AAR18 - Having a Budgeting Breakthrough with Kathy Tomes

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2:16Hello everyone and welcome back to At Any Rate. My name is Evan Ray, and we are here to help you make sustainable financial changes without breaking a sweat. And today we actually have an exciting new guest that I know is exactly the perfect kind of guest to resonate with this audience. Her name is Kathy Tomes. She is the creator and host of The Budgeting Breakthrough. Good morning, Kathy. How are you doing? Good morning, Evan. I'm good. How are you? I'm doing very well, especially now that we've gotten through those technical difficulties that we had prior to this. Yeah, we passed with flying colors.

2:44100%. It feels like we've already put in plenty of work for this morning, so I think we're all set. Yes. Yeah. It's going to be easy, smooth sailing from now. There we go. Positive manifesting. Okay. So the first question I love to ask guests, I think it dives into a lot of interesting concepts, is when would you say was your financial awakening when you just came around and quote unquote woke up one day and said, oh crap, finance is something I personally need to pay attention to. Let me start learning about this. Well, I have answered this question in my head a number of times listening to the podcast, And I think, oh my gosh, what?

3:19That's cheating. How would I answer that? And sadly, I don't have, everyone always has like one little short answer. And I'm not a short answer person. So I'm going to make, people say to make a long story short. I make a long story longer. I'm here for it. So I think when my husband and I first wanted to buy a house. No, before that. I think it was my first job. So right out of college, I worked in the corporate world, but pretty small businesses. And I remember the corporate investment person coming in, wanting us to invest in the 401k that they offered. And I had a pension there. So they're just giving new employees the spiel.

4:08And that's where I first learned about compounding interest. and I remember him drawing it on a whiteboard behind him. And so I had gone through four years of high school. I was a pretty good student. I'd gone through four years of college. I was a pretty good student. I had never learned about this. So luckily I was right out of college. So that was luck that I did learn it then because a lot of people learn it a whole lot later. And he gave the examples of if you put in a dollar a week, here's what that can do over the course of your career. $10 a week,$100. And I don't remember all of the numbers that he used.

4:49But that was where I saw the charts and graphs of what investing consistently over a long period of time can do. So that was my first awakening. And then the second awakening was when we wanted to buy our first house. And we were paying rent. And so we could pay a monthly sum of money for our housing. We could do that. But the down payment was blowing our minds. Yeah, yeah. So that's actually when Budget Breakthrough was born. It didn't have that name at the time, but we just started budgeting. And like a lot of people, I just started like pen and paper, just and drawing up all the buckets. And here's how we're going to save or try to save for this house.

5:40And just every month we blew it. And then we're like, what do we do now? Like we, we don't have the money we thought we were going to have. And we're going into the next month, almost in the hole. So that was an awakening. Like we needed a better way. And then a couple of times after that, like wanting to start a business, like where's that money going to come from? Like we need a plan. And then I've been through a couple of bear markets and a couple of bull markets, and that's a big awakening too. And oh, reading about this, like I said, I can make a long story even longer, but you're good of awakenings, but those would be the high points.

6:22Okay. Okay. Yeah, no, that's incredibly interesting. And if you don't mind my asking when you initially learned about the compounding, what did that immediately lead you to do differently if that makes sense what kind of decisions did you make because of that it was instantly okay i'm in this for the long haul i'm gonna be steady it's like the tortoise and the hare okay i'm gonna be the tortoise i'm gonna stay on this path i'm gonna keep investing i'm gonna be sure that money peels off first thing i don't want it in my checking account i knew i couldn't be trusted yeah Okay, that's beautiful. Are you a fan of automation?

7:01Do you automate where your money goes and everything? Yes, I'm a big fan of automation. I just think, I don't want to say, I think most people need that. I don't want to say that, but I will say it. I think most people need that. Human nature, human nature. We're so impulsive and especially living in a world with so much media, it's so easy to get pulled in even when we think we're not getting pulled in and yeah that's just not a good way to manage money yeah 100 % not yeah even me myself I'm a very passive investor I just want to be in the market consistently you know dollar cost average constantly that's my whole end goal but even still if I see horrible news about the stock market on tv if I was doing that manually every week it would be much harder for me to hit that buy button it would be a mess it It would be a mess.

7:53Yeah. And that would just make me so inconsistent. So what would you say are some of the financial beliefs that drive you to try and help people and to make the budgeting breakthrough and everything? Yeah. So at my core, and you guys talk about this, I think it might even be at the header for the podcast about financial freedom. I think freedom is what we all want. want. Really, at the end of the day, when we look at our habits and the things we choose, like freedom for ourselves, freedom for our families, wanting to do certain things with our families, wanting to provide in a certain way, managing my finances is, for me, one of those paths to that freedom and managing it.

8:44I think you have to have a plan. You have to have a plan. You have to, it's kind of like going on a trip. If you're going on a big trip and spending a lot of money and spending a lot of time, you need a plan. Like what's your itinerary? What cities do you want to go to? What's your route? Are we flying? Are we driving? So I think, I really believe that planning makes all the difference. And again, it helps us not fall into those emotional traps that are out there. It's like a minefield of emotional traps. And so to try to stay out of those, I really think everyone needs a good plan. Everyone's plan is different.

9:21We all have different priorities, but decide what yours is, decide what your priorities are, and how your money can help you get there, not the other way around. And I think money is so emotionally charged for people. I think money, diet, and exercise, I feel like those are the big three triggers for most people. So if you've got a plan, I think that means less triggering. And then being able to manage your emotions around it. I really believe that those are key components. Yeah, no, that's absolutely beautiful. And you mentioned a minute ago how, and I really love how you phrased it, that your money should be giving you freedom and leading you towards your beliefs, not the other way around.

10:07What are some of those, on the podcast, we tend to call them your whys. What are some of those whys for you that makes the money mean more to you than just more comes in your bank account? I know you mentioned time with family and everything. What are some of the wise for you? And also how did you arrive at those wise to realize what mattered to you? Yeah. For me, it's, again, it goes back to priorities. And I think this is an exercise, I've worked with some coaches over the years. I hate using the term life coach, but I just like to say coach. I don't know why, but I've worked with a few life coaches and I think that's really beneficial to prioritize what your priorities are.

10:46And then that drives how you spend your money, how you spend your time, that creates all the whys. For me, it's about being able to explore different things that I want to explore. Going back to some of my financial awakenings, I feel like my whys have developed along those realizations, along those awakenings. Hey, rent, this stinks. I would rather be putting that money into my own piece of property. It's like a savings account then. Why am I planning my money? Why am I creating a budget? Because I don't want to keep putting money into rent. And then I shortly after that decided to leave the corporate setting and work on my own, realized I was a bit of an outdoor cat.

11:30They're showing me where the litter box is. No, thanks. I'm going outside. That was kind of an awakening also and realizing, hey, I need to manage my money so that I'm not the golden handcuff. I want to be able to take the golden handcuff off when I want to and follow my own work, my own path. So managing money allowed me to do that. I started a freelance business. And then I'm thinking like after that, another why, like we had kids shortly after that, and I wanted to work less. So that meant managing my money in a certain way so that I could do that. So I think whatever your priorities are, being able to match up, let your money work for you so that you can live out those priorities.

12:22Okay. Okay. That's beautiful. And when you make those changes, especially when you're talking about something like managing your finances differently to be able to care for kids, spend more time with kids and such, how do you go about making sure that changes you're trying to make are going to be sustainable and they're going to be something that you're going to be able to carry on for decades and decades in the future. Yeah. It's funny you say decades and decades. I'm more of a short-term planner, except for investing. I'm a long-term investor. But as far as things just change in life, we get better jobs, we get better clients, we lose a client, or we lose a job, or inflation happens, or we've got a bull market, we've got a bear market.

13:03So I think that as far as investing goes, again, I'm a tortoise, slow and steady. But as far as like planning, I think it's healthier for me, I can't speak for everyone, but to look in shorter increments. And that's, well, like budget breakthrough. I sell one year's sheet at a time and I always have three up there. So I guess I like a three-year model so I can plug my numbers in and plan what I think is going to happen. and then put placeholders in there for the unexpected. That's why we have emergency savings. Then let some of those worries slide off a little bit because I've done all the planning that I can.

13:45And then I think with time too, one of the benefits of age, you realize that crazy stuff happens and you can't predict it all. But if you plan in a way that you're comfortable with, you learn, oh, that was really uncomfortable. but I did make it through that. I didn't love my lifestyle during that time, but I did make it through. And then you kind of build some confidence. Okay. Yeah. That's really interesting. Some of the stress roll off, which is the goal, right? We just want to be as stress-free as possible. What if you could get a 25 % match on every dividend you earn? Well, now you can. When you earn dividends on the Plink app, you'll receive a 25 % cash boost up to$250 bonus per year.

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16:42Yep, get that freedom and stress-free life. So do you want to give a quick breakdown for everybody of what the budget breakthrough actually is? So it's a system that I'm going to rewind. Again, I'm going to make a long story a little bit longer. So rewind to when we were saving for our first house. And we were making our rent. That wasn't a problem. And so we found a realtor and went out to look at houses. And I think we looked at nine houses that afternoon. And he had been in all of them except one that had just gone on the market when he got to work that morning. Didn't even have a sign in the yard yet.

17:21And that was the first one closest to where we were meeting. So we pop into this house. I fell in love. It was adorable. Again, emotions popping in here. It was a great little house. It had a tiny yard, which was great for us because we had not done any sort of lawn care. So starting small, we thought was good for us. And we were still wanting to travel a lot, spend a lot of time with friends. It seems like a great fit. and we walked inside and this place was fantastic. It had been really well maintained. It only had a couple of owners. It was almost 100 years old, beautiful little bungalow. And the realtor, as soon as we walked in the door said, oh no, I should not have brought you here first because everything else is gonna look like a dump.

18:08So it was underpriced. It was on a busy street, which again, not a big deal for us. We didn't mind. It was quiet inside and the little yard was fine, all fenced in. We left that afternoon. I'm a really good sleeper at night. My head hits the pillow and it's five minutes and I'm gone or less. And that night I lost sleep because we were like, this is the house we want. How on earth are we going to get a down payment together? Honestly, I think we had zero dollars saved for a house. So I remember sitting down at my desk and there was a wall calendar. And like I had like my pen and paper failed budgeting attempts or staring at me, shaming me.

18:56And I look up on the wall and I had one of those calendars like with a picture up at the top and then down below like a square for every day of the month. And then you turn the page. And I remember thinking, I wish I had a way to mark how much money I have beginning the day and all my expenses for the day, bills, coffee, meals, whatever. And then what I end the day with. And then I want that number to carry up to the next day and then do the same thing. I want that math to all be done automatically for me. And I thought, wow, I really wish that existed. Huh? Is that something I could make? That would be nice.

19:37So this is going to show my age a little bit. I sat down at my gateway computer that I had just bought recently that showed up at your door in eight enormous boxes. It was like a freight shipment and you unpacked it and there was like this giant piece of paper. I think some of your listeners will resonate with this. There was a giant piece of paper that mapped out how you put it together and how you hook it up. So funny to look back. So I sat down on my gateway computer and launched Microsoft Excel. And I started building this little thing. And then so we plugged in. We knew what our expenses were.

20:17And we knew what we wanted to save to be able to buy this little bungalow that we loved so much. And so I mapped it out. Nope, that won't work. We're in the red June 1st or whatever the date was that we needed that money. so let's go back, let's rework some of these numbers. But what I loved was I put the formulas in so that it was doing the math for me and I could just tweak a little here and there. I could tweak all of our expenses a little bit and see the results on June 1st, which is when we needed this money. That was how it was born and I thought it was just to save money for our first house.

20:55Well, then you get the house and, oh, well, we want to do some renovations. How are we going to save for those? And then, oh, hey, we really want to go to Europe. We've never been to Europe before. Let's save for that. And then it was me wanting to start a business. And how do I take off the golden handcuff and manage how much money I think I could make doing freelance work? And then we had kids and wanting to take maternity leave. So I was in freelance, no paid maternity leave. So I needed to plan for that. And then more home renovations, a different house. And that most recently, we have moved back to where I'm from originally, I grew up on a farm.

21:36And we decided to move back here and start practicing some regenerative agriculture. So how are you going to pay for that? So again, it's all about just plugging in numbers, and then tweaking your lifestyle to match what your goal is. And that's what I love about a spreadsheet and an automated spreadsheet where you can just tweak what you're doing. And then it shows you in black and white and red sometimes, whether it's going to work or not. Yeah, that sounds really amazing and incredibly useful for a lot of people. So is that something that you would recommend people to set up and just use over and over again, essentially for a ton of goals that come up?

22:17That's interesting. So I've been selling it. And I, it was funny, I shared it with some friends and family members over the years that were at similar situations, wanting to save for something or in some sort of financial hardship. And it was very helpful to them also. And they kept saying, you should really sell this, you should really sell this. So finally, I decided to do that. Joke's on them, now they have to pay for it. But it's proving to be helpful for other folks too. And what's interesting is I've got people all along the gamut. And that's how I found you guys. I had a neighbor that started using it because she was wanting to invest more in the market, but she needed to peel away, figure out how to peel away the money that she wanted to invest.

23:03She started the spreadsheet to lay out her finances, lay out her budget and see where she could peel those little pieces away to make for some meaningful investments. And again, slow and steady, that builds over time. But she's able to see that in black and white, sometimes red, if what she's doing is working and if she's able to meet that goal. And then I've got some young adults in their early 20s, right out of college, or I have a client that left college and left early and just wanted to work. It was during the pandemic and it was a very different experience being in college during the pandemic.

23:47And she just wanted to work, but was trying to figure out how much money she would need to make to be able to pay those bills. And then opposite end, I've got a client that just retired from being a school superintendent. He had been managing his finances successfully for decades. But that lifestyle shift, they were wanting to do a lot of travel. And it was different. So he was able to set up what his new lifestyle might look like and to map out how to reach those retirement goals of things they wanted to do in retirement. So some people, I'm the person who, let's see, I think it was, I think it was 27 years ago.

24:30So I've been using this spreadsheet for 27 years. And I just add, it's not one long spreadsheet, I do peel off a year at a time. But I just keep plugging in another year at the bottom so that I can plan forward. Some people will just sit down and map it out and then know those numbers. Okay, I can spend this each week, you know, this each month, this on vacation a couple of times a year. And then they put it away until something else comes up that they want to try to do. I don't like that. It gives me peace of mind being able to look at that. You guys talked about financial rituals. I forget the term that you use.

25:13Yeah, weekly check-ins or financial check-ins. Yes, a check-in. And I think somebody said they did it monthly. Oh, no way. I would be so nervous. I'm a weekly person, but I really do think there's something magical about, I think it does something energetically when you sit down. Again, not with stress on your shoulders, not sitting down and sweating at the keyboard, but this is my ritual and I have goals and I have a plan and I'm going to check in on it. And yeah, so I'm a big, I like the weekly approach. I'm not a set it and forget it person, but that does work for some people. And then another way, I don't know anyone who's actually doing this, but I want to find someone to do it.

25:56A lot of folks in the manifesting world talk about how you need to see it like a vision board. I think it would be fun. I'm going to try it myself. Sit down and make a vision budget of all the things that maybe I'm not doing now, but I want to. plug those in and then reverse engineer it to see how to get there. And then I think people just say, practice feeling the feeling of what it's like when you get there. So play around with fictitious numbers and see what that feels like. You might find out that, oh, that's just, there's not E, there's not any more ease there than what I can capture with my own actual numbers.

26:45Maybe there is. Now, if you're particularly if you're in a some sort of financial hardship situation right now, that would be a great exercise. Work with some fictitious numbers and feel that. How does that feel to take that weight off and then try to capture that and bring it back to your own financial work that you're doing and just practice feeling easy about it. That goes a long way. I think that's powerful. Yeah, that's actually, that's a really fascinating concept to me. I really like that idea because if you're trying to do anything or get better at anything, if you never imagined that you can get better at it or you can reach that situation, then I mean, chances are you're just never going to reach it.