“You are in quite a variable career, and you don’t know what is going to happen and so having that insurance in place, having a savings is what will give you that longer runway to make it work” – Sam, on the main reason to budget

For the first time ever I have started keeping a budget. In this episode, I try and convince a sceptical Emma that budgets are great.

Recommended Listening:

  • Episode 46: The More You Earn, The Harder It Is To Start A Business
  • Episode 32: Financial Independence & Early Retirement

Resources Mentioned In This Episode Of The Lazy Entrepreneur Podcast:

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Structure

02:00 – Prestige of brokeness in digital nomadism
03:11 – Asking your parents for money when you’re 35
04:48 – Hedonistic adaption
06:42 – How our price expectations change over time
07:57 – Reason 1 to budget: to not have to work a 9 to 5 again
09:17 – It’s easier to save more than to earn more
11:05 – Reason 2 to budget: You have more fun
13:55 – Emma’s first experience in Thailand
14:37 – Reason 3 to budget: Closer to culture
16:38 – Reason 4 to budget: It’s like keeping a diary
17:08 – Reason 5 to budget: Knowing you can control your expenses is empowering

Transcript

SAM: Hello and welcome back to another episode of The Lazy Entrepreneur, we’re your hosts Sam and Emma Priestley.

EMMA: Hello.

SAM: And today we’ve got a very exciting episode that Emma has been buzzing about. We’re going to talk about budgeting and it’s because for the first time ever I have started to budget. Emma is not particularly happy about this.

EMMA: Nope.

SAM: But it’s kind of been motivated by two things, one of which is that we’re in Bali at the moment and we’re meeting a lot of people who are doing the whole digital Nomad thing, they’re starting businesses, they’re traveling a lot and most of them, maybe not most of them, but a lot of them seem to have absolutely no savings at all.

EMMA: Yes.

SAM: Which is bonkers because they are in really fragile careers, they’re starting and stopping loads of different businesses, they’re hustling as they’d call it, and they’ve got no guaranteed income each month. I can kind of understand if you work a full-time job and you get lulled into this false sense of security that you’re going to receive a paycheck every month and so therefore it’s okay to spend all your money, but it’s absolutely ludicrous that people living this kind of fragile life without saving anything, they’re just spending everything.

EMMA: Yep it’s very hard to save.

SAM: And yeah I mean it’s it’s hard to save, so I thought it’d be an interesting topic to talk about because of that and I think if one of those things where in this sort of digital nomads group, people I think are a bit more open about talking about their struggles.

EMMA: Yes.

SAM: Like there’s almost a prestige to struggling, having no money and hustling and working hard and someone’s told us the other day they’ve gone broke four times in the last year or something like that. There seems to be a sort of prestige behind that, like it’s part of the journey.

EMMA: And I don’t really know why.

SAM: Yeah it’s a weird culture isn’t it. It’s funny how cultures like that pop up, it’s definitely not the culture we had in Tunbridge Wells , it was the opposite there. Everyone was trying to show off how much money they’re making.

EMMA: I guess the point is once you’re already in a cheap place to live, there’s less risks around not having very much money because your day-to-day living costs a lot lower than probably home.

SAM: Yeah that’s probably true. The only problem is we have seen it before, is people end up getting trapped in somewhere like Indonesia or Thailand where the cost of living is very low and they can’t really afford to leave or go home.

EMMA: Yeah and I suppose the other thing is you don’t have your support network around you like you would at home so you probably don’t have any friends spare rooms you can stay in or parents can give you some food. And it’s pretty, it’s a pretty strange thing to think that you could, you’d need to ask your parents for money because you spent it all.

SAM: Yeah especially when you’re 35 or however old a lot of these people are.

EMMA: Yeah.

SAM: And the other thing is there’s no safety net here, like there’s jobseekers allowance and things back in the UK, there is some stuff the government puts to stop you hitting rock bottom. If you hit rock bottom in Bali no one’s gonna care.

EMMA: No, and probably no one is going to know.

SAM: Yeah so that’s one side that I thought would be quite interesting to talk about, and quite interesting to I suppose lead by example, do it ourselves. Do budgeting. Because how can I tell someone about budgeting if I don’t do it myself. It’s hard right?

EMMA: Really hard.

SAM: And then secondly, and the more important reason why we’re doing this is that our lifestyle is creeping up and up and up, and getting more and more expensive. I’ve always out earned my expenses, but I started when I was at university and I was living as a student and when I started to earn money I kept spending as a student and then my kind of expenses have slowly kept up with my peers and maybe just slightly, slightly outpaced them. There’s this concept I quite like that everybody wants to be just a little bit better than everyone around them.

EMMA: Yeah.

SAM: You want to be just a little bit better than everyone around you. You don’t want it to be like miles better, you just want it to be a little bit better. And if you’re in Tunbridge Wells and you’re surrounded by people with fancy cars and vintage wine collections, then it’s a lot harder to be just a little bit better. And then also there’s this concept of hedonistic adaption that if you have something good, you need to have more of it it, like you keep needing more to get the same level enjoyment out of things. Like Dan Bilzerian is a sort of instagram celebrity, he’s always sort of posting pictures of him surrounded by half naked girls on yachts and machine guns and things like that. Very very popular. And I looked into an interview with him and he basically said that he’s had everything and now nothing really gives him joy anymore because there is no next level that he can spend to. Like everything is just boring.

EMMA: Which is ridiculous.

SAM Which is ridiculous, like how can he have that life that he’s literally got millions of followers because loads of people want that life and he just, so yeah and that’s what we’re experiencing. So one example of this to that quite hit home recently was about three years ago we stayed in like the nicest hotel we’ve ever stayed in, and it was amazing and we stayed there for a few days and we’d been kind of thinking about it ever since and then since then and now, we stayed in quite a lot nice hotels to the point that we came back to that hotel a few weeks ago, and I thought, oh this is actually quite affordable. When we first went I was horrified by how much it cost and then we’ve gone back and how I’m like, compared to the other place we stayed it’s actually not too bad.

EMMA: Well part of that is because at the time when we first picked it, you did think it would be twice the price.

SAM: Well I remember it being so I think it’s about 250 pounds a night, and I remembered it being about 450 pounds of night but I only remembered it being 450 pounds a night because that is what my idea of a luxury hotel should cost has slowly crept. And that just seemed normal and so when I heard that it’s actually 250 pounds, I was like, oh, bargain! How ludicrous is that. So I want to counter that, I don’t want to just keep needing more and more and more to get to the same level of happy. So yeah, we started a budget, we got a little app we use called spendy where we add everything we spent on it. It’s quite good actually, it’s almost a bit like keeping a diary because when we go out for a meal or something, we’ll put it into the app and then we’ll add a picture for it so you were writing, oh what did we have done Monday? You can open up the little app and have a look.

EMMA: still not sold. I have a diary which doesn’t require me to not spend any money, which I am very happy with.

SAM: So, to try and convince Emma and to convince everyone else listening, I’ve come up with five reasons why keeping a budget is a really cool thing and we should all do it.

EMMA: I wish you could see us recording this, you should see the smile on Sam’s face right now, you are so you happy!

SAM: I really am! I really am, I’m quite smug. So number one the best way to never have to work a 9 to 5 again is keeping a budget. It is much easier to save money than it is to earn more, but everybody can save money, everyone can budget, but not everyone can earn more money because you need quite a bit of luck, and you also need some sort of level of skill or competence in something in order to earn more money. So, yeah if you want to quit your job as soon as possible, then spend less money and save it. We did an episode on financial independence and early retirement which is quite like a big community in itself. You can google it, it’s like FIRE, financially independent retired early, and their whole philosophy is you don’t need to earn loads of money, you just need to not spend a lot yeah and that if you save half your salary, you can retire in, I don’t know, 10 years or something like that. And that’s what they’re doing, there’s huge communities of people doing that. That’s because it’s not very good advice to say, well the best way to quit your job is to go in and find the job that pays a million pounds a year and then retire after two years.

EMMA: Yeah that is ridiculous.

SAM: But it is possible to say well maybe you can you know have a few less Starbucks each day. Maybe go support your local coffee shop where it’s actually cheaper. So yeah it’s easy to save then to earn more money, and also for every pound or dollar you save, is actually worth more than an extra pound or dollar earned, because of taxes. Like if you’re in a higher tax rate, you basically have to give half that dollar away, so you’d have to earn two dollars for every dollar you save.

EMMA: And also you can do something with that savings, so you can invest it.

SAM: You can put it to work so it actually earns you more money. And then when you see the charts of this sort of stuff with compound interest, it doesn’t take that long if you’re saving quite a lot before your income from your investments are outpacing your actual job or salary, and then you know, perhaps the most obvious thing is that keeping a budget means it gives you insurance for the future. So, for me, insurance is making sure I don’t need to get a job, but like that can be all sorts of things, if you’d have a job it could be insurance against getting fired, losing it, it can be insurance against falling ill and not being able to work. That’s a risk for me, you know, I don’t have a job that will pay me sick pay if I suddenly can’t work, that’s it. If I’m true to the name of this podcast and I’m really lazy and just don’t do anything, at least I have a little bit of insurance.

EMMA: Well and for a lot of people it’s paying their mortgages which are not necessarily fixed price. They could really fluctuate and do you have enough money to pay that?

SAM: Yeah, well what would happen if your interest on your mortgage goes up by three to five percent?

EMMA: Yeah.

SAM: A lot of people would be really screwed, so yeah, saving gives you a bit of insurance. So that’s number one, the best way to get out of your 9-5. Number two is that you actually have more fun at the budget end of the world. Emma is giving me a slightly unimpressed look.

EMMA: You can only get away with that phrase because we’re in Bali and we’ve been in Thailand.

SAM: No because everywhere has its budget versions, so here we could be in really expensive five-star resorts, we could be getting taxis everywhere, we could have a personal driver who drives us around. We could have rented like a huge villa and then just not left it for the whole time.

EMMA: Yeah.

SAM: I always try and say, have you ever tried to meet someone or organize a night out or basically have fun at a five-star hotel that doesn’t involve just you? It doesn’t happen. Those people don’t want to talk to you. Whereas what about our hostel?

EMMA: Yeah.

SAM: Every hostel you go to, you can go down and say, does anyone want to go out tonight? Or just go and introduce yourself to people, everyone’s up for having a chat. It’s also where you have all the adventures at the lower end, we have the saying that everything that happens is either fun or funny. Even if it doesn’t work out, it makes a great story. So later, what are the best stories you hear about people’s travels or what they say in? It’s the stuff that’s kind of got a bit wrong and they are a bit silly. If everything’s perfect, that never happens. Yeah it’s more fun and it’s more challenging which therefore means it’s more rewarding. So, for instance, hunting out the best cheap eats in a place is quite, we enjoy that. We enjoy going to all the street food.

EMMA: Yeah.

SAM: Finding all that kind of stuff, not just sticking to the really high-end restaurants, not just working our way down like the michelin list, it’s finding those secret places.

EMMA: Yeah and also, people’s recommendations tend to be rubbish.

SAM: Yeah well that’s a whole episode in itself. Same with working your way aroudd a city. We got to know Changu really well which is the part of Bali we’re in because we’ve got a scooter, so we’re having to explore it ourselves and look around. If we’re only going to the top-rated places on TripAdvisor and getting a taxi to each one, I think we’ve definitely had a more rewarding experience. Same with like finding somewhere to stay. Like, how we did it is we spent a day going to visit loads of different guest houses and villas. Just trying to find one to stay at as opposed to just going on booking.com and booking like a 5 star resort.

EMMA: Yeah, and it is a lot cheaper. It’s very direct.

SAM: Miles cheaper, yeah. Even just getting from the airport to your accommodation, like in Bangkok, we decided to get public transport from the airport to our hotel, and we basically end up walking through the red light district. And so this was Emma’s first experience in Thailand. saying we’ve liked finding somewhere to stay well how we did it is we spend the day going to visit loads of different guest house and villas to try to find the best one to stay out as a post is going on cooking calm and looking like a five-star resort yeah and it’s a lot cheaper to go direct miles cheaper yeah even just getting from the airports your accommodation my in Bangkok we can’t we thought to get public transport from the airport to our hotel and we may see him that walking through the red light district and so this was Emma’s first experience at Thailand, we were walking down this street and all along the street were mostly naked women, kind of like shouting at us, with like little suitcases rolling through.

EMMA: And I thought wow this is Bangkok, this is what I think I had in my head, I didn’t think it actually happened.

SAM: You didn’t think it actually exists. And a few days later, you said what’s your favorite thing we’ve done so far and I think that’s what you said, is that walk down …

EMMA: So crazy.

SAM: It’s so crazy and you only get that if you’re not like, the problem with living in the high end is that you’re a bit like buffered from everything around you, and all the adventures. Which brings me on to my next one which is the number three is you’re much closer to culture if you’re on the budget ends.

EMMA: Yeah.

SAM: LIke if you go travelling and you stay at the high end, you’re only really meet locals who are the staff of the hotels and the restaurants. You don’t really get to know what life is like. You get this rose tinted white washed idea of the culture. If you talk to a lot of people, some of the most fun they had has been backpacking around the world where they don’t have any money and not having much money has led to more adventures and more fun, you talk to people about some of their best times, a lot of people say sort of freshers at university at first university and part of that is you got no money and everyone is in the same boat and you’re trying to work it out because you got independence and it’s the time where you’re probably poorest in your life and also having some of the most fun and closer to the student culture, because even at university there were people who came in with quite a lot of money. Instead of staying in the cheap hall of accommodation with everyone else where you make all the friends, they would rent a house that’s quite far away and instead of going to the really cheap student dives for food and drink, they would go to the high-end bars and their experience was like completely different.

EMMA: Yeah that reminds me actually, I had a friend of my course that lived in a flat that her parents owned in Lovington all three years. I thought she was crazy.

SAM: Yeah it’s ludicrous isn’t it? Even though like student halls were nice, it’s just more fun and closer to culture, closer student culture that kind of university is all about. So moving on, number four which is basically what I said already was that using this app and keeping a budget is like keeping a diary. It tells the story of what we’ve been doing and it means, I don’t keep a diary, I’ve tried to before and I’m really bad at it but this means that when Emma says, oh what did we do last monday, I have a look and I could see the pictures and think, oh that was really fun. And I quite like a deal and so I could look back at all the food we’ve got and be like, wow, that meal was only 11 pounds, that was amazing, that was like the best fun we had. Whereas otherwise my memory would just forget those sort of details.

EMMA: Yeah.

SAM: I’m quite liking that and number 5, maybe most important, is that knowing you can control your expenses is empowering in itself. And it’s something that even though my businesses are going well and I don’t need to budget basically, it is something that I worry about, it’s that insurance thing. Like what happens if it all disappears, and especially with the lifestyle creep and knowing that my life is just gonna get more and more expenses, like.

EMMA: If we’d stayed in Tunbridge Wells.

SAM: If we’d stayed in Tunbridge Wells surrounded by people trying to keep up with the Joneses, not budgeting, it’s something that like was worrying me a bit, because I was earning my most amount of money when I think was 23 and then I decided to quit all my highly profitable stuff so I said, life is great, I don’t spend that much money, I’ve earned more than enough to keep me happy for ages, and let’s just go and do some fun stuff and start interesting weird businesses. Well that was fine for however old I was, 24 25 year old Sam to say. But then you get to 30 year old Sam, and Sam is spending three times the amount of money that 25 year old Sam was spending, and I thought, Sam why did you quit so early and just build up a bit of a buffer zone.

EMMA: Because you probably would have spent more.

SAM: Well yeah probably would’ve spent more, and that’s it, it’s like the trajectory. I saw life just getting more and more expensive because you know, we’re still just the two of us, we don’t have any kids, we’re healthy, we don’t have any responsibilities, that is going to change at some point. And then life will get more expensive. So knowing that we can keep control of our expenses and that this lifestyle creep doesn’t have to happen is quite apparent. I find that quite empowering, hopefully you will too at some point.

EMMA: Yeah I can’t agree with that right now. It’s only been about a week. It feels like a lifetime.

SAM: I think it’s been about three weeks.

EMMA: Really?

SAM: Let me have a look. Two weeks.

EMMA: Wow, well halfway.

SAM: It’s worth saying that Emma is complaining about nothing because I don’t think our life has really changed at all, we’re still eating out three times a day, having massages, going to fancy bars, buying the most expensive cocktail on the menu.

EMMA: Well actually.

SAM: Doing everything you’ve always done.

EMMA: Well I would say we have done less. I have definitely not always had the most expensive cocktail.

SAM: Just because you’re slightly thinking about it bit more and you’re expecting my reaction.

EMMA: Yeah and I haven’t had as massages.

SAM: Wow, I think that is a good point to leave this. There you go, we are budgeting, I think that people should budget and that saving money is important because of loads of reasons but I think that the main one, especially for people out here doing the digital nomad thing or trying to build their own business is that you are in quite a variable career, and you don’t know what is going to happen and so having that insurance in place, having a savings is what will give you that longer runway to make it work, and so you won’t be having to go back and get a job. Well thanks for listening, any feedback. Do you know what feedback, I think the feedback we’re going to get is loads of people are going to tell me how stupid I am for not bugeting before. That the firs time I’ve budgeted is when I’m 30.

EMMA: I think they should send us some encouragement.

SAM: Tell us how great budgeting has been for you and your wife.

EMMA: You.

SAM: Yeah thanks for listening, feedback to hello at sam priestley dot com, please leave us a five star review on iTunes and Spotify or wherever you’re listing on, and apart from that, adios.