tough.

Bryce: [00:17:08] Tough. So, yes, money in, money out. I think the key thing is think about your account set ups and do you have enough to avoid in and out in the same account. 

Alec: [00:17:17] But yeah, I think the action, if we're going back to that, if you don't have an emergency account, now's the time to think about it. Yeah, we will do a full episode on it next time and where you can set it up. But. But that's, I think, is a non-negotiable. Yes.

Bryce: [00:17:30] Yeah, yeah. 

Alec: [00:17:31] All right. What's number two? 

Bryce: [00:17:32] Take the time to review your last month's spending. And if you're not tracking your accounts, have a look at where the money's going. It is crucial to understand where you're spending your money, and I can guarantee you'll be surprised with something. 

Alec: [00:17:43] Now, what Bryce was saying earlier in this episode is that I did this exercise about halfway through last year, and it's revealing, even if you think you're pretty good. And like I literally host a money podcast, there's things that slip through the yeah, okay.

Bryce: [00:17:59] But that's the thing.

Alec: [00:18:00] Automatic transfers. But so the one is like direct debits that you just don't know about. The other is the amount that you're spending on certain categories that you know you're spending too much on. But yeah. Actually stay out of.

Bryce: [00:18:12] Yeah, yeah. So do yourself a favour, check out your spending and just try and categorise it. Broad strokes doesn't need to be specifics, but just try and categorise it into buckets and see where your money's going. 

Alec: [00:18:22] Even if you don't categorise it, force yourself to revel in your shame and look down each transaction line for a full month. Say like, why did I spend that? 

Bryce: [00:18:30] Yes. And then thirdly, put more money in your bank account and cancel at least one monthly subscription.

Alec: [00:18:36] There's come on. You know, there's one that you don't really need. You know, there's one that's kind of in a grey area. You can't. 

Bryce: [00:18:44] Cancel it. Cancel it? Yes. I actually cancelled one recently. That was my Disney subscription. Oh, really? On. No, sorry, not Disney. We kept Disney got rid of Apple TV. 

Alec: [00:18:54] Yeah. 

Bryce: [00:18:55] 799 and whatever it is, don't need it a year later. 

Alec: [00:18:58] So when I did that review of my spending and looked at a month and just saw where money was going, I realised I hadn't cancelled my free Paramount Plus subscription. I Yeah, that was amazing.

Bryce: [00:19:09] So I've been thinking as well rather than because there's no lock in contracts for any of these things and the streaming services, you can come and go. So just like you binge a TV series on Netflix. Yeah, I've been thinking about Netflix binge months where you just say, I'm only going to pay for three months a year on Netflix. 

Alec: [00:19:29] No, you could literally just. 

Bryce: [00:19:30] Do like one on one. 

Alec: [00:19:32] You could go like binge stand Netflix month, month, month, yeah, pump whatever good shows and you can honestly set up you could with all your mates you could say this month let's older Netflix and let's all watch whatever the show is. And then next month, that's all they binge or watch. House of Dragon. 

Bryce: [00:19:48] Show. Anyway, we're Off. So that's something I think about. So set up your accounts review last month's spending and cancel the subscription and think about your budgeting. But Ryan, you've mentioned emergency funds a number of times and that's where we'll be picking it up in our next episode for get started investing. And if you're not signed up to our Get Started Investing weekly email, make sure you jump to our website equitymates.com to sign up because each episode is going to have an accompanying write up on some of the key pieces of information, links, resources to build on what we've discussed in this episode. So head to equitymates.com To sign up. We will leave it there. We'll include some links in the show notes for the Money Smart Budgeting website where there's plenty of free information on budgeting and how to think about it. But we'll pick it up next episode. 

Alec: [00:20:32] Sounds good.