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Don't miss out on the ultimate thrifting experience at our Pix Exchange parking lot anniversary sale at our Torrance location. Visit pixexchangehh.org for more details. Today on Radical Personal Finance we're going to talk about budgeting. Oh you know what they say about budgeting? The dreaded B word. Man I hate that joke.

I despise that joke. Do me a favor please. There are very few jokes that you can say around me that make me really angry, but that one does. I cannot stand the negative attitude that so many people seem to have about budgeting and it's perpetuated with stupid jokes like that one.

Because here's my contention, and I say this without reservation period. Budgeting has the opportunity to change every single aspect of your life. If you understand what budgeting is, how it works, the progressions of budgeting, and the areas to which you should apply the concept. Welcome to the Radical Personal Finance podcast.

My name is Joshua Sheets and I'm your host. Welcome to the show. I'm excited about today's show because some of the concepts that I have to share with you I believe will bring some real clarity to the conversation around budgeting. Today I'm going to give you a framework for budgeting, how you can apply it to your life, and yes I really do believe that this show has the opportunity, the potential to change your life.

People argue about, well they, oh okay. People argue about everything. People who care about finance argue about everything finance related and budgeting is one of the sources of arguments that people love to argue about. Talk about different ways and different approaches and things like that. Yes, hey, we can argue about stuff.

I like a good argument sometimes. Budgeting is one of those things that you can't really get around and even the people who think they're getting around it, "I don't budget. I don't need to budget." They're getting around it without actually getting around it. I hope that that becomes very clear to you in today's show that even the people who say they don't budget, they really are when we understand and expand our definition of budgeting.

My intent in today's show is to share some ideas and some thoughts with you that I think will maybe help to bring people together on the subject of budgeting because I've been there, done that, tried different things, seen different things. Today, I'm going to share with you a continuum of budgeting approaches that I think will be helpful for you.

You would never run a business without having a budget of some kind and having some sort of controls on your finances or at least you wouldn't run such a business and expect it to stay in business. In fact, if you trace the problems of business bankruptcy, many times you're going to find that often the budgeting system and the control system and the feedback mechanisms weren't responding fast enough to be able to help the business owner and the entrepreneur to be able to make good decisions.

Now, they may – the fault is not always the budgeting system, but the budgeting system is going to be in there somewhere. So why would you run your life any differently? Well, you would say because money is not everything. You're right. And that's why today I want to talk about budgeting in an expansive concept beyond just money.

See, there are very few times I make absolute statements because there are very few things in finance that are absolute. But here's an absolute statement for you. I can't come up with a single valid argument not to have a system of financial tracking, budgeting and control if you are interested in building wealth.

And furthermore, the better your system of financial tracking, budgeting and control, the more efficient your wealth plan will be. Now the cool thing is that principle is applicable to money and money is a great thing to talk about because it's easily measured. It's easily denominated. It's a great scorecard.

But obviously money is not the central focus of life. Money is simply a tool to fund the central themes of life. And so that statement can and should and we will today be applied to other areas including time and food because the budgeting principles apply to each area of life and the process is the same.

So there are probably other areas we could apply it to. But I want to talk today about the three major budgets that we need to have in our life. And those three budgets are a budget for our time, a budget for our food intake and a budget for our money.

Now you could again expand this feel free. You could have a budget for our physical activity or have a budget for our emotional energy. Run with this as far as you want. But today I just want to talk about three budgets. Hat tip to Gary North who was the first person years ago when I was reading his site and he talked about the three major budgets and it's like time, food and money.

I said, "Wow, that's exactly right." Hat tip to him for originally years ago giving me the idea of three budgets. But today I've expanded the idea and we're going to go beyond that. I want to share with you the importance of these three major budgets and how they are going to impact your life.

I want to share with you the three major stages of budgeting through which people go. And the key thing here is this is where all the arguments come from. This is where people argue, "Well, your budgeting system is stink because you use credit cards and you run it through Mint.com and I use cash envelopes." This is all a matter of understanding what stage you're at.

I want to share with you the major ideas that are applicable to every type of budgeting and some truths. I'm going to talk about some tools, basically the types of tools that you need for different types of budgeting and then some tools that will give you options. And hopefully at the end of today's show, if I've done my job, I will have number one sold you on the concept of budgeting.

I will also, number two, have given you a way to assess your own personal budgeting system and perhaps discussed some tools that could be helpful to you as you move on to the next stage. And so that's the major content of today's show. Before I start walking through that content, I want to share with you the sponsors of today's show.

Sponsor of the day, number one today is Jay Fleischman and the Student Loan Show. Jay is an awesome guy, twice guest on – twice he has been a guest on Radical Personal Finance. He is a student loan and bankruptcy attorney practicing in the state of California and New York.

He additionally has a student loan podcast called the Student Loan Show, which you should subscribe to if you have student loans and go and listen to. Additionally, he does consulting and he specializes in performing a comprehensive analysis of your specific student loans, your specific goals and finding ways to save you tons of money.

That's basically the deal. So if you have student loans, may I make a recommendation? As I record this show, it's December 2015. We're heading into the new year. If you have student loans, especially if you have big student loans and especially if you have student loans that are in some stage of controversy, you're falling behind, you're having trouble making your payment, please go to studentloanshow.com/radical.

Sign up for the $50 email consulting package that Jay has, $25 off his normal price. He'll do consulting for you on your federal student loans through that package and he should be able to provide you with at least some good ideas or if not, he can at least share with you a confirmation that you're already doing the best thing and that is a cheap price to get good peace of mind.

Go to studentloanshow.com/radical. Make sure you subscribe to the show while you're there. If any of you are in contentious situations with friends, family members, co-sign on student loans, reach out to Jay for help on that stuff too. You can actually get help with that stuff. Sponsor of the day number two is – I kind of like that.

I should do the radio voice. Sponsor of the day number two today is Patrick Snow. Patrick is actually my personal publishing coach and we're making good progress on the manuscript of Radical Personal Finance book. In fact, today's show, some of the content, this is the type of thing that's in the book, the outline of the subject.

This comes from part of my manuscript of my ideas on budgeting. But Patrick has been instrumental to me in helping me navigate the process of publishing but in addition to that, the business of coaching, speaking, basically being an expert in the expert economy. He is excellent at that but he has a special skill set in the area of publishing.

If you don't have a book, why not? Have you ever thought of one? Well, if so, get started. Talk to Patrick and check him out at thepublishingdoctor.com, thepublishingdoctor.com. All right. Let's talk budgeting. Today, first, I want to sell you on the impact that budgeting can make and why it can affect your results and then we'll go into the stages of budgeting.

I want to start not with money, not even with time but actually with food. I want to use food as a good concept or a good metaphor to illustrate the concepts. Think of the people in the world whose bodies are instrumental in their success. So here I'm thinking of athletes and ask yourself this question.

Do you think that a highly skilled, highly advanced athlete would have a plan with regard to their food intake? It's almost inconceivable that they wouldn't, right? Think about somebody like a bodybuilder preparing for a bodybuilding competition. A bodybuilder, they've got everything mapped out. They know exactly what they're going to eat.

They know exactly the time that they're going to eat it and depending on the type of competition, maybe they've got four containers of chicken breast and green beans planned out and everything divided up. Maybe they're waking up in the middle of the night to slam down their ice cream smoothie with extra calories so that they can gain the weight they're trying to gain.

They've got their supplements lined up. Somebody who's preparing for a marathon, they've got their supplements. They've got their schedule figured out. They've got their carbohydrate and protein intake carefully mapped out. An Olympic athlete, everything is planned on a careful program and the higher the level of performance that you need to go, the more important that plan is.

Are there exceptions to that rule? I would say yes, there are. In fact, the exceptions generally in this case prove the rule. The only exception that comes to mind right now is I remember when Michael Phelps was competing at the Olympics, Michael Phelps was the Olympic swimmer. I read an article about how he just eats like a maniac and eats all kinds of different things because he's in the pool so much.

He's swimming constantly. He's got to scarf down all the information. He's eating all the food that he can possibly stuff in. It's thousands and thousands and thousands of calories per day. Sometimes the sources were clean and sometimes the sources were not. The reason that he was able to do that though was because of all of the activity on the other side, which is why when we talk about wealth planning and you see somebody who is earning millions of dollars a year and is only comparing it to the fact that him swimming hours and hours and hours a day and then just scarfing and then him scarfing down calories, well, if you're not swimming hours and hours a day, you can't just scarf down the 6,000 calories a day.

In the same way that if you're not earning millions of dollars a year, you can't waste hundreds of thousands of dollars per year like you might see some celebrity or star doing. It catches up to you. Now, do elite athletes reach their level of eliteness and then start budgeting or do they budget along the way?

Now here for the sake of my illustration, let's focus on something that's very physical related to the body, something like bodybuilding. Ignore for a moment basic athletic skill. Just talk about bodybuilding. Does an elite bodybuilder budget only after they become elite or did the fact that they budgeted allow them to become elite?

I would argue that generally it's the latter. Usually those little disciplines that started when they were a scrawny high school student and wanted to start building their muscles, those little disciplines, learning how to eat, learning how the process, learning how their body responded to different things, learning what was right for them, that's what allows them to go to the elite levels.

Then they hone and refine their skill over time. That's a really good example because what it shows is that – it shows that the skills build the platform for somebody to go on and do later. Now there are people who have natural talent or who have a natural genetic ability over somebody else.

Well, the same thing happens in money. There are people who get lucky. There are people who hit it rich unexpectedly. But somebody with good genetics and a bad food budget is not going to win a competition. Somebody with bad genetics, so-called, and a great food budget might win a competition.

Think about it and how that applies to money. One more point on the food and we'll be off of it is recognize literally how big of a difference food makes, going away from athletes, in the lives of the common everyday man and woman. Our level of performance is going to be driven by the quality and kinds of foods that we eat.

Our level of – the amount of work that we can put out, the amount of focus, the amount of clarity, the quality and length of our life is going to be driven by the amount of food that we eat. So I was using the athlete metaphor to talk about growth into elite levels, which will be especially important when we talk about when we switch to money and time.

But just simply recognize that I'm literally talking about having a plan for food. I just – night before last was helping somebody move and this person was moving into a home of a relative. I walked into the home of the relative and this was an older, sick person's house.

I had never met the person before. But the wife was lying in a chair, obviously very sick and she was overweight. She had – I don't know if she had medical equipment around her. She was obviously not very mobile, lying in a chair, very sick. The whole house had that sick smell to it.

Then the husband was moving around, hobbling around with a walker and he was very obese and just looked very unhealthy. The whole house kind of had that sick old person smell. Now I don't know the circumstances of the health condition. I didn't ask and obviously I don't know the details.

So this is a little bit of premature judging. But as I walked through the kitchen, I was just struck by the food that was sitting on the counter. There were crumb cakes and donuts and just – it was bread. It was sugary bread of about ten different varieties all partially consumed.

I couldn't believe it. There was nothing green. There was nothing with nutrients. It was all sugary breads in some state of consumption, way more than even a family of many people should eat one of them and yet there were only two people in the house and they were all partially eaten.

I said, "Hmm." My heart went out to them and I didn't have opportunity to ask any questions nor was it my place. But I just thought, "Are they sick because of this or are they eating this way because they're sick? Who knows?" But the same thing happens in money and in time.

That's why budgeting is so important. The person wastes money. Are they poor because they waste money or are they wasting money because they're poor? The person isn't productive with their life. Are they unproductive because they're wasting time or you get the point? So we've got to pay attention to each of these budgets.

The major budget I think that will make the biggest difference in how our life turns out is how we budget our time because the things that we budget our time to do, that's the stuff of life. Time is the stuff of life. Number two is probably food and number three is probably money if I had to put a priority on them.

So what do we actually do? Let's talk about the stages of budgeting that I think are important. I think there are three major stages of budgeting. If you are getting the results that you're happy with, you may not need to change anything. Life is not always about constantly changing everything again and again and again and again.

This question is are you happy with the results? And if you're happy with them, just go with what you're doing. But if you're not completely satisfied with your results in some area, I think there are some stages that you can apply. Stage number one is awareness. Start with awareness of what's actually happening.

In food, if you were working with a diet consultant, the first thing they would do is provide and ask you to have some mechanism of tracking your food, whether that's keeping a diet log and writing down the things that you eat, whether that's taking a picture with your phone of everything that you eat, some mechanism of recording so that you can become aware of what's going through your body.

If you were working with a productivity coach, the first thing that productivity coach would ask you to do is become aware of what you're spending your time doing. Where are you actually – where is it going? What are you actually doing? Again, an app on your phone, an app on your computer, tracking the time on your computer and on your phone to figure out what you're actually spending your time on, a written journal of some kind, anything to gain some level of awareness.

And then finally with budgeting, same thing. If you were talking with me, the first thing I'm going to find out is where is your money going? We have to have a system of tracking and being aware of where your money is going. That's stage one. Stage one, awareness. Stage two of making major change is proactive planning or proactive allocation.

There's a caveat. It has to be proactive planning, proactive allocation with an appropriate level of detail. That little caveat with an appropriate level of detail is very subjective and it's very subjective based upon what you're trying to do. If you're trying to win a bodybuilding competition, you're going to track every one of your macros and you're going to have them every single day recorded.

If on the other hand, you're just trying to live a normal life, you don't need such an obsessive level of detail. Same thing with regard to finance. There are times at which very, very specific and careful detail is important. There are times where just big picture allocation and proactive planning is all you need.

The concept is the same. Nutrition coach says, "Hey, let's adjust your food. Here are the foods I want you to eat more of. Here are the foods I want you to eat less of." Or "Hey, you've got terminal cancer. Okay, this is what you're allowed to eat." There's a food place near my house, world famous, called Hippocrates Health Institute.

People come in from all over the world who are in end stage cancer and just very difficult situations. Some people that just want to live a healthy life and they come in for intensive nutritional treatments. Man, their level of the stuff, I've gone there for lunch. Everything's raw. Everything's green.

It's crazy when you really look at it. But the level of specificity of the things you must eat, the things you must not eat is hardcore. But they're working with people who are looking for hardcore extreme results. So proactive planning with appropriate detail. Same applies to time. Same applies to money.

The third stage is we need a system of ongoing controls with an appropriate level of relaxation. Whatever the category of life, whatever the system, we must have some kind of ongoing feedback loop. That feedback loop can be very simple or it can be very complex. But it's got to be a livable level of feedback loop.

So three major stages of budgeting. Number one, awareness. Number two, proactive planning with appropriate level of detail. And number three, ongoing controls with an appropriate level of relaxation. Let me sketch out the framework for you and I'll give some very specific monetary examples. Before I do that though, I believe there are some major ideas that are consistent across all these different types of budgeting, all these different kinds of allocation.

First, great results come from having clear goals. Nutrition coach, what are you trying to do? I just want to lose five or 10 pounds and feel better. Or I want to win Mr. Olympia. Very different process. But we've got to start with clear goals and the goals inform everything.

Yeah, Joshua, I'd just like to get out of debt, live a normal lifestyle, save a little bit of money and focus on just hanging out with my friends and doing things I love. Joshua, I want to retire in five years. Okay. Or Joshua, I want to be a mega billionaire.

Okay. Different plan. The plan is driven by the goals. And if you have a goal of being a mega billionaire, that's going to require a very different allocation of your time and a very different allocation of your money than if your goal is I just want to live a debt-free life, save a little bit of money and spend a lot of time outside.

Very different plan. Is one right or is one wrong? You be the judge. I'm just pointing out there's a very different plan. Next major idea is in all of these circumstances, you've got to start with the big rocks first. Here I'm referring back to the classic illustration of time management.

Stephen Covey is the one who popularized it. Professor stands at the front of the room, fills up a jar with big rocks, presents it to the class and says, "Is the jar full?" They all agree that yes, it is. Professor puts the jar down, puts some gravel, which filters around the big rocks, looks up to the class and says, "Is the jar full?" Class says, "Yeah, we think it is," but they're starting to wise up.

Professor pours sand down in among the rocks and holds it up and says, "Is the jar full?" One student bravely says, "I think so," but they're not very sure of it. Professor takes a pitcher of water, pours the pitcher of water in, fills the jar up. Now is the jar full?

Yes, finally the jar is full. The point of the illustration is that if you start with filling the jar with water and then you put sand and then you put gravel, you're never going to get everything into the jar because you put all the little things in first and you can't ever get the big things in on top.

The point is life only works if you start with the big rocks, if you start with the important things and do those first and then fit everything else in around those. That theme is consistent with regard to money, time, and food. We've got to start with the big rocks.

Start with the things that are going to make the biggest impact on your situation, the big habits, the big expenditures. Sometimes the major roadblock in a budget is the fact that there's a car payment. If we just get rid of the car payment, it loosens everything else up. It makes no sense to focus on the little things.

You're spending, you're buying a $4 latte or you have a bad habit of giving a dollar to the kid on the street. It makes no sense to start with those things when there's a big giant problem. Start with the big rocks first. That concept could be expanded. It's just a mental concept.

It could be expanded to say why are we focusing on the budget when you're making $11,000 a year. No matter your level of budgeting prowess, it's very difficult to live on $11,000 a year. Let's start with the big thing, which leads me to my next major idea, which in some ways is complementary to the idea of big rocks first, but it's also a little bit different that both top-down and bottom-up approaches can work.

This is where you can help somebody by starting with the big stuff or you can help them by starting with the little stuff because we're not necessarily talking about the specific detail. We're talking about a person and that person is going to need life change. Best example on this topic is years ago, I read David Allen's book called Getting Things Done and his emphasis in that book was on the very tangible tactical level of task completion.

What's the next action that I can take that will result in the project being moved forward? He didn't spend much time talking in that book about the big giant goals that we can talk about and how your vision for your life can be planned out. This is why it's so utterly overwhelming when somebody who's just trying to figure out, "Well, how do I have enough money to buy food this month?" Talk about, "Let's plan out a major plan for your life." It doesn't work.

But if you help somebody with little things, it can do it. On the flip side, it might work. That's where sometimes you can do the top down. The bottom up is the little things first, focusing on the little things, the little habits, eating the – for food, it would be eating the candy on the co-worker's desk.

For time, it would be how many times to check Facebook. But you can start with the big ones and say, "Let's just make one big major change. Let's start with your most important project and spend two hours working on that every morning. Let's start with fixing breakfast and have a really great breakfast." Top down and bottom up are both important.

It's ultimately going to be OK to focus on either of them. We've got to handle the big stuff. We've got to handle the big car payment. But we might need to get there with a bottom up approach or with a quick top down approach and that's going to be very subject to the person's personality.

Next, we need tools that are appropriate for the job that are based on the goal. Not everybody needs some fancy dancy budgeting software. Not everybody needs YNAB, the sponsor of the show. Not everybody needs YNAB. When I was in college, I kept my budget on a legal pad and there were six categories.

Every month, I write down the amount of money that I'd had, write to get my rent, take out my savings, take out my giving, take out my rent, take out my car insurance, and then I would take cash out of the bank for food and that included any groceries or dining out and then I'd take cash out of the bank for little expenditures if I wanted to buy something small.

That was basically it. It wasn't much more – I guess a cell phone bill. I missed a cell phone bill. But it took about five minutes and it was a once a month deal and the constraint, the level of appropriate control, the appropriate tool in that situation was cash and it worked great.

But of course now, when I'm running a household with many more budget categories and multiple people, it's different and I expect it to be much different in the future as my financial life becomes more complicated. I could not run my budget today based on cash. It doesn't work in our modern world.

So they're just tools and you've got to find a tool that's appropriate for the job based upon the specific goal. Next major idea is we need appropriate levels of control and here I'm specifically talking about the curbing effects of a budget. So this is – when I'm using the term budget, it should be evident to you by now that I'm thinking about budgeting perhaps in a way of thinking about allocation, choosing the allocation of resources.

But when many people are thinking about budgets, they're thinking about the curbing effect of a budget. The idea that I only have $100 to spend on clothing. How am I going to – I want to spend $120. Oh, I can't do it because the budget says I can't. That can be very, very valuable but that needs to be appropriate based upon the phase of life, phase of business and the goals involved.

Think about this in terms of a business startup, a business venture. I am running a business startup. In the beginning of the business startup, I put a very tight level of control on every single dollar. When you're facing a high degree of uncertainty, you've got to keep resources back.

Example, you're walking on a hike. You see the end of the hike up above. You're feeling thirsty. You're just down the whole bottle of water. No big deal. You can get water up ahead. You don't need to exercise a tight level of rationing and control in the bottle of water.

There's a high degree of certainty. You're out in the middle of the desert and all of a sudden you realize you're totally lost. You have no idea where you are and you have a half a bottle of water left. Do you just start chugging water? You're probably going to start to think about caring for things and rationing a little bit more.

So the amount of certainty that you have about the situation is what dictates your ability to consume. So in the initial stages of starting a business, cash controls have to be very, very, very tight. Business starts to grow. Is it appropriate that a highly functioning business that where everything is doing well, there's substantial profit margins, that every single dollar has to be tracked?

I don't think so. I'm not going to say tracked, but I mean controlled. I don't think so because you reach a point in time where it's more frustrating than it is empowering. If you are running a large business, the $1.99 purchase doesn't really make nearly a big difference when you're dealing with $100,000 purchases.

So in business, this should be evident. Well, let's take it over to personal lives. Let's say that you are this type of person or you're working with somebody. Somebody is deeply in debt. They are behind on their bills and they're really struggling and there's uncertainty at work. Guess what?

You need an absolute tight system of control. Remember, I'm not talking about necessarily how much money he spends. I'm talking about system of control. So in that situation, when I'm counseling somebody, we take every single automatic payment out of the bank account. We stop every single automatic transaction. We take the whole – it's like a full stop on everything and we take back radical control of the budget, every single dollar, every one.

We move to a system of controls that is absolutely foolproof, something like cash because you can't afford if someone is deeply in debt, you can't afford to have a $35 bounce check fee. That's destructive when somebody is in that situation. So cash is tight. Put everything on cash, envelope system, budgeting all the way, very, very tight, daily analysis, daily tracking, what's the balance today, just everything tight.

Now fast forward a little bit. Out of debt, good margin between savings and income. Do you really expect somebody to live on that type of tight control forever? I don't. I think it's absurd to think about somebody needs to have that level of control and they have to look in their wallet before going to Costco and recognize I've got $82 in here so I can only spend $82.

That's silly. Somebody is doing well. You go to Costco. You see one of their fancy doodads they bring in. Oh, hey, here's a $200 item I'd really like to have and I never knew I wanted to have it until I went to Costco. But no, go ahead. It's not that big of a deal.

And does somebody who's a multimillionaire need a system of controls where every single day they're checking things? No. They just need some basic big picture intention and have a check on it maybe once a month, maybe once a quarter, maybe even once a year would be totally fine. So there needs to be an appropriate level of control based upon the situation that someone is in.

So the process of budgeting is the same in every type of budgeting, time, money and food and it goes through these different phases. We always start with awareness. We build a simple tracking system that's appropriate. We want to move on to intentional planning and here the key is the bigger the results that you want, the more intentional you'll need to be.

I've shared on the show how a breakthrough banner year for me was when I was in college and my senior year of college. That was the year that me personally, I was determined to get out of debt. I was doing the Dave Ramsey plan, work like crazy, get out of debt.

I worked a 40-hour full-time job. I took 19 hours of classes and I did well in school. But in order to get there, I had to establish a very, very, very tight budget of my time. Every single hour was planned out. I'd mapped out all my classes. The classes were all very efficiently laid out so that I could work on a certain schedule.

Every single thing was accounted for at the time when I'm going to do homework. The only free time I had was I'd scheduled in a couple of hours of fun on Friday night, Saturday night, something like that. It said free time. That was it. But I got great results and the level of control was very, very tight because I was shooting for very high results.

In food, the people who are going to get the best results, their level of control is going to be very tight. In money, if that person with $2 million in the bank is determined that they're going to become the next billionaire, they've still got to have a very tight level of control.

If they're content with a few million bucks, then they don't need such a tight level of control. The bigger the results you want, the more intentional you need to be. So the cool thing about this process of budgeting, we start with awareness, move on to intentional, proactive planning of allocation, tight controls, and then we transition to habits.

Somebody who's developed good habits doesn't need such a tight system. We just need to transition to good habits with some kind of appropriate ongoing checking. People who maintain their weight, they weigh themselves every day and if they fluctuate by more than a certain amount, or they weigh themselves once a month, or they go in for their annual checkup, we need some sort of system of checking up.

With money, we need to check our account statements and see, "Okay, the last quarter, how did we do? How's our net worth increased?" Those controls and ongoing checking will give you the data that you need to be able to say, "Are we happy and satisfied or do we need to make a change?" The better the results, we'll have to tighten up, so we make the budget a little bit tighter because the biggest results always come from that careful, diligent planning.

But if we're okay with the results we have, then enjoy the looseness a little bit. Next let's talk about tools. I think the tools that we use vary based upon where we are. So here I'm going to talk about money primarily and give you money tools, but I will weave in food and time because I believe that these concepts are applicable in each category.

First we need a dashboard. Some kind of overview system. Some way to have a quick check of where we are. That's what a dashboard on a car does or a dashboard on a boat or whatever. It just tells you, "Hey, here are the RPMs, here's the speed. Any problems?" We need some kind of dashboard system.

It needs to have good data and it's good if it has some reports. So those reports are useful if it's money and we can look and say, "Okay, the last three months we've spent about this much. Our spending is averaging up. Our spending is averaging down." That's useful. Or if it's time, "Okay, we're spending about this number of hours on productive things versus unproductive things." If it's food, "All right, our weight is adjusting in this certain way." So we need some tools for the dashboard overview.

But we also need tools for big picture planning and intention. So we need some kind of forward-looking tool that, extending the metaphor of the car, the dashboard doesn't tell you where you're going. It just tells you basically how things are going. So we need to look forward and say, "Are we headed to the East Coast or West?" Same thing with money.

"Are we headed for this goal or that?" So we need some kind of forward intention in a proactive forward-looking tool. Then we also need some intentional boundaries, that system of controls that's going to keep us on track. So the best results come when we have tools that address all of these.

And they might be the same tool or they might not be. And again, it's got to be appropriate to the level of complexity in your life. Tools should serve you. You shouldn't serve them. So some simple financial tools to actually implement these concepts. Simple dashboards that are available. Mint.com is the most popular one.

They do a great job. It's a free system. You put all your data in there. They mine your data. They present to you some simple reports. You can pull it up. You can see how all your accounts are at any time. You can just pull it up and see.

You can run some quick reports. It works great. It's a dashboard. My favorite is Personal Capital as far as they're much prettier and they have more useful investment functions. I'm actually launching them as a sponsor on the show very soon. Links are already on the website. If you've never used Personal Capital, go to YNAB.com/PersonalCapital.

It's like Mint but better and they have much prettier dashboards and it just does a good job. Personal Capital is awesome. Same thing. You load all your accounts in there. It loads your investment accounts. It gives tracking. You load all the information in there. What both of those companies do, Mint and Personal Capital, is they're taking a look at your data and then they're trying to offer you something better, a way to save money, trying to offer you a way to enhance your situation in some way.

We had on the show Peter Polson from Tiller. Tiller is great. It's cool. It's a tracking system. It's a great way to track your data and you can use it to have great spreadsheets. That can fill the job. Your dashboard could be something as simple as checking your account statements, your checkbook register.

Is money going up or is money going down? These are just simply concepts of – these are tools for looking at a dashboard. YNAB is a great dashboard. You can pull it up. You can see all your account balances, see how things are going. They have some good simple reports for tracking.

Just hey, here's where the money is spent. These different things perform that dashboard function very well. With regard to tracking of expenses, I jumped the gun there and talked about YNAB with tracking. YNAB will work for dashboards because it can show you some account information. But the downside with YNAB is it's got to be account information that you enter currently.

It's not the type of dashboard that will illustrate for you your investment balances. It doesn't auto-import that kind of stuff. Tracking software, your bank has some kind of tracking software. So you're figuring out where is the money going. Most banks now, if you categorize the stuff, you can pull up those reports.

So you can figure out where is the money going. Quicken, Microsoft Money, all of those systems do a great job of – if you're importing the data, tracking where it's going. Mint does it. Personal Capital does it. Here is where YNAB does it. If you're entering the data and it's tracking, it's tracking the data going back.

So you can have different tools for a dashboard system, different tools for a tracking system. I don't track any categories for me. I don't track any categories in Personal Capital. All I use it is as an easy way for me to aggregate all of my accounts. I'm testing Tiller.

Tiller does tracking and does kind of big picture view dashboard stuff. Then you move to the concept of proactive planning and that's where your options become far fewer. You can do proactive planning with a yellow pad if your situation is simple enough. If you're working with a yellow pad, probably you will need to just do a cash envelope system.

If your situation is simple or let's say you're teaching your kids or you are a young person with a simple life or maybe an old person with a simple life, some of us who are at more complicated stages probably a little envious of you, cash in an envelope and then you're putting some constraints on there because when the cash is gone, I can't spend it.

But you're proactively allocating, "Hey, here's $2,000 and $100 bills. It's being divided up in this way," and then there's a constraint on there. There's a control. A great piece of software that I've used in the past is a software called Envelopes. As in Mike, Envelopes. They do a good job as far as that's their whole concept is taking the cash envelope system and putting it to a proactive forward-looking system.

I didn't like the price tag on Envelopes which is why I never continued through buying their service, but they do a good job. That was why when I switched to YNAB, it was a better value. Once I tried YNAB again, those of you who have listened to the show and that's when I brought them on the show as a sponsor, when I tried YNAB, I realized, "Wait a second.

This does everything Envelopes does and it's a much better price point, much better deal." If you'd like to try YNAB, radicalpersonalfinance.com/ynab is the link for them, the sponsor link for them. But those tools are not necessary for everybody. You don't need to necessarily track week to week, month to month.

I do. I'm at the stage where I need to. I don't anticipate doing that forever, although I might because maybe it becomes such a good habit and I see the value of it, but if I had 10 million bucks in the bank, I don't think I'd do that. If I had 10 million bucks in the bank, I'd create some kind of just annualized pro forma big picture idea based upon my income sources.

I'd have a bookkeeper track that stuff and have the bookkeeper be the one providing controls and just give them some guidelines to say, "I'm going to look at this stuff quarterly and then let me know if I'm making a wide variation in my spending." It's going to change based upon where you are.

That's what – speaking specifically on the money question, this is what's so frustrating to people is the system that you need at 18 is not the system that you need at 68. So people often have experience with their system and they don't know how to think about somebody at a different place.

Let me give you an example just to illustrate this with an email exchange. A listener of the show named Brian emailed me. He says, "Joshua, I wanted to get your opinion on something as it relates to one of your sponsor's products. I'm trying to figure out if I'll get anything out of using YNAB.

I'll give some background on my current financial status and goals. I've been using Mint to track my finances since 2009, so I have a historical data going back to then. I have a budget set up on there that I use to track all of my monthly spending. I meticulously itemize and categorize every transaction that Mint pulls in and I check it every day.

I think it's fun. I pay off my credit card balance every month and the only loan that I have is the remainder of my student loan, currently $1,300 at a 1.62% interest rate. So I'm not paying it off in full until it's just making the payments. I max out my 401(k), my HSA, my Roth IRA, and I put any excess money into taxable investments after making sure my three and six-month safety nets are fully funded.

I live a simple life focusing on minimizing my expenses and environmental footprint. My current savings rate is between 60 and 65% and I'm aiming for financial independence at 45. Currently, I'm 34. Once I get there, I'm going to be volunteering my time and I'll probably still be earning some money with some more fulfilling part-time work.

This is where I start to question my current methods. I know already exactly where every single cent of my money is going but I'm wondering if switching to YNAB to track everything would be beneficial for an active budgeting once I'm not relying on an external paycheck. Were all my money current spending and savings habits strong enough that I wouldn't need it?

Most of the YNAB users I read about, they're focused on getting out of debt and getting their finances in order. They usually start using it at a place of complete financial ignorance but I know I'm already in a good place and there's room for improvement. So he says, "So starting where I am right now, do you think it would be a good investment of time and money to switch my finance tracking to YNAB in preparation for the future?" I don't know if a 30-day trial period will answer him.

Here was my response. I said, "Brian, it's probably not going to make a big, huge difference for you how much money you're able to save. You're already disciplined and you already have a system," I would insert here, "a system of controls that works well for you. You have a steady income and as long as you're earning a steady paycheck, you don't need the extra budgeting figures because you just don't need it.

I think it would be helpful when you leave your job and start living. Just try it for 30 days and see it. Do you need it? No. You're doing fine without it. Is it better than mint? Yes." The point was this person already had a good system of tracking and there was plenty of margin in what they were doing.

They didn't need to track every single dollar. If somebody is saving 60% to 65% of their income on an ongoing basis and they're already tracking carefully their money and they decide they want to spend something, they want to buy some $200 item, do they have to all of a sudden rework their whole budget to figure out the $200?

No. That's very different than if you're month to month, day to day and you got to figure out where do I get the $200 from to buy this item. Very, very different. The appropriate level of control has to be there at different stages. I want to briefly cover how these different types of tools are available for tracking time and for tracking food as well and then wrap up with some budgeting questions from the Patreon page.

But first, quick dashboard. So let's talk about time. Dashboard overview is where is my time going? That might be your calendar. I like to have a list of here's the number of hours that I'm spending. So here, dashboards and tracking. I've used a few tools in the past that I've mentioned on the show.

Presently, I am using something called Toggle. It's T-O-G-G-L.com, Toggle.com. What Toggle does, it's a free time tracking. They have a smartphone app. They have a web app and they have an actual program for your computer. The great thing about Toggle is it allows me just to put in what I'm working on and how much time and I have some different projects put in.

So what I track is what am I doing and then I track it. Is this income producing or is this not income producing? Because as an entrepreneur, it can be very, very challenging to stay focused on the things that make you money instead of on the things that cost you money because the things that cost you money always seem to be yelling louder than the things that make you money.

So I use that as a simple time tracking thing. That's been helpful for me as I've just tried to get a handle on now that my life is settling down a little bit and I'm able to rebuild the structure. It's helpful and I would encourage you every single year, at least take a month or take a week, two weeks or something and just kind of get a grasp on where is the time going.

Track your time and get a quick overview. When it comes to proactive planning, you have to choose, OK, how am I going to proactively plan my time? So here in the next year, my wife and I, we've sat down. We've completely reworked our household schedule. We've got my schedule changed.

We've got her and the kids are on a schedule. So we know exactly at a certain time at 1 o'clock every day and it helps so much with a toddler and a baby. The baby is a little bit schedulized. We're not hardcore on having her totally scheduled. But also it's not totally free.

But with my toddler, then we have a plan for him. So we know at 11 o'clock, here's what the plan is because otherwise what happens is you go from one thing to the next and you wander instead of, OK, at 11 o'clock, we're going to do art. At 12 o'clock, it's nap time.

At 2 o'clock, it's going to be time to go for a walk. Then it's going to be free time at the park. Here are the days we're going to go to the park and here are the days we're going to do laundry. The concept is the same whether you're running a multimillion-dollar business or running a household.

So we have – we've built out schedules and those schedules are up on the refrigerator and on my desk of here are the hours that I'm working. Same thing when you come in with proactive planning, you have to have an approach for your workday. What are the most important things that I'm going to get done first?

If you're not doing that, everything falls apart. I'll be doing I think the next show after this which will be the final show of the year. I'm intending to do a kind of a state of the show, just a little bit of a personal story. Here's where the show has been.

Here's where it's going in the next year, some of the changes I'm anticipating for 2016. But one aspect of that is when you're not on a schedule, you can't get much done. The challenge in my house, the big challenge has been because of the needs of my little baby girl, that completely upset the apple cart with regard to the show.

My average monthly show production dropped from 18-ish, 18 to 20 shows a month to – there were two months I think that had 12, eight? No, two months that had eight, 12, just dramatically dropped. Well, why? Because everything else upset the schedule. So no problem. You got to deal with the emergencies when they happen.

But that's – it all comes back to budgeting. You got to have tools with regard to food as well. So you can have simple overview tools. Hey, I've got a scale. OK, that's a dashboard. Here's my weight or body fat percentage or whatever. How you look in the mirror, I don't know.

This is where I struggle the most. So I'm slow to give advice on this. But if you look at things like tracking, something is simple. Have a system of tracking. For me, taking pictures of the food as I eat it. So at least if I could take a picture of it, I can be aware of it and I can go back through and look for patterns and trends.

Am I really overeating or am I not? Am I really eating too many carbohydrates or am I not? Just simple habit of taking a picture. Then the proactive planning is how do I make sure that the choices are there? Where are the problems? How do I budget my time so that I can cook the good food?

How do I make sure the good food is available when I'm in a bind instead of the wrong choices? You'll have to figure out what works for you. So I want to answer some questions here from the Patreon page and then we'll be done for today. I put this out, the show topic out on Patreon in advance and a few people asked questions.

So I want to answer some of those questions. Scott asked me the question, he said, "What are the pros and cons of micromanaging discretionary expenses versus having a monthly lump sum not to exceed limit? Example, food, clothing, home, pet, baby versus Costco." Scott, I think it very much depends on the phase that you're in.

If you're trying to make a change. So with budgeting, if you're just trying to make sure you don't overspend your income, it doesn't matter much whether Costco is broken out into each of those different things or if it's just Costco. You're just trying not to overspend. But if you're trying to make changes at that, you need to know what those transactions are.

So if you're looking down and you're saying, "Man, we're spending $800 a month, $800 a month on food," and you hear someone else say, "Well, we spend $400 a month," you say, "Well, that sounds a little extreme." But if Costco is at $800 a month, you're probably not just buying food.

You're buying food and you're buying a generator and you're buying clothing, like you said here, and you're buying dog food. Well, you're spending $800 a month on all that stuff, not just on food. And so if you're trying to make a change or if you're concerned, you got to drill down just to see what's actually going on.

Not on a month – do you need to every single month sit down and carefully itemize your Costco receipt only if you're tracking it for a purpose? Otherwise, it's probably not the best use of time or at least it's not the best use of time as long as you have plenty of other money and you're just kind of doing it for interest.

If you've got money, the money is flowing, there's excess, you're saving towards the big goals, I don't think you need that crazy level of detail unless you're really going for dramatic results. Food is a good example. Does every single person out there, every business executive, does every business executive need to track every single one of their micro and macro nutrients?

No, only if you're trying to pursue elite athletic ability. But if you're trying to dig in and say, "Why am I gaining weight?" It might be good to track them for a month and find out what's going on. You can draw a lot and extrapolate a lot from a month.

So that would be my answer. Joe asked, "What's a good budgeting strategy for a two-income household where one income is steady and predictable and the other is unpredictable in timing and amount? Cheers." Joe, I would say budget for the bills, the ongoing expenses off of the steady income and then budget the unpredictably timed, unpredictably amounted money for the more discretionary expenses.

And so this would be... YNAB is getting lots of plugs today, but this would be why I love YNAB. Because with YNAB, what you're doing is you're budgeting the actual money that you have in the account. And so in that situation, I struggled with this for years because I've been on unpredictable income forever.

And YNAB has made such a big difference even just to... My system was just more of a tracking system because I couldn't figure out the easy proactive system. So I would do it on the fly. I struggled for years. It's so much better now. So I would try to...

If the steady income lines up, and I've just got to figure out how much is it versus what the goals are. If the steady income lines up with the bills and hopefully the savings as well, then use the other one for discretionary stuff. And you just, with YNAB, you budget the money that's in the account.

So when the money comes in, you sit down and say, "What should we spend it on?" And you prioritize. We want to fund the vacation fund or we want to go get our teeth fixed. Okay, which one is more important? And just budget on that. But the nice thing is most of us live in a monthly society.

We pay monthly bills and that steady predictable floor can make a big difference. That's the best I got for you. Sam says, "Do you have any particular advice about how to budget for gift giving without becoming overly stingy about it?" My advice is to have a percentage of your income that you are going to give away.

Set that aside in a separate account and always have it available so that it's there for the gifts. That's what I do. Take a percentage of your income, set it aside and use it for gifts. Now, you can decide what the meaning of that category is. So is that gift, do those gifts include birthday gifts and Christmas gifts and graduation gifts or do those gifts include people on the street?

You've got to decide for that. But just figure out how much of my money, in my percentage of my income do I want to give away and then just try to give it away. That's one of the best things you can do. I have strong feelings about budgeting to be able to give and save before you do anything else.

Once you have a giving account, it totally changes the way that you view life. It helps you to feel less stingy. It helps you feel richer. What's remarkable is if you start building up some funds in your giving account, let's say that you allocate 10% of your income, household income $50,000, you're going to give away 10% of your income.

That's $5,000. That is amazing when you start to even just on that, a median income, think about giving away $5,000 every single year and you allocate the money in advance and then you have an account that always has money in it. So when you come across a need and you say, "Hey, here's a need that I can help," you start packing it up and you can make some really nice gifts just by simply allocating that money steadily over time.

That makes a huge difference in your outlook on life and it is so empowering and it's the most fun. It's so empowering. So that would be how I would handle it is decide what percentage of your money you're going to give away and get rid of it and give it away.

Look for the opportunities but give it away. Someday I should do shows on giving but for today, I'll just say it's more blessed to give than to receive. So Chris asks, "What's the best method of budgeting calories and food? I've spent over two years tuning in my usage of YNAB, which is the best product out there for money budgeting, but have not yet found a good way to track my eating.

Many of my approaches were just not convenient as I would have liked and ended up only getting a few weeks of actual usage." Maybe you can give some ideas. So Chris, on this one, I don't have a perfect system. This is my biggest weakness personally. I'm good at time.

I'm good at money. I'm not so good at food. So part of me doing the show today is to encourage myself and to push out the ideas that can be useful. I've tried some of the different apps as far as where you enter in every meal and everything. I found them so constrictive because I don't eat from a package.

Interestingly, I saw on J.D. Roth's Facebook page that he was actually telling his girlfriend – he was going to design – his girlfriend wanted to lose weight evidently and his diet for her was that he was going to put her on a packaged food diet. The point was that by being on a packaged food diet, you could use a tracking app like MyFitnessPal or whatever, something like that.

You could use a tracking app, scan the barcode and have all the nutritional data automatically installed. His point was calories are more important than anything else and so by tracking that with a barcode, we'll be able to make more options. I thought, "Interesting idea," because I can see the value.

Now we don't eat – in my family, we don't eat a lot of packaged foods and so it's really frustrating when I'm sitting there making something with food and, "Okay, am I going to weigh this and I'm making a big bowl for the family? Am I going to sit there and put these things on a scale to be able to track this?" I haven't been able to come up with that.

So what I'm convinced has the biggest difference is personally for me, overweight guy talking, take this with a grain of salt, do your own research. I'm convinced calories are not a major factor in weight. I'm convinced they're also not a major factor in health. Now there are lots of people who disagree with me but I've read as extensively as I can and I can't find the data that demonstrates that calories are the key.

So what I've been working on is adjusting the major choices. So many people seem well agreed on the fact that calories are not the contributor of weight gain, it's carbohydrates. And so each of us will have a varying level at which our bodies come out based upon the amount of carbohydrates.

So that to me is easier to track. It's not necessarily to track in an app, it's easier to track with the choices. So that's what I choose to do and so for me, I try to just take pictures and say, "Remind myself, what am I eating?" And so that way I know if I chose to eat something that had more carbohydrates, "Oh, I've got the record there." So it's not a surprise.

But you're going to have to go to someone else because I'm not an expert, anything beyond that. I would say if the most compelling book that I read on the subject was Why We Get Fat by Gary Taubes. Another compelling book was Wheat Belly. I read those books a few months ago and they both were really, really compelling.

And I knew the basic premise of them but finally I read the books and they helped me to be confident and more confident in my perspective. But there's too much of a battle out there. I don't want to get into that one anymore. Lee asks, "I'd love to get to Jesse Mecham's live on last month's income but other than cut back on spending, do you have any practical tips?

P.S. close to 20% of net income is put straight to savings so it's not like we're spending everything." Lee, I would say you're using YNAB and so one of the major premises of YNAB is live on last month's income. I didn't get that until I walked through their training and all of a sudden I realized what that little function of budgeting the income for December or January was.

And so it's very simple. If you are saving that much money, you're saving 20% of your income. As long as you've done that for five months, you have one month's income in savings. What I would do is just simply move the money into my checking account and then I would allocate – I would start putting this month's money and allocating it for next month and then I would go ahead and just replenish the savings and just adjust it very simply.

If you're saving that percentage of your income, you're in good shape. If you don't have that much money in savings, then follow the plan that they have in their budget where you set up a buffer account. What you do is in your YNAB budgeting system, you establish a buffer account and you fund that buffer account until it's equal to one month's expenses.

So the money will gradually grow in your checking account and then once it's grown to be an amount equal to one month's expenses, then you just pull it out of the buffer account, budget it and from then on, you put all the money into the month ahead. So that's the way that they do it and it really works great.

Last question comes from Victoria. She says, "How do you fit budgeting for big expenses like a kitchen remodel into your budget? I tend to stop my long-term savings for X number of months to save for big purchases but wonder if there's a better way." So Victoria, I don't know if there's a better way.

No. I would just say for me, the key question here would be getting clear on your priorities. So I don't have a lot of experience as being a homeowner for decades to where, "OK, I'm going to remodel the kitchen." I will tell you where I'm at now at my age is I wouldn't remodel the kitchen because right now, it would cost me too much money as compared to my long-term goals of financial independence.

But if I started to realize that remodeling the kitchen was a priority, then I would assess it and I would say, "Would I rather have the kitchen remodeled?" Maybe that would bring my wife a greater deal of happiness and that would be worth it. Maybe it would bring me – if I would, I'd rather have the kitchen remodeled and delay financial independence by X number of months or years or not.

I would run that calculation so that I knew. Then if I knew that I'd rather have the kitchen remodeled, I would do exactly what you said. I would just say, "OK. Right now, we're going to remodel the kitchen and this is going to be the major priority." I don't know of anything more intelligent to do than that.

Maybe some of you guys have a better system and you can help Victoria out with that. I hope these ideas have been useful to you. I know some of these things are a little bit conceptual but I think they're powerful. Just to reiterate, three major budgets, time, food, and money.

There are three major stages that we go through. First stage is getting an awareness. Got to start with getting awareness. If you don't have awareness about one of those aspects of your life, start with just getting awareness. Don't try to plan. Just get aware. Then try to do some proactive planning.

If you need or want big results, do very tight proactive planning. If you just need OK results, then do looser proactive planning. Do proactive planning with appropriate detail. Number three, set up a system of ongoing controls with an appropriate level of relaxation. If you're getting great results, you don't need to do that tight planning forever.

If you are – there was somebody I was corresponding with in the Facebook group. He said, "Hey, I'm doing great. I've done fine. I've used Quicken for years. Do I really need YNAB?" My answer was no, you don't because you don't need to do that month-to-month planning. You just need to have a vague idea of, "OK, in 2016, here's how much money I'm going to make.

We're going to spend about this much. We're going to save about this much. So I know this much about is available." It's my opinion. You go through phases and you got to get clear on the goals, put in the big rocks, get the tools that are appropriate and make sure that you're having a level of control that's appropriate for what you're trying to do.

The better the results you want, the tighter you need to make those results because mega results come from the most careful, diligent planning but that may not be where you're at. So I hope this is useful to you. I hope it can inspire you. Listen, December is a great time to be doing budgeting because you can start with a fresh years of data, a fresh month.

It's just great. So this show is going on December 17th. If you're not using a system, start with something. Sign up for Tiller. I think they still have the free code there. Maybe they still have the two-month code working. Go to tillerhq.com/radical. Tillerhq.com/radical. Try YNAB. Radicalpersonalfinance.com/ynab. Try Personal Capital.

Radicalpersonalfinance.com/personalcapital. You're getting the idea. But try something and start working on it and don't be scared if it doesn't work. I'm not going to say it's a bad idea. I'm just saying that it's a good idea. I'm not saying that it's a bad idea. I'm just saying that it's a good idea.

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