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Simple Steps to Budgeting · Talking FACS

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  Welcome to Talking FACS, what you need to know about family,
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  food, finance, and fitness.
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  This nationally recognized, award-winning podcast is hosted by the University
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  of Kentucky Family and Consumer Sciences Extension Program.
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  Our educators share research knowledge with individuals, families,
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  and communities to improve quality of life.
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  Money touches almost every part of our lives, but budgeting doesn't have to
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  feel stressful or restricted.
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  You're listening to MoneyWi$e on Talking FACS, where budgets meet real life.
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  We're talking simple money strategies, everyday decisions, and practical ways
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  to make your money work harder for you.
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  In this podcast, we're going to break down budgeting into three realistic steps
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  that help you spend with purpose, save with confidence, and feel even more control
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  of your financial future.
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  My guest today is Kelly May, Senior Extension Associate for Family Resource
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  Management. Welcome, Kelly.
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  Thanks, Mindy. I'm so happy to be here today.
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  Budgeting does seem kind of scary to some people, especially if they've never done it before.
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  But really, it's just a plan, and we talk about planning all the time on this podcast. Yes, we do.
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  Budgeting is just a step-by-step plan, and you pick a period of time,
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  and you just look at what comes in and what goes out.
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  So what comes in, that is our income, your gross income and your net income.
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  So what's the difference between those two?
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  Your gross pay is your total income before taxes and other deductions are taken out.
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  I like to think to myself that it's gross that some of that money goes to somebody
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  else because you don't get to keep it all.
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  The net pay is what you actually take home or your take-home pay.
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  And that is the total you have left after all those deductions are taken out.
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  So when you're planning your monthly budget, don't plan with the number they
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  promised you when they hired you because that's not what you actually take home.
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  Plan with that net pay so that you know you have an income source that is accurate
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  to what you're actually receiving and then also count any other income you might have.
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  So sometimes there is occasional income like bonuses.
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  You might have regular income like benefits, child support, alimony, or other payments.
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  So as you build your budget, make sure you count all of the different income
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  you receive in, let's say, a month's time for your household.
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  And in this day and age, we have lots of people who have a side gig or a second job.
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  So those also count as income. Absolutely.
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  Let's talk about expenses now. We're going to really focus on expenses,
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  those we can't change, those that might change over time, and then of course
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  those that are not something that happen every single month.
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  So let's start with our fixed expenses first. What are those things that we need to talk about?
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  So your fixed expenses are the things that are the same amount every month.
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  So you know exactly how much that bill is going to be,
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  whenever it comes in each month. So usually your car payment is a fixed expense,
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  your mortgage or your rent payment, some of the other expenses you have might be fixed, like your.
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  Electric bill, for example, it could be fixed or flexible.
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  If you have one of those plans where it evens it out for the whole year and
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  then there's one month where it catches up,
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  then it will look more like a fixed expense to you because they've estimated
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  over the year how much you normally spend monthly on average.
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  But really, things like your electric without that kind of payment plan are
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  a flexible expense because it depends on how much electric you use.
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  If you run the air conditioner or the heat a lot more one month than another
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  month, then your electric bill is going to be higher if you have electric heat.
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  If you leave all the lights on and leave all your TVs on and plugged in and
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  everything's charging all the time, then that's going to boost that bill up a little more.
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  And so there are things you can do on those flexible expenses to make the payment
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  less if if you're trying to cut back a little bit.
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  Well, and another flexible expense is what we spend on food.
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  And that can really vary greatly. Oh, definitely.
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  Depending on where you choose to eat. Right, absolutely. So.
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  I mean, even just shopping at the grocery, I know everybody picks on your coffee
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  of the week or the day and going to restaurants and all of those things.
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  But even the food you buy for your home meal planning can vary greatly depending
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  on what you're deciding to cook. How fancy does that meal have to be?
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  You know, what do you need to have to get your family's nutrition in?
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  And what are you buying just for fun that everybody likes to eat?
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  There's no wrong answer. You've got to figure out what's right for your family.
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  But those all do play into your budget and all of it counts.
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  The restaurants, the drinks and beverages, the food you buy at home,
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  the snacks at the vending machine, all of those things add up.
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  And I think that snacks at the vending machine is probably the category that
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  people forget to include when they're trying to figure out what exactly they spend on food.
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  Often because that's something you put cash in.
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  And this day and age, we use cards for everything. But if you put cash in something,
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  you have to remember that too.
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  Exactly. So then we have occasional expenses. So what are those? Right.
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  So those creep up on you and they can be a surprise.
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  And some months you could have a bunch of them and some months you could have none.
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  So this could include things like
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  your taxes, your annual car taxes or the taxes that we pay each April.
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  This could be birthday gifts, holidays, vacations.
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  A lot of things come up just every now and then. It's not something that we always have to pay.
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  And then, of course, there are those surprise occasional expenses,
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  too, like a flat tire or a car repair or something breaking on your house if
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  you're a homeowner or medical bill.
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  These are all things that aren't in your regular, I have to do this every month.
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  And yet, when it comes up, you most likely either have to or want to get that bill paid.
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  So, we have to count those things too if we're going to have an accurate budget.
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  Say in my family, we have a birthday season because all of the birthdays,
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  whether it's mine and my husband's or our kids', our granddaughter's,
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  or even my parents', they all fall within a period of three months.
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  So that's the birthday season.
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  And then we can think about other gifts afterwards. And so I have to plan for that.
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  Yeah. And well, some people have the birthday season during the holiday season.
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  Exactly. And then it's extra.
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  Exactly. So one of the ways that we know best to balance our budget is to look
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  at what comes in each month and then look at what goes out each month and figure
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  out how those can line up.
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  But how do we determine what to do with extra if we find that either we have
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  more income or we have more expenses?
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  So that is the trick, isn't it? One of my favorite things to say is that budging
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  requires honesty, first of all.
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  Exactly. And then I call that big total at the end, the moment of truth.
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  So you take your income, you subtract your expenses, and you're either going
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  to have a positive or a negative number.
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  It's hardly ever zero.
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  You are a spectacular budgeter if it has come out to zero and hopefully you've
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  counted everything if that's the case. Because if there's one thing you've missed,
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  then all of a sudden you're in the negative.
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  So if there's a positive extra, that's fabulous. That is your opportunity to save money.
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  So you can build an emergency fund, you can contribute to long-term savings
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  like your retirement, you can use that to pay off debt.
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  So if you have bills like credit cards that are part of your regular expenses,
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  or even your mortgage, or your car payment, or whatever it is that you owe money on,
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  you can use your extra at the end of each month to pay down those debts so that
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  you can build up more money over the next month. time having to pay less on those.
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  You can also save it for something fun like,
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  you know, vacation or to keep as a down payment on your next car so that maybe
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  you don't have to get as big of a loan next time.
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  Or college expenses if you have family members who need to think about that in the future.
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  On the other hand, if your number comes out negative.
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  Hopefully, it's not something that happens every month. If it's happening every
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  month, then we need to reevaluate and try to either increase the income or decrease
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  the expenses so that's not repeatedly happening.
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  But if you do end up with a negative budget for that month, that is kind of how debt is created.
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  So something is being owed somewhere. There's not enough money.
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  So something is being left out.
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  And so in that case, you need to look at those flexible expenses in particular
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  and see if there's a way to trim spending.
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  You might have to prioritize something to make sure that your family has what
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  they absolutely have to have.
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  And if there are some extras that are fun that maybe you can live without for
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  a month or two, then that may help your balance come back into line.
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  And you mentioned if this is happening every month. That is really important
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  to note that once you do the budget, it's not forever.
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  You have to re-evaluate it and look and see where you can make changes or where
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  you might have a little extra flexibility.
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  That's very true. And I know we've had articles in our Money Wise newsletter
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  before about something called lifestyle creep.
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  So even when you get a raise and you get really comfortable with that,
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  it doesn't feel like extra money anymore.
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  It blends into all the things you normally spend.
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  And kind of the fun things in life get a little bigger to match.
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  And all of a sudden, you don't have extra money because the things that you're
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  buying have grown to match that extra you got as your raise or whatever it was.
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  You have to think about the fact that there are some costs that are increasing,
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  and we talked about this a couple of months ago, and we don't have any control
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  over that. That's inflation.
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  And so if those are costs that you are finding are really putting a strain on
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  your budget, then maybe it is time to talk about that thing we mentioned at
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  the beginning, a side gig or another way to get some additional income.
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  Sure. That's a great point. Kelly, I love that we're talking about balancing
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  the budget because that's happening all over.
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  We're seeing it in government. We're seeing it in industry. that it's something
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  that we need to also do in our own homes every month or at least every quarter, right?
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  Right, yeah. Re-evaluate at least once a year, a couple times a year.
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  The more often you do it, the more you know what's going on.
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  And truly, that money is going to be spent whether you write it down or not, isn't it?
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  So those bills are still coming in whether you face the facts or not.
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  So sometimes you get a boost to your mood when you recognize that you're really
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  doing a good job in staying within your budget.
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  And so it doesn't have to be something we're afraid of.
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  Exactly. It can be comforting to know that, hey, everything's going to be all
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  right. We can afford this. Yeah.
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  And if you are finding yourself in a situation where there isn't enough money to meet all of the bills,
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  reach out to your local extension office because they have a wealth of resources
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  to help you manage your budget. We're happy to help.
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  Kelly, thanks so much for your time today. If you are just tuning in,
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  you're listening to MoneyWi$e on Talking FACS, and we're available the first
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  Extension at the University of Kentucky
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