Financial coach Jack Wang explains how to start budgeting by tracking where your money actually goes. Review 2-3 months of bank statements to find high-impact categories like dining out and coffee, then do one to two weeks of intensive tracking to build a realistic baseline. Small cuts in these areas often free up hundreds for debt repayment.
budget, right? So what you're really talking about in the beginning is really tracking, right? Like you say, you gotta know sort of where it goes so that you can then make a plan. So I know before we came on, um, I know you have a spreadsheet that you use with your clients, but what are some good ways sort of in general that people can even begin that tracking process? Is it a spreadsheet, or is it an app, or is it pen and paper? Well, you know, what do you find? I think it tends to be effective.
Yeah, it depends on your learning style or what you like. If you're a pen and paper person, get out a legal pad and write it down. I would say even if you looked at 2 or 3 months worth of back statements of all your checking or credit cards, wherever your money goes through, and get some high-level numbers. Like, I know when we first started deciding we wanted to eliminate debt, when I saw how much we were spending and eating out every month, it just about choked me. And I would look to my husband and say, do you remember any place we ate out last month? Because, you know, we spent $600 or something in dining and there was no fancy restaurants. It was, you know, picking up and coffees and chicken and lunch and pizza and whatever. It was not fancy. It just was frequent, you know, and so Getting a number around that or clothing or travel or gas, gas in your car, you just usually fill up 'cause you just need gas, right? And that may not be someplace you can change, but you should at least know where that factors in so that as you're putting in your priorities, you can say, well, yeah, I gotta get to work, so I need this much for just gas. That means maybe I have to adjust something else, whether it's, dining or clothes or trips, or, you know, there's lots of disposable areas in our budget that you can make some choices. There are some things you don't have a lot of choice on. Your utility bill is what it is. You can save a little money by turning down the thermostat or, you know, wearing extra clothes in the winter, or, you know, there are some little hacks here and there. You can reduce some expenses around let's say cable or whatever. But if you don't, if you don't have any clue where you started from, you don't really know what to shave and what you're allowed to shave. So I do a budget in like an Excel spreadsheet, basically, I do it up on Google Drive so that I can see it with my clients live. But some people like the apps, I have not had a ton of success with the apps personally. Because so many of the apps are doing more of the tracking, they're not planning. You know, you can link things like Mint with your bank and you can see where you spent it. A lot of banks actually, I believe, will show you what percentage of the pie you've spent on different categories. But if you're not setting the plan intentionally up front, it doesn't really matter. You're just seeing what you did. Now, and it's kind of like driving, looking through the rearview mirror. If you're not going to look out the window and say, where am I going to go? Doesn't really matter what you did. So I wouldn't spend a ton of time tracking. But you know, sometimes even 2 weeks, if you don't even want to look back at old stuff, write it down for 2 weeks, everything you spent, or a month. And then at least then you start budgeting and you go, okay, that's a ridiculous number, we're not going to do that anymore. But I'm also— so even though you said I, you know, I graduated from the Dave Ramsey training program, I like to think of myself as a little kinder, gentler than Dave. And I work with people, you know, one-on-one. I don't do everything Dave does. I don't I don't shove that down people's throats. So if they, you know, people are kind of hot and cold about Dave Ramsey, which he's got some really great stuff that's helped a lot of really, you know, awesome people get out of debt. But you don't have to do it Dave's way. You have to find your way, right? And that's where I think it's not Penny's way either. It has to be what's going to work for you and your family. It wasn't realistic for me and my family to never eat out. I was working 50, 60 hours a week in a really high stress job. And so was my husband. We were going to pick up pizza and chicken once in a while. But did we have to do it as often? Did we have to buy a drink every time? Did we, you know, could we use a coupon? There started to become ways where you can go, oh, there's more than one way to sort of fill the need and still hit your goal, right? Because our goal was, this is ridiculous. We're spending a ton of money that's, you know, in interest. You just might as well light a light a bill on fire when you're giving it to the creditors. And I wanted that money so that I could do something. I felt like I could be more responsible with the money than just giving it to creditors.
So that's a great point. So let me ask you a question before we move on to the sort of the managing debt part of things. As you work with clients, what are, what are probably the most common areas of expenses that people are really surprised once they go through this process, right? I would have to imagine that once they start tracking and as they start to formulate a plan, like you said about the eating out, they have that aha moment, if you will, like, oh my goodness, we spent how much on this? So what are some of the common areas where that tends to sort of pop for people?
Dining, for sure. That's different from your groceries. But how much are you eating in restaurants? Because it's typically more expensive if you eat any kind of quality food versus fast food, you know, dollar menus. You're going to spend more on eating out than you would cooking. So eating out, groceries— most people, I think, way underestimate what it takes to feed their family. And when we start budgeting, they say, oh yeah, I don't— you know, $200 is good. I'm like, Really? Do you really think you're going to feed your family of 5 on $200? You know, how long is that gonna— so food in general, I think, and because food keeps going up and it gets— you lose sight of what have you really been spending on just surviving. Entertainment stuff like subscriptions. There's a lot of— now we're buying Netflix and Hulu and Spotify and every kind of thing you can think of that has a monthly ongoing expense. Those are ones people forget about and just think, oh, it's only, it's only $8, it's only $10. Well, that's $120 a year, right? So when we start adding those up times 5 or 6 or 10 subscriptions or things you've forgotten that you even had, because again, they're not looking, nobody's balancing checkbooks anymore, they're not even looking at what's going through. It just money comes in, money goes out, and they, they never look at it.
