The One Simple Budgeting Method That Changed My Life
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- Опубліковано 1 чер 2024
- This budgeting method I talk about in today's video really changed the way I view my own finances. It's called the P&L Method, or running your life like you would a business. Every month, I have my own personal P&L sheet, and I've also created one for you guys so you can budget on your own today too.
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Timestamps:
0:00 - Start Here
0:36 - Step 1: Being Aware
1:42 - Tracking Expenses Challenge
3:24 - Embarrassment & Finances
4:55 - 4 Things To Get Better
6:17 - THE BUDGETING METHOD
8:51 - Zero-Based Alternative
9:54 - How to Allocate Money
13:07 - Where People Get Stuck
PS: I am not a current Financial Advisor, any investment commentary are my opinions only. Some of the links in this description are affiliate links that I do receive a commission for & they help support the channel!
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Are their videos of you walking through the master finance sheet? I’m sure I’ll figure it out but was just curious if you had an overview video
The wisest advice I’ve ever received I continue to share whenever possible: “You are the CEO of your life”
I’m the daughter of an accounting professor-I’ve been following this basic plan for years and can testify that it works
yess!!
Creating wealth entails establishing positive routines, such as consistently setting aside funds at regular intervals for sound investments. Financial management is a vital subject that many avoid, often leading to future regrets.
It’s precisely at times like these that investors need to be on guard against the next certainty. You don’t have to act on every forecast, hence i will suggest you get yourself a financial-advisor.
I always consult a financial advisor before investing. During the pandemic, I used their strategies to minimize risks and maximize profits, generating around $883k in three years with my advisor
My advisor is "Vivian Carol Gioia". You can easily find her online. She has a wealth of experience in the financial market gained over several years.
After following for a few months now, I can confirm that Humphrey is a VERY eligible bachelor. Ladies, where u at???!!
That’s… a peculiar comment 😂
i absolutely love the empathy tied into this channel. a lot of investment/personal finance advice is super "macho" and tells us to get rid of our fears without any tangible steps to do so. love how open, calm, and accepting this all is!
This is a great video and great method. I do zero based and the one thing I'd add is, just because every dollar is assigned, doesn't mean every dollar is spent. So just like in your example you had $782 left over to decide what to do with, in zero-based, you can also decide what to do with that $782. You can assign it to 'save for next month (rollover)', 'save for concert tickets', whatever.
Just started with the zero-based and after putting money aside for my roth and emergency fund and esentials i found myself with some left aswell, i put some to my emergency fund and i rolled over a couple hundred to start my next month with a buffer. Your right just because its planned it doesn’t mean it has to be spend. This needs to be thought more.
The key that hit me as I operate my finances like a business:
Monthly Retained Earnings!!
Love that!
I have been doing this for over a decade after trying various methods for 5 years prior. Great method to recommend to others.
The thing I found most impactful with this method is the mindset of running personal finances like a business.
The goal of a business is to make as much money as soon as possible.
The goal of my personal "business" is to grow my wealth as quickly as possible.
I did this for decades - I didn't want to add up the debts because I knew I'd be embarrassed and personally frustrated with the totals. I've always had a monthly budget, but just never tracked those incidental expenses. A sudden job closure earlier this year had me face to face with my financial stability... thankfully for a 6mo emergency fund already saved. I'm now watching finance channels, consolidating decades of prior employers' 401K accounts left behind, and using library to read good authors' finance books to learn more than the UA-cam channels provide. I've decluttered entire house and feel more empowered, knowledgeable, and rolling over the "profit" each month at new job into a Roth acct and investing. It is better to know... the debts, the balances, the wasted money, than to "not know" and be a victim to your own consumerism.
agreed, well written
Luv it
What books would recommend? Thank you!
As an Entrepreneur, the moment I starts operating my personal finances like a profitable business, my finances jumped up! This is a transformational idea!
As an accountant, I get this 😅
I find it efficient to download the csv file from my bank & credit card and import to my spreadsheet. Since I’m a nerd, I have it automatically feeding pivot charts, so I can see everything in a dashboard with very few clicks. There’s obviously more sophisticated software available but this is a cheap, accessible approach.
The disassociation tip is so unique and yet, makes perfect sense! I really like that tip.
Are you okay Humphrey? Mentioning being single once or twice as a joke I get but it's becoming a common trend. I care about you man and a lot of people are going through being single later in life myself included but do not let it get to you.
it definitely gets to me a little bit, but im trying out here. Staying positive too!
@@humphrey That's good to hear you're trying, I think a lot of people don't put themselves out there and expect things to fall into place. You're a great guy I'm sure things will fall into place soon just keep at it
I love your videos. They have motivated me to make different money moves. You definitely make things feel more approachable. Finally trying to make my money work for me. Thanks!
Love your content Humphrey!
Time to utilize the P&L method this weekend!
in 4 months I'll be getting a raise which means more net income but when I keep my expenses the same, I'll be pocketing more profits for the future. Thanks Humphrey!!
I use the Zero based budget because for me, I feel like I'd be tapping away thinking it's only $5 here, $2 there and by the end of the month it would be too polarising. I like the zero based budget as I allocate to my investment portfolio, coffee for the pay period and once the money from my cash envelope is gone then that's it. I have to wait till next pay.
This, I feel this is true budgeting, else you are just running total at the end of the month and reacting
I always set my investments/savings to auto deposit and I try to never spend more than what my paycheck for that period is.
I’ve never heard anyone else say it, but I’m glad I’m not the only one who specifically looks forward to the last day of the month! It’s so fun to have a thoughtful financial wrap up moment before closing the books and starting on the next month’s finances. It’s borderline therapeutic for my Type-A self.
I just started with my budgeting i use the zero-based method i have my roth contributions and emergency fund on automatic and whats left its for bills and essentials. Just by doing that and and checking it often aswel as my bank statements its changing the way i see my finances, it feels good when i see i have some left over just because its assigned it doesn’t mean i have to spend it. I do like how you put things in that way of looking it like a company. After every month i will turn my complete budget into a P & L and have a binder for it to check it often. Thanks Humphrey 🙏
you are the best , thanks for sharing .
Going to start a monthly income and expenses report this year! Def seems helpful! Since I already track it.
hahaha love to see how excited you get over your end of month finance tracking 😂 great video humphrey!
Love this video! Newer to budgeting and I am so excited to integrate your P&L sheet into my routine, thank you!!!
I didn't realize that this was the name for this type of budgeting. A few months ago I started setting a hard budget for myself. I set it up so that after all my bills were paid (groceries/saving/credit card payments/subs) that I had around $300-$400 left in my account (I call it my Reserve) for "spending money" until my next bi-weekly paycheque. I still try and spend as little of that money in the two weeks between paycheques unless I absolutely have to. When I get paid again two weeks later, I take what's left in my Reserve and divide it up where I think it should go, treating my new paycheque like the only money I have for the next 2 weeks.
Wow this is really helpful. That psychological study completely describes myself. Its time to rip off the bandaid!
Love your content and look forward to your vids. They're practical and easy to understand. One additional thing I've added that I've learned the hard way. In addition to a 6-12 month Emergency Fund (which I basically consider should be used for a job loss)...I've found it's advisable to also save to a Medical/Dental fund/bucket (if you dont have the option for an HSA). Trust me...the older you get...all of a sudden you might need a crown or bridge and even with insurance...they rarely cover the full amount. Crowns can be a 1k. 3k for bridges, etc. And also any medical emergencies. ER visits for many are $135 now. An ambulance is often $250 or more. It really helps to cushion you a bit because there is 99.9% chance something will happen that you might not want to dip into an income Emergency Fund. (PS: I cant fathom how you dont have a gf? They're missing out.)
Amazing tips.
I've been using your Financial Spreadsheet Template for the last 4 months and it's really shifted my brain into saving more in multiple areas. I increased my savings rate from 10% to 35%. Can't thank you enough for sharing that in the video from last year 🤘
Hot damn! congrats Zack
Thanks for this video
I started doing this in sept. Turns out I almost $300 on boba that month. 😂
.. --- EXCUSE ME??
i kid, but damn, thats a lot :D
@@humphrey don’t worry. Oct was only $80 😉
At that point buy a boba machine haha
@@Mactakun what’s a boba machine?
I actually enjoy budget day too. even if it’s been a tough month, the post mortem brings peace & eases anxiety.
Love your content! I've never tried treating personal finance like a business P&L but love the idea. Going to download the template (thanks!) and try it now...
Hello mam , how are you i hope you doing well. I'm from India. City of Pondicherry.
I'm watching your videos you also giving best financial plannings and many advises continue this. Thank you ❤
I have been using this method for 2 years now and I enjoy every bit whilst doing it. I even went a bit further to prepare also the balance sheet and cash flow for further financial viability. I would encourage everyone to give it a go, life changing stuff.
Do you have a copy of your balance sheet and cash flow that I can use? Please and thanks!
Getting 3.38% on both I-bonds. Not getting the 1.30% fixed rate. Just sold both. Looking to move them to something better. Any suggestions? I'm regarding whether or not to liquidate my $138k
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks.
agree with you. I started out with investing on my own, but I lost a lot of money. I was able to pull out about $200k after the 2020 crash. I invested the money using an analyst, and in seven months, I raked in almost $673,000
Please, could you recommend the FA you work with? I could really use some help right now.
I just came across her web page, I went through her resume and I must say it was quite impressive. I reached out to her and I have booked a session with her.
There are tons of banks offering 4-5% on high yield savings accounts. Put it there.
I mean this with affection since I enjoy watching your videos, but the part where you talked about being excited about tracking your income at the end of the month is making me think of Randall Park's character "Pete the Logic Rock" from the Netflix show, Human Resources. 😆 Nothing wrong with being excited about stuff like this though!
All that matters if your monthly cash flow. Obviously income plays a factor into this, but there are people cash flowing 5x more than people making three times as much as them.
Net worth is more important than cash flow
@@Michael-DS can’t add to net with without cash flow
Good video 👍
Data entry for your personal finances is slow and manual but fun if you like finance!
Proud of you! Making major moves since our Kabam days 😊!
thx man!
Truth, just by checking your accounts everyday and being aware of the amounts (debts and assets), you'll subconsciously want to improve.
Do you have tips of catching up with retirement if you are just starting at 30?
Hi Humphrey! I love your videos and I’m currently using this method not only in my own life but in developing a curriculum that teaches youth transitioning out of foster care how to treat their money. It would be incredible if you had any interest in contributing your skills and advice to that.
I've always been curious as to what the strategy is for when you want to spend the money in your taxable accounts?
I downloaded the mint app a couple months ago. I found I enjoy it much more doing it manually. I wanto purchase a business and I’m Budgeting every little aspect of my life via pen and paper on a bi weekly basis(2 paychecks) I love it. It makes you feel good to be on top of everything you are doing. I have my work 401k and you are a huge part of why I also have a traditional and Roth IRA with fidelity . Keep up the great work
amazing man!
I saved 10k from watching your videos a year ago saving 47% every check your the best
BOOM
You should include depreciation expense if you run yourself like a business
Simple question. Do you do the P&L statement at the beginning of the month or the end?
The fact that you're salivating and sipping on diet Coke and rubbing your hands together in anticipation for the end of the month to just add up those numbers is hilarious to me.😂😂 But to each his own.😊 I'll continue to listen and I appreciate all your financial advice and wisdom.
hahaha it literally is my favorite thing
Too funny!😀
In the 7 places your money should go, are we splitting the funds into 7 monthly or we are handling one at a time until it is complete.
We are soulmates xD. Love tracking stuff too at the end of the month hahahah
Your FA is focused on the US finance system, but wanted to know if you could do Europe for example. As I follow your advice but i think most of it doesn't translate to the EU.
Thanks for everything!!
I would like to thank my two angel investors that allowed me to operate my life P&L at a loss for 18 years as a startup before I became profitable 😄
Being profitable starting at 18 is fantastic!
Awe, that’s so sweet. Your angel parents must be very proud of you. 😊
How about tools like Rocket money that do all the summarization and tracking for you? It’s helped me because it was hard to truly understand total spending across multiple credit cards before I could see it all in one place.
I do EXACTLY that same EOM personal finance "wrap party" with the same amount of genuine enjoyment - though i pour a glass of wine, as i don't like soda lol🍷👍
hahaha :D
All I really do is put 20% of my take home pay (after 401k max to match) into retirement and as long as I can live off 80% for everything with no debt outside mortgage I’m good.
Hi Humphrey, thanks for posting, love the content and I think the P&L statement is a very interesting idea. I’m just taking a look at the sheet now and I have a couple of comments.
1. I think the monthly income calculation you use for biweekly pay periods is incorrect. It should be D4*26/12 instead of D4*2.
2. I’m thinking of adding a new category to my sheet for amortized expenses. For instance, I have a bunch of insurance expenses that come as a one time payment which I’m thinking of representing as a monthly payment to make monthly budgets more balanced over the course of the year (even though it introduces a bit of fakeness to the sheet). Probably incorrect from a pure accounting perspective, but I wonder if that makes sense from a budget planning perspective. What do you think?
Use the accrual method. Should address that.
These are called "sinking funds". If you search for "budget sinking funds", you'll find some explainers. Setting a little bit aside each month for planned expenses. Same concept for expenses you don't know for sure, but which know are bound to happen at some point, like medical expenses and auto repair.
What if you have a recurring discretionary expense like a netflix subscription for example, where do i put that
Great video... Even though it was recorded 10 years ago according to Tom and Mary's choice of console ( 7:29 ) 😂🎮
Where can I get that spreadsheet you talked about? The master spreadsheet?
I check my accounts once a day, this means I can shift money around if needed so I don’t go overdrawn, i would know if my account had been hacked and I have a really good unofficial my finances.
Now most of my net worth is in real estate, the listed prices in the area vary by 2 to 3x - how can I track my net worth then? Just the financial part, and an acredited appraisal every few years?
Learning to budget is scary, because as he says, you find out how broke you are, and you didn't want to know. That sucks. BUT, what you get in return is a MUCH lower overall stress level. When budgeting is done properly you may be sad that you have $20 of spending money until payday, and can't do much, but you also know that the bills are paid, 100%, and you can sleep like a baby knowing that no financial monsters are sneaking up on you. That might be brand new for you if you've been struggling a while.
The way he confidently says check your bank account once a week to a month is crazy I have to check that shit before every purchase cause I’m broooooooke
honestly there should be classes in highschool like this that are mandatory so many people especially in america have terrible finances
they dont even need a teacher they might as well just show your videos then quiz kids on it
Most Kids don’t take it seriously until they start working.
is there a caffeine free version of diet coke? i would also like to enjoy a diet coke at the end of the day
Thank you! Are you offering accountability support for that 3 month challenge? It's hard for me to track EVERY expense bc I work in 2 currencies, but mostly, because I use cash. Please help!
How are you single Humphrey god damn. If you're single we are doomed LOL
Good stuff as always buddy. Good luck finding that GF
I know its not the point of the video but i had to check the upload date when you said "you could buy a ps4" lol
For real though, I hope more people hear your message and realize that knowing where your money goes every month can bring comfort rather than stress
1:15 Focusing on my finances has dramatically reduced my sex drive (virgin male at 22) and I'm more proud than ashamed :-)
that's the thing about being embarrassed that the last 6 months since I went fulltime just went to spending more
Nobody's buying that you don't have a gf. But we do believe in good financial habits. Thanks for all the great tips!
haha im a lonely man
The key takeaway is Humphrey is looking for a girlfriend.😘
yep DM me ladies!!
I think youre missing a couple zeroes on that bloomberg terminal line item 😅
LOL seriously
My biggest question remaining from this video is how millionnaire, accomplished men with millions of followers (you incl.) find it hard to meet that special lady...😢 is there social distancing involved when ppl encounter social media icons? What's the hypothesis?
The only problem I see with this is that you will have trouble accounting for split over multiple month payments (such as annual insurance).With your method, you can't account for a payment or expense that hasn't occurred yet. OK, "pro-rata" type tracking IS possible, but then you have money sitting in your plus side.. that actually is meant for a future debit. THAT is the one thing that stops me in my tracks.. and past tracking of expenses fails miserably because of this shortcoming. BTW, in the last 44 years, I have only come close to brushing the edge of insolvency (too much house for the income). To this day we maintain a plus balance by NOT accumulating debt (no subscriptions, monthly payments, extending out bills, etc.). Those "little" things nibble at your balance.. and by the time you notice, it's too late. Thank you for the video, though.
That is not really an issue though. You just add a balance sheet and cashflow statement so you can balance your p&l and then you can incur costs as appropriate with accruals method. Highly recommend it, that way you can track your real monthly costs rather than use the cash method (might be technically more challenging but also more rewarding and precise). In my view, analysing your finances from p&l, balance sheet and cash flow statement standpoint gives you the best picture overall and facilitates financial planning as each statement tracks something different I.e. p&l tracks costs, BS tracks net worth and leverage, cashflow tracks where your cash is going.
@@kevinsica"Highly recommend it, that way you can track your real monthly costs rather than use the cash method..." Aha! There is the answer I was looking for! This idea of the "cash Method" always threw me for a loop for the reasons I stated in my original post.. because if you do the "envelope system" for allocation - Using real physical cash in envelopes - no problem.. but as soon as you start doing it electronically, all sorts of confusion can arise, ergo, how much money do I really have? Thanks for your reply!
❤
I use 50/50 method. Every $1 spent is $1 invested
I felt that girlfriend statement... same here.
I prefer the US government budgeting method.
Disassociate your spending from your identity - I read that as not needing to prove myself by keeping up with the Joneses. 😉
Pete’s coffee??? Not even Starbucks is that expensive lol
Peet’s
Me earn money.
Me not spend all money.
Me got spare money??!?!?!? WAaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaat?
Some people may be stuck in the financial stability stuff because they're poor too, like that's most people.
Id be salivating at the end of the month too, if youtube was making me more than 20k a month. Lol
Hmmm if you winning the financial game you shouldn't feel the need to check your bank account that often
I make 40k after taxes …
9k in savings
1’500 cash
6k debt
And pull in about 800 a week…
Help!
Ahhh.. to be able to rent for $800 in SoCal.
Frugality will get you farther all day every day.
PS4?? 7:29 Did you shoot this video in 2013?
putting a chair in front of a glass door is crazy
PS4
P&L = Profit & Loss
My boy out here soliciting girls into his DMs haha
Somebody date this man lol
Get a "Good" accountant, he can do most of these things for you.
Sinking Funds?