Episode 28
Budgeting 101: To Budget or not to Budget? That shouldn’t be the Question…
Episode Description
Join Jason Blumstein, CFA® (aka Big Bo), CEO & Founder of Julius Wealth Advisors, LLC, as he guides you through the essential steps of budgeting.
In this episode, discover why the truly wealthy always have a plan and how you can achieve the same budgeting discipline.
Learn to distinguish between necessary and variable expenses,
Understand the critical role of cash flow in building long-term wealth, and
Explore practical tips to gain financial clarity and control.
Hear compelling stories and get inspired to take control of your financial future. If you’re ready to unlock a life of abundance and security, this episode is for you. Don’t miss out on the master key to financial freedom!
Episode Transcript
Ladies and gentlemen, welcome to Episode 28 of "The Big Bo $how." Imagine for a moment, standing at the edge of a vast, unexplored wilderness. In your hands, you hold a map – a map that promises to lead you to a hidden treasure, a treasure that can secure your future and transform your life. But this map isn't just a set of directions; it's a guide, requiring careful planning, discipline, and the courage to take the first step.
Today, we’re going to talk about that map, your map – the map to financial freedom and sustainable wealth. I’m Jason Blumstein, aka Big Bo, CEO & Founder of Julius Wealth Advisors, your guide on this journey, and today, we're delving into the art and science of budgeting. But don’t think of budgeting as a restrictive chore; think of it as your master key to unlocking a life of wealth, abundance, and security.
To budget or not to budget? That shouldn’t be the question. The rich may spend without thinking, but the truly wealthy? They understand that real wealth requires a plan, a vision, and yes, a budget. It’s time to unravel the secrets of the wealthy, step by disciplined step.
So, join me as we turn this map into a treasure trove of practical wisdom, starting with the basics and building up to a strategy that could change your life. So sit back, relax, and welcome to Episode 28 of The Big Bo $how!
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So, how do you achieve this budgeting discipline? Let's break it down step by step.
First, know your income. It sounds simple, doesn’t it? But understanding what’s coming in each month is the foundation of your budget. Let me share a story to illustrate this.
Imagine Sarah, a marketing executive. Sarah receives a base salary, but she also gets quarterly bonuses and occasionally picks up freelance gigs on the side. She realized that while her monthly salary was predictable, those bonuses and freelance payments varied. By creating a detailed list of her income sources, Sarah was able to see the full picture. She added up her base salary, estimated her bonuses based on past years, and included an average of her freelance earnings. When she segmented these totals by month, she could plan her budget with more accuracy, smoothing out the highs and lows.
For example, if Sarah earned $150,000 annually from her salary, $25,000 from bonuses, and $15,000 from freelancing, she now had a clear picture of her yearly income. By dividing this total by 12, she could better anticipate her monthly cash flow. This helped her avoid the common pitfall of overspending in months when her income was higher, only to struggle in leaner months.
Have you ever found yourself wondering where your money went at the end of the month? Understanding your income in detail helps prevent those surprises and helps ensure you can plan accurately.
If there are multiple earners in your household, like Sarah’s situation with her partner, they both need to budget accordingly and then combine their totals. Her partner, Tom, worked in sales and had a commission-based income. By sitting down together and aggregating their earnings, Sarah and Tom could create a comprehensive household budget, ensuring they were aligned and financially prepared for both expected and unexpected expenses
By knowing their income, both Sarah and Tom turned what seemed like a simple step into a powerful tool for financial clarity and control. This practice allowed them to set realistic savings goals, allocate funds for investments, and confidently manage their day-to-day expenses.
This is the first, crucial step in your journey to financial discipline and ultimately, wealth.
Now that we’ve covered knowing your income, let’s move to the other side of the equation: understanding your expenses. Equally obvious, yet often more challenging, is knowing what’s going out each month. This is where budgeting can feel like a chore, but it’s essential for creating a clear path to your financial goals.
I often tell people that knowing your expenses is vitally important, but it’s not important for you to nail things down to the penny. Do you worry that focusing on every penny will stress you out? Nailing things down to the penny is often what causes stress and anxiety, and this stress and anxiety is often what keeps people away from doing the exercise. Just like your health and going to the gym, it's about consistency and understanding, not perfection.
Let’s try to simplify the process by breaking it down into two main categories: necessities and variable expenses.
Necessities are your essential expenses – the ones you can’t avoid. Think of them as the pillars holding up your financial house. These include your mortgage or rent, real estate taxes, income taxes, insurance payments, utilities, gas for your car, groceries, phone bills, and so on. Most people have a rough idea of these numbers, but let me emphasize the importance of being disciplined and writing them down in a budget format.
Take, for instance, our couple Sarah & Tom, who recently bought their first home. They knew their mortgage was a fixed cost, but the utility bills varied month to month. By tracking these expenses over several months, Sarah & Tom were able to estimate an average and plan accordingly. This not only helped them avoid surprises but also allowed them to see where they might be able to reduce usage and save money.
For necessities, some expenses are fixed, such as their mortgage, while others fluctuate based on circumstances or usage, like gas and utilities. Estimating these as best as possible gives you a solid foundation to build your budget on.
Have you ever considered how small changes in your necessary expenses can lead to significant savings over time? This is where the magic happens.
Now, let’s move on to variable expenses. This is where most people lose track of their money. Variable expenses are those that come with choice – they are your lifestyle expenses. You don’t have to go out to dinner once a week, you don’t have to buy that new set of weights, and you don’t have to go to Europe for a vacation. These are the expenses you control, and they can add up quickly if you’re not careful.
But, here’s the good news. These days with the heavy use of credit cards for points, etc. Most people use their credit cards for daily spending and pay off that amount every month. More of what we call an “operating account.” The good news is that this is also the place most of your variable expenses go, so understanding your monthly credit card spend is a great starting point in understanding your lifestyle expenses.
Take our friendly couple, Sarah & Tom, for example. They loved dining out and traveling. But when they started tracking their expenses by looking at their monthly credit card bill, they realized just how much they were spending on these activities. Digging a little deeper, they saw a clear picture of where their money was going. They realized they could cut back on dining out and save a significant amount each month, redirecting that money towards their savings and investments.
Have you ever tallied up your dining out expenses for a month? It can be eye-opening. Believe me, I know, given my passion for food. Understanding your variable expenses can feel tedious, but trust me, the value of this discipline will be seen in the end. It’s not about agonizing over every penny, but rather gaining a comprehensive understanding of your spending habits. This knowledge empowers you to make informed decisions, aligning your daily choices with your long-term financial goals.
Why is this important? Knowing your expenses isn’t just about keeping the lights on; it’s about setting the stage for wealth creation. When you understand where your money goes, you can make conscious decisions to align your spending with your values and goals. If you want to retire early, travel the world, or start a business, knowing your expenses will help you plan how much you need to save and invest to make those dreams a reality.
Remember, this isn’t about restricting yourself; it’s about empowering yourself with knowledge and control. The journey to wealth begins with understanding where you stand today. So, let’s commit to this discipline together and take the next step towards financial freedom.
OK, so you understand your income, and your expenses. When you net the two out, and realize items you can look to reduce, you should have a positive number. This positive number is known as cash flow, the lifeblood of your wealth-building journey.
Imagine it as the steady rhythm of your heart, pumping life into every aspect of your future. Just like if your heart stops pumping blood, it's going to be hard to survive. Similarly, if your finances aren’t pumping cash flow, it will be tough for you to live the life you want.
I can hear you saying, “Great analogy, Big Bo, but what does this really mean for me?”
Positive cash flow is your ultimate goal, both annually and monthly. It means you’re earning more than you’re spending. This surplus is crucial because it allows you to put money aside into savings, invest in opportunities, and ultimately start building wealth. Think of it as the fuel for your financial engine, propelling you forward towards your goals.
Just like our couple Sarah & Tom, by understanding their income and expenses, they made a few adjustments, cutting back on dining out and unnecessary subscriptions, and soon turned their negative cash flow into a positive one. This shift not only reduced financial stress but also gave them the confidence to start saving for their family’s future, and potentially Sarah’s dream of starting her own business.
On the flip side, before this exercise, they had negative cash flow, which caused some stress in their relationship. They realized while they had short-term happiness dining out with friends constantly, the stress it added put longer-term downsides on their family.
You get the point. You see why it takes discipline. To build wealth, you MUST start with a positive cash flow. This is the foundation upon which all your financial goals are built. Without it, your dreams of financial independence, early retirement, or even a comfortable lifestyle remain just that – dreams.
Have you considered what your life could look like with consistent positive cash flow? Now, achieving positive cash flow is a significant milestone, but the journey doesn’t end there. The core issue, and a serious matter many overlook, is how to leverage your positive cash flow to build long-term wealth the right way. This is where an accountability coach can make all the difference.
Think about it: if your car needs repair, you call a mechanic. When it’s tax time, you call your accountant. Similarly, unless managing money is your business, reviewing your situation with a fiduciary wealth advisor is a no-brainer. A wealth advisor can provide an objective perspective, help you avoid common pitfalls, and guide you towards strategies that maximize your financial potential. This is not an expense, but an investment in your future.
So, what are you waiting for? Building wealth is by choice, not chance. It requires proactive steps and informed decisions. You need to take the first step towards securing your financial future. When you think you’re ready to break out and take the all-important step toward building long-term, sustainable wealth for you and your family, let’s chat. Visit juliuswealthadvisors.com, send an email info@juliuswealth.com, or call us at 201-408-4644. This is your opportunity to transform your positive cash flow into a powerful engine for wealth creation.
Thank you for joining me today on "The Big Bo $how." Stay disciplined, stay focused, and let’s build that wealth together by choice, not chance!
Thank you for tuning in to The Big Bo $how!
Disclosure:
The content is developed from sources believed to be providing accurate information. The information in this podcast is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Julius Wealth Advisors, LLC (“JWA”) is a registered investment adviser located in Englewood, NJ. Registration as an investment adviser does not imply a certain level of skill or training. The publication of The Big Bo $how should not be construed by any consumer or prospective client as JWA’s solicitation or attempt to effect transactions in securities, or the rendering of personalized investment advice over the Internet. A copy of JWA’s current written disclosure statement as set forth on Form ADV, discussing JWA’s business operations, services, and fees is available from JWA upon written request. JWA does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. JWA is neither your attorneys nor your accountants and no portion of this podcast should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.