Better Grab Your Calculator For This Math!

All right, welcome back to We're Talking Money. I'm Phil Clark, everyone knows me from the show, but we've got something really special tonight. We're starting a new series.

Yes, today is a little bit of a change of speed for the channel. We have two special guests with us. Thank you to my fiance Frankie for being a part of the show, and her roommate Haley.

I'm Haley, and I am a dietitian. I'm in my first year of my career.

I'm Frankie. I'm also in my first year of my big girl job. I'm a behavior analyst, so learning how to budget is a new thing for us. We have been spending a little too much money doing girl math.

We're talking about girl math, and you may or may not be familiar with that term. I wasn't. Girl math, girl math, girl math, girl math. We're going to talk through it. We're going to hear from some experts because they seem to be maybe dealing with it a little bit. We're going to try to debunk it, and we're going to say that spending is not just girl math, it's everybody's math.

Frankie and Haley, for those who are not as social media inclined, can you help our viewers with what exactly is girl math?

Girl math is a way girls think about spending money that logically to us makes us feel like we're saving money.

Yeah, exactly. It's definitely real, because me and Haley do it every day. It's probably not the smartest thing, but an example would be when you pay for things with cash, it feels like you're not really spending money, cuz it's not coming out of your bank account, so you don't see the total in your bank account go down. Or if you return something, it's free money to shop, because it doesn't feel like you're spending more money.

And that is that if I am buying something but I'm a couple dollars off from free shipping, I might as well go ahead and buy something else to get the free shipping. For example, the other day I bought something for $40. It was $50 to get free shipping, so I bought something else I needed to get the $55 spending to get that free shipping, and that made it seem like a discount on the second thing I was buying.

Girl M, yes. This keeps laying in capitalism. Okay, okay.

Another one would be getting stuff from a thrift store kind of feels free, cuz it's at such a discounted price. Or if you find three to five items at a thrift store at $3 each, then it would be the same thing as going to another store and buying one more expensive item, because I still spent the same total, but I felt better about myself because I got more bang for my buck at the thrift store.

Okay, yeah. All right, all right. Haley, you mentioned something about spending a little bit more to get free shipping. If what you're spending in addition to the first item that you got put you at the threshold of, okay, well now I'm going to get free shipping, well, it depends on how much your shipping is. If your shipping for that item is, say, $50, and you only had to spend 15 more to get the free shipping, then you're exactly right. You did get a discount, you saved yourself some money. But on some of the other things, I think maybe we can help to debunk your thinking.

And so, Phil, correct me if I'm wrong, but a lot of girl math, I think, is budget-based thinking, or lack thereof.

There's two things at play here. One, it absolutely is based on budget and/or the lack thereof, and so without a budget, I think you can run afoul. The other thing is goals, right? And if you don't have goals, then it's hard to know where you might be headed. So do you two have any specific questions for the two of us?

Well, the first one is how much extra money should we be saving? Like, what is a good amount from each paycheck to save for someone our age? And we're 25.

The general rule of thumb is for us to say between 15 and 20%, and then based on what your budget tells you, you have leftover dollars, and those dollars can go towards your coffee or your TJ Maxx trip or a trip to the nail salon.

Or a trip to the nail salon. It is, it's a must. A must.

Now, where you're saving can influence how many dollars you have left over, and so how you're saving is important. So Haley, the other day we had a conversation about, you don't have the ability to save into your 401k yet through your employer, because you haven't been with them for a year. So Frankie, you do have the ability to save into your 401k, so you're contributing, I think, 6%, company matches 2%. There you go. You would include your employer savings on your behalf in your savings rate, so you're at 8%. And then if you're saving money in other accounts, maybe to your savings or maybe to an investment account, then you would try to obtain that 15 to 20% mark from each of your paychecks. So if you get paid $1,000, really $150 to $200 should go away, either in retirement savings, or ideally retirement savings.

Is it bad for it just to go in my normal bank account savings?

No, I don't think it's bad, and I think if you really get to the core of planning, the first thing that you're trying to do is accumulate an emergency fund.

That's right.

And so that's savings 101. So you want, say, $1,000 in a savings account, and then after that it's retirement savings. So you want to think about savings not so much as a budget that's a restrictor from spending, but a budget so that you understand how much you can spend. So it really takes off the restrictor plate if you're budgeting, setting goals.

And if I can get both of you ladies to think about silos. And so if we have these silos that are all titled a certain thing based on your goals, and each of you will be different, if we can fill those silos each week or every month, however often you get paid, then anything that doesn't go in a silo is burn money. You can do anything you want with it, but you got to fill the silos first. Otherwise it doesn't matter how much you think you save.

So one way I think about getting EXT spending extra money is if I do extra project or earn extra money in any other way that's not from my salary, which pays my living and my savings, that to me is my fund money. I have extra money to go shopping. Is that a bad philosophy?

I think it goes back to goals-based planning, and so what are the goals? And if we know what the goals are, then we can easily answer that. But if you do it blindly, it may be okay to spend it, but if we don't have goals and if we don't really know where you're trying to go, Haley, then we can't really say that it's a good or bad thing, right? It's all relative to the goals. Goals-based planning is how you make success part of your life.

Sounds like we both need to set our goals first.

We're going to at least talk through some goal setting. That will be important, and it's going to give both of you confidence when you have the goal. Really, the goals that you have drive your budget, and without them you're left in the dark. You have blind spots.

Well, just think about it this way, Spell. You came from a sports world, so to speak. You were a big soccer player. That was a huge part of your life. Now think about it: if you were planning to win those games, that goal reinforced the need to practice, and to practice hard, so that you and your teammates could go on that field and, with reasonable certainty, you could win that game.

Sure.

If your goal, on the other hand, was let's lose the game, then that would give you the flexibility and freedom to say, well, I don't have to do anything, I can lose without practicing at all.

That's right.

If the goal is to win, then it changes behavior. If the goal's to lose, that changes behavior.

Say you're trying to, for your goals, you have your goals, but you have been doing habits like we explained with girl math for a long time. So practically, it's kind of hard to, I guess, get in that mindset of doing the right behaviors to save. So do you guys have any actionable tips?

I'm going to respond to that with a question. Okay. Do either of you have a budget?

No.

A loose one. Yeah, loosely, but not to start it. That's my issue, is that I'm in between paychecks. I'm like, so do I just wait till my next paycheck to start this budget? But my next paycheck's not the first of the month paycheck. So is it more ideal to start at the first of the month? That be easier to read the budget.

I think you start today. There's no set time where, okay, if I make a budget today it's going to make more sense than it would tomorrow. There's lots of budgeting software, and a lot of them are free. You can link your bank account or your checking account to that software, and it will track what you're spending, and it'll categorize those things. And so then you have data to go at your budget and say, okay, I've spent 30% of my monthly budget on food, or 50% of my monthly budget on iced coffee.

Iced coffee.

Okay, so let's pull this back onto the center line. What are the tips that we could give you? And I'm going to tell you the same way I would tell someone when I started my career: it's baby steps. You take a little step at the time. You don't want to rip the Band-Aid off and act like, oh, I'm just going to do this. That's like dieting and just all of a sudden changing your habits, only to fail. Or it's like a resolution, which we know that 60 70% of resolutions fail by the time March rolls around, right? Don't start that. Let's take baby steps so that you can get into new habits. Otherwise, I think you'll overwhelm yourself and you will revert to those old habits.

Figure out the goal, build the budget. Start a budget whenever, don't have to wait till a payday. You can build a budget tonight.

Yep.

And then know that next month you're going to start it, or next week you're going to start it. Give yourself an allowance, and before you know it, you will appreciate this new way of living. And the reason you'll appreciate it is you will see money beginning to grow, and the more that you have, believe it or not, the more that you want, and as that occurs, it will reinforce the habit.

So we took a chocolate Frappuccino, $5.75 at Starbucks these days, so with tax you're over six bucks, and that's a lot of money for a drink. Now, is it satisfying? Of course. I like Starbucks, I enjoy their coffees, although I just get black coffee, and that's three bucks or almost four. But it's $6 or more. If you took that $6 and saved it and invested it over the first 20 years, stop at age 45, don't put another penny into your savings, by the time you're 65, that account would be worth, guess how many times a week are we getting this coffee?

Five times a week.

Every day.

$1,500 a year.

Rough.

That's 20 years. Do that for 20 years.

So like $25,000.

All right. And then we just let it cook. At 45 years old, we'll stop putting money in that account and we'll just let it now grow until you're 65, and so that's retirement age for most people. What's it worth? Spell, you did the math for us. Tell them what it's worth.

$330,000.

$330,000. That's enough for some people today to buy a house.

It is.

That's rough.

But it's hundreds of thousands of dollars, and that's only assuming an 8% rate of interest, Spell.

True.

What if we did something above that 8%? What if we did 10? We're talking about a half million dollars at 10. What's the point? The point is girl math isn't a bad thing, and frankly, I don't think this is limited to girls. I see a lot of guys doing the same thing, for sure. But what I do believe is that we forget about what we're doing, because in the moment, with all the distractions where we live today, we just do things because it feels good, but we don't think about what it will feel like down the road. And that's where goals-based planning gets so important.

That's a huge expense, those Frappuccinos. So one time a week, is that acceptable?

One time a week is maybe acceptable if it's in the budget.

That's right. Build it in the budget.

Put it in your budget. $100 for coffee in budget.

Here's what we're going to do as we continue our series. We're going to bring Haley and Frankie back to the studio, and we'll do this several times so that we can begin to show what does it look like to take baby steps, set goals, build a budget that you can follow, and do it in such a way that it's not overwhelming. And by the time we're through, everyone out there is going to better understand some of these kinds of things that they're dealing with, and I bet you are too. We're going to show you how to fix it. You're going to be better as a result, and I'm sure you're going to be wealthier in the end.

So that'll do it for this first episode, and I hope it's inspired you to take a look at your budget and your goal setting. In the meantime, make sure you subscribe to the channel, ring that bell if you like this kind of information

That way you'll never miss one of our great episodes. Hey, we'll see you next time on We're Talking Money. Girl math