[00:00:00] Molly: Are you ready to budget like a boss? We sit down and chat with Lexi Smith who is a money coach on the gc. She used to be an ex financial advisor about how do we actually budget and what are the categories that we should be budgeting for? Get your pen and paper out. Ready, ladies? Cuz this one's a goodie.

 Hello, Lexi Smith. Welcome to the show. I'm so excited to have you on to talk to us about the B word budgeting because so many of us have negative connotations with this word. but we're gonna be breaking it down today, so welcome.

[00:01:16] Lexi: Thank you so much for having me, Molly.

[00:01:19] Molly: So Lex, I wanted to start with like, when it comes to budgeting and if you are feeling like a bit of a financial hot mess or maybe just a bit of a mess and you just feel like you don't have any control over anything.

Where is a good starting point?

[00:01:34] Lexi: just to start, just to get a blank piece of paper and put pen to paper and see what happens. So you know, logging into your internet banking and just getting the income figure, your after-tax income figure and writing that down, and then brain dumping all of your expenses. Like it doesn't have to be hard.

The hardest part is actually starting..

[00:01:55] Molly: Yeah. I love that. And I love just going back to basics as well, just going, okay, list out all the things you can think of that you pay all those expenses and then you can compare. And I actually. When you've done this with clients before, cause I know you do a lot of financial coaching, which we'll love to hear more about later, but also, um, you do like these cash flow critiques.

Are people surprised where they think their money's going versus where it's actually going?

[00:02:21] Lexi: Very surprised or rather, not so much at the category, but the actual amount. So, simple things like groceries. People think they have a pretty good idea of what they spend on groceries, and they're able to quite confidently tell me what they think they spend. And that number is usually. Far higher than they ever anticipated.

So, there's no point in coming up with a budget if the data that you are putting into that budget is unrealistic.

[00:02:46] Molly: Great. So can you talk us through kind of like the process that works for your clients when they're trying to get their budget? Cause I know I've spoken to coaches in the past and they like, they do like a budget of what they think they do, an actual budget of where their money's going, and then they do like a future budget of where they wanna kind of be at.

what's the process that you do with your clients?

[00:03:07] Lexi: I wouldn't necessarily say there is just one process. I'm a very big believer in that there is no one size fits all. So it's about gathering as much information as possible to start with, to see kind of, well, where does this client stand. What is their income and their expenses? What's their experience with money?

What assets do they have? What debt do they have? Just where do we stand today and what do you wanna achieve in the future? And then it's kind of coming up with a plan to get there. So it doesn't necessarily involve a budget. But there are certain situations and certain people that budgets do work really well for.

[00:03:41] Molly: So for anyone who's listening at the moment, you know, they might wanna kind of pause the podcast, go get that pen and paper, jot down all those expenses, what are kind of the different categories we need to be budgeting for?

[00:03:52] Lexi: So you've got your, standard kind of fixed expenses. So it's either your rent or your mortgage. You've got groceries eating out retail, and you can potentially break that down further or just use a broader category of retail. That is one area that a lot of people underestimate how much they actually spend.

I was speaking to a client recently. It's a family of four with two young kids, and they're consistently over a 12 month period spending $350 a week on retail. So that totally blew their mind. They had no idea that it added up so quickly. Some other categories would be things like utility, so water, electricity car.

So your normal re fuel servicing, parking tolls there is a lot to kind of consider in lots of different categories. You might have kids sport to consider or your own personal fitness and health pets, beauty and self care. Telecommunications. So that's like phone and internet. We've got other things like fees, interests, and fines.

So that's something that people don't necessarily budget for. You don't want to be spending money on that, but if you've got those things happening you can't ignore them. Alcohol, that's another area that is in a lot of people's expenditure. Subscriptions, the chemist, donations. This is something that I try to always highlight that I see a lot of people who are making donations to charity but they're not putting their own oxygen mask on first. So I would encourage anyone that has high interest debt when you are reviewing. Your budget or your spending plan or whatever name you want to give it reflect on that and put your own oxygen mask on first.

So it may be canceling some of those subscriptions or donations and that kind of thing until you're in a better place, at which point you can restart them.

[00:05:44] Molly: Yeah. Fantastic. so when you do have those one off big ones, like, so we've got the car registration, maybe the insurances, things like that. What is a good way to budget those? Do you kind of just work it out, divide it by 12, and should you be keeping that money kind of somewhere separate where you can't touch it?

[00:06:01] Lexi: What works for one person won't necessarily work for another. I did see on our registration papers that came in this week, there is now the option to do one month direct debits, at least in Queensland for Red Joe. So that might be an option for some people rather than having that. Annual or six monthly larger expense.

Generally you pay a little bit more to be able to pay that way. So I guess that ties in with how many bank accounts people wanna have. So I'm someone who can quite comfortably just have one bank account and that's okay. It works for me. And then I've got other people that I've seen that have 21 bank accounts.

So, if you are one to wanna allocate. get your bigger bills, divide them by 12, and make sure you're having that amount transferred into that account. That's certainly an option, but it's not gonna work for everyone. So it's about working through the different methods and ideas out there so that you can finally find something that just works for you.

[00:06:57] Molly: Yeah. And I know Barefoot made that bucket. You know, having those different buckets really popular. When he bought out his booked Barefoot Investors, sorry, Scott Pape. although sometimes, you know, that does work beautifully for people. For other times it won't work beautifully for people. And I know from like speaking to different members, like a challenge they find is not kind of moving money from an account to account.

So being like, oh, I've spent all the, plane money, all the fun money, and now I'm kind of pulling from that living expenses where I have been budgeting and putting my car insurance, my car rego and then all of a sudden they're out of whack when it comes to, paying those, those bigger annual.

Bills, 

[00:07:36] Lexi: if that's something that you're experiencing, I would suggest that maybe what you've got set up isn't really working for you it's not you that's broken, it's the system. So either reassessing what amounts that you've got allocated to certain things or just trying something completely different

[00:07:52] Molly: and Rachel Cruz in the us. She's the daughter of Dave Ramsey. Who is kind of like, the American, slightly more religious out there version of Scott Pape . But she always talks that it takes around 90 days to sort out your budget. So this isn't something that you're gonna do and you've automatically got, oh, my budget's done.

Like, it takes work and the great thing with your budget, It's your budget so you can move money around, like, you know. And I really love how you say, you know, what works for one person isn't gonna work for the other person. So with special occasions, I know we can sometimes forget special occasions into budget for special occasions and that can blow out the budget a little bit.

So what do you do for special occasion? Anniversaries, Christmas, kind of Easter holidays. What do you find works well for you or your clients when it comes to making sure you remember to budget for these things?

[00:08:48] Lexi: Sometimes I think that budgeting for things like special occasions actually keeps people in a bit of a pay cycle, you know, paycheck to paycheck cycle which might be a little bit of a controversial opinion, but in my opinion, you do not have to spend a lot on a special occasion to have a really happy joy.

Occasion. I think so often we're on Instagram, we're seeing what other people are doing. We're trying to keep up with the Joneses and give out, you know, we want the best for our children, as an example, but that doesn't necessarily mean buying them copious amounts of gifts or spending a huge amount on them at Christmas.

So kind of re-evaluating your values and making sure that any money that you're spending. It's to make you happy. Not necessarily to have a facade of, how you wanna be perceived.

[00:09:38] Molly: I love that. And I know this is something that we're quite aligned on where it's like we value experiences over lots of things in our lives, and I think at Christmas as well, like even with my family, we just stopped doing Christmas presents because we're like, we don't need more things in our lives.

and likewise for we just kind of give cash and I'm always like, buy investments. yeah, and then with friends now we just do a massive secret Santa. So you're just buying one thing because you know, when people just give you like something small and it's so sweet.

Or when, you know, people offer to send me stuff, I'm now just saying like, thank you so much, but I'm trying to reduce how much I keep in my life and I'm trying to be really mindful of what I actually have in it. Because otherwise, it just piles up and then you don't have space. You're trying to organize it.

Manage it, 

[00:10:23] Lexi: I'm really conscious as well of, landfills. So, that's something that is really important to me to try to limit my contribution to land landfill unnecessarily. So, yeah, reducing the amount spent on things like that. I am, as you said, totally in alignment with.

[00:10:40] Molly: So for anyone listening, we've got our piece of paper, we've written down our expenses, we've downloaded our bank statements. You have a little nifty trick where you can actually download your bank statements, don't you?

And you can kind of, work out how much you've spent that month quite easily.

[00:10:55] Lexi: Yeah, it's a pretty easy process. Jumping into internet banking. You do need to do it on a computer rather than your phone on the app. Navigating to transactions, changing the date range to whatever period you're looking at. It might be one month, it might be two month. Six months, a year. And then exporting that as, generally it's labeled as a CSV file, which is just a spreadsheet.

So, actually getting that data out into something that you may not have used a spreadsheet for a while. You may hate spreadsheets, you may love spreadsheets, but just getting that data out and just having a look at it, and there's some, as you say, really simple things you can do, like ordering the transactions by either amount or the expense rather than the date.

So you can kind of group all expenses together. So it might be grouping all your Woolworths transactions together and looking at what you're spending on groceries that kind of.

[00:11:46] Molly: Fantastic. And how important is it that you do that pre-work? So you actually look at, okay, what am I currently spending before you kind of put together the new spending plan or the new kind of budget?

[00:11:57] Lexi: In my experience where budgets tend to fail is because that data that's been input it's just not realistic. So getting that data first and looking at, well, where has your money been going? And then translating that into a budget to see, well, do you have a surplus? are you earning more than you're spending?

Or do you have a deficit? Are you spending more than you're earning? it's really important to just get the actual real data rather than making assumptions.

[00:12:24] Molly: okay, piece of paper done, bank statements downloaded, going, okay, wow, I'm spending, you know, X amount on cheese. I had no idea. you have a bit of a system to actually kind of work out what are those, kind of needs and wants Once.

[00:12:38] Lexi: Yeah, so it's called the traffic light activity. And it's super simple. You don't have to do it every month or anything like that. It can be a one-off thing that you do, but it can be really eye-opening. So for those who don't necessarily Want to get down into the detail but wanna reflect. we have three different colors that we highlight our transactions.

And normally we'd only do it for say, a one month period. So if there's any transactions in your one month period that you had to spend money on. So it's groceries, it's the electricity bill, it's the rent, things like that. You highlight those green, they. fine. Totally. Okay. Expenses. On the flip side of that, you've got the red transactions, so that might be things that when you are reflecting in hindsight, you wish you hadn't have actually spent that money.

So for me, , I bought some smoked salmon for my lunches and never ate it. I regret that purchase. But it might be that you didn't impulse spend or that you spent more than you planned on something.

And then you've got the orange expenses. So the orange ones are, it's debatable. It's not necessarily green. It's not really red, it's somewhere in the middle,

[00:13:45] Molly: okay, so once we've done that, then looking at ways of going forward and managing our money, we can do it obviously, like in a spreadsheet, an Excel.

That's not how I personally work. I'm not a big spreadsheet. Person. I do like apps and I know there's, we Money and Follo are some great free apps out there. Or, you know, some people, they set up the bucket method as well that was made famous by Scott Pape Barefoot Investor.

 Looking at a couple of those different methods, could you maybe just break down you know, what is the 50 30 20 method zero based budgeting method? And I, I know I'm giving you lots of questions here, so we'll break them down. But also really interested to hear, like from all your clients, if you had to kind of look at the data, what works best for them.

And I know everyone is different, but like, if you had to say this is what I'm seeing is popular and working for clients at the moment, what way is.

[00:14:36] Lexi: So in terms of what is more popular I'm a big advocate of mindful and intentional spending, which is where you don't actually have a budget but you really think twice about every single. thing that you spend money on and really assess whether that's moving you closer to your goals, whether it makes you truly happy.

When you've got things that are like the 50, 30, 20 method, that is another loose way to do things whereby you look at your income, it might be $5,000 a month and you work out, well, 50%. , which is the 50 part of 50, 30, 20, goes towards your needs.

So it's things like housing groceries, bills. Then you've got 30% going towards your needs. So that's things like eating out retail might be hobbies. And then the other 20% is meant to be allocated towards future use. So it might be savings, investments, or even extra debt re. So that 50, 30, 20, it doesn't have to be 50, 30, 20. It might be 40, 30. 30.

 And then you've got the zero base budgeting. So the zero base budgeting is giving every dollar a job. So of those $5,000 every single one of those dollars gets a job. So it might be towards certain bills or certain goals, but at the end of the day, you've got nothing left because everything has been allocated.

Everything has got a job. So they are a few different ways that you can do things. So reiterating again, what works for one person won't necessarily work for another. If what you're doing now isn't working, try something else. Reach out to either a financial counsellor or a financial coach and see what other methods they might suggest based on your particular situation

[00:16:21] Molly: and I always love hearing how. Different people budget. So also feel free to head over to our Facebook group, Ladies Finance Club Money Chat, and let us know how you budget in there as well. I know for me personally, I do the 50, 30 20 rule, but not necessarily those exact percentages.

but I do have a number of different accounts. I have an account. For my goal, which is to buy property. So to buy a house, I have an account, which is just for my living expenses. I have an account, which is just for my fun money and I've set it up. So every week New Fun Money hits that Fun money account.

So I know how much I have to spend for a week. I tried to do it for a month, but I just went bananas in the first week and we just try and like spend all the money. And then another one for those expenses that I just wanna keep an eye on. So like my. Food, fuel and some of those incidentals as well, just so I know I'm coming close to kind of going over those ones.

 So what kinda mistakes are you seeing people make with their budgets? Lexi, I know I see some common ones, but yeah, was really curious to find out. What do you see?

[00:17:23] Lexi: Typically, the people that I'm in front of, they either don't already have a budget or they're not interested in having a budget. So I wouldn't necessarily say I see a lot of budgeting mistakes apart from the ones where they've got everything listed out. But then when we look at those transactions, when we download that transaction history, They are not aligned at all.

The numbers just are completely different

[00:17:47] Molly: yeah, I mean, a couple I see as well as people forgetting about budgeting for like special occasions or forgetting to budget for, holidays and things like that. And then also not having an OMG fund or an emergency fund so when something happens, they have to either put it on credit card or they have to kind of put their budget out of whack to pay for that thing.

and another one I see which I find quite common is just when someone has no goal, they're not saving for anything. and they're just kind of frittering money away because they're like, oh, well, I've got income. It's there for spending.

And when there's no clear goal, that's where I find people's budgets kind of can be out of whack cuz they've got no accountability, they've got nothing that's driving them towards a certain goal.

[00:18:30] Lexi: It's that balance between YOLO and, you know, achieving those bigger life goals, even if you don't necessarily have them written down. everyone has something that they're striving to achieve.

[00:18:40] Molly: so with bank accounts, how many bank accounts should you have set up, or minimum should you have set up?

[00:18:46] Lexi: A minimum is one, somewhere to get your income . I know I keep coming back to this, but there is no right number. You might read articles to say that there are, but in my experience, there is no one size fits all. It's a bit like saying what's the best way to exercise.

Like is it the gym? Is it at home? Is it a boot camp? Is it walking? Is it dancing? No one size fits all. So in terms of the number of bank accounts, I would say the client that I had that had 21 bank accounts, that was a huge mess and it was not working for her. So I think 20 is too excessive. 

So anywhere between one and 21, I would say.

[00:19:19] Molly: And what is the difference between a money coach and a financial advisor? Just really quickly.

[00:19:24] Lexi: Yeah. So, we've touched on financial counseling. Financial advisors can give you advice on what to invest in, what super contributions to make what insurance you need to have. And the cost associated with that is $3,000 plus. Typically financial coaching is a much more affordable way, but you're not given specific advice, so it's more around cash.

And accountability. But you can have a session for $150. So it depends on where you are at as to what type of service you might be best suited to.

[00:19:56] Molly: Awesome. And what's one of the craziest things you've seen money spent on? 

[00:20:00] Lexi: that is a very good question. Something that really sticks in my mind was a client that I had, whose after tax income was $50,000 a year and she had spent in a 12 month period nearly $11,000 on apps and games on her phone. 

Uh, so that's about. Yeah. And when I say I've seen it all, I really mean I've seen it all.

So if anyone's feeling like embarrassed or not wanting to kind of face all of this I would strongly encourage you to just reach out because I guarantee you I have seen much worse. 

So that was, yeah, will stick in my mind for a long time, 

[00:20:40] Molly: Yeah, definitely. Wow. And now we've got some questions that we're asking all our speakers. So the first one is what is a recent purchase you regret?

[00:20:50] Lexi: apart from the smoked salmon I was in an op shop the other day dropping off. And stuff. And I saw some gems in there, like really, really cheap designer stuff. And so I thought, oh, beauty, you might be able to resell that bit of extra income just for the fun of it. And I have not found the time to resell that stuff.

So now it's in my house and I regret buying it.

[00:21:12] Molly: That reminds me of a, something I've bought recently. I was in a op shop as well and there was this nice green top from seed and I was like, oh, what a find. But I didn't have time to try it on, so then bought it, got home, tried it on, looked horrendous. So now I've just gotta take it back to the op shop. I was like, ah. That was a learning. 

Um, 

[00:21:29] Lexi: Well you supported that charity.

[00:21:31] Molly: I did. Exactly. You know, just, just donating. And how do you, I know we've spoken about this, but just cause we're asking all speakers, how do you budget spreadsheet, head app, or buckets?

[00:21:41] Lexi: I just do my annual cash flow critiques for our family. So, looking at the real transactions in the last 12 months and reflecting on those.

[00:21:49] Molly: Awesome. And where did you grow up and did you think you would ever end up in a career talking about finance or teaching women about how to be better with money?

[00:21:58] Lexi: I was born in Sweden, grew up on the Gold Coast. And there was a period where I wanted to be a forensic investigator. I think I was watching too much c s I as a kid. But then probably since about year nine of 10, that's when I decided I was gonna be an advisor did that for 10 years and now doing financial 

[00:22:14] Molly: What's the best piece of advice you got about money?

[00:22:17] Lexi: I'm not necessarily sure it would be the best, but the one that has always stuck in my mind, and it actually came from my mom and she said, if you. I have to lay by it. You can't afford it. And so that translates into today's language. If you have to afterpay it, you can't afford it. And so that one thing always in your mind, if you can take that on you'll probably see a big change in your finances.

[00:22:40] Molly: What is the best piece of advice you wish you had listened to but you didn't?

[00:22:45] Lexi: With my daughter first born, people told me like, embrace being nap trapped. And I was like, I did do that, but I also tried to like get her to sleep in her own bed in the day and stuff. And the second child, I'm like, I am embracing being na trapped. So I wish I listened the first time.

[00:23:00] Molly: Ah, love that. What are some of your favorite podcasts, or what are you reading at the moment?

[00:23:06] Lexi: if you don't already listen to this, Molly, you have to listen to it. It's called Clutter Bug. So it's all about decluttering and organizing your home and ties in with our values about adding to landfill and not having all that stuff because, you know, that's a big weight on our shoulders.

So if you haven't ever listened to Clutter Bug she's in Canada and really easy to listen to, 

[00:23:25] Molly: awesome. We'll check it out. And if you had to be in a reality TV show, what would it be?

[00:23:30] Lexi: I have not watched reality TV since I was probably in primary school, so the only reality TV show that I actually know that I've watched is probably a big brother, but I'm not sure I would want to be on it.

[00:23:40] Molly: Handing out Money hacks left, right, and center and Finally, real quick, and finally a life hack that you love that you don't think many people know about. For instance, mine was watching videos back on double speed or like having a password manager, that kind of stuff.

[00:23:55] Lexi: I thought that everyone knew this and did this but apparently they don't. And boiling the water in a kettle before adding it to your saucepan for things like pasta. When you've got kids at your feet annoying you, that is like total game changer.

[00:24:10] Molly: and where can people find you in the great big wide world?

[00:24:14] Lexi: On Instagram, au. Or I do have a Facebook group too, the Savvy Sisters on Facebook. So yeah, come and join 

[00:24:23] Molly: Fantastic. Thank you so much Lexi, for talking all things money, budgeting with Ladies Finance Club, and we'll pop in the show notes where exactly you can find Lexi online.

[00:24:33] Lexi: Thanks so much, Molly.