Spencer’s End of Year Review | Military Money Manual Podcast Episode 16

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Make sure next year is your most successful year yet with the timeless financial freedom lessons in the Military Money Manual, available now at militarymoneymanual.com/book The end of the calendar year is an excellent time to review your progress, success, and failures over the past year. In this episode Jamie and Spencer dissect Spencer's “State of the Money” address to his wife.

We also discuss:

  • What's a “sinking fund” and how to use it to stay ahead of infrequent but predictable expenses
  • How Spencer analyses his income, expenses, investing performance, and 
  • How to set financial and non-financial goals for the next year
  • When Spencer rebalances his portfolio and why
  • Focusing on actions that move the needle
  • Using the Pareto Principle to focus on the 20% of efforts that produce 80% of the results

Learn more at militarymoneymanual.com

Military Money Manual Podcast Episode 16 Links

Military Money Manual Podcast Episode 16 Transcript

[00:00:00] Spencer: Welcome to the Military Money Manual Podcast.

[00:00:08] Jamie: Welcome to another episode. We're excited this week to talk about the annual state of money and kind of wrap up the end of year and look forward to next year. I'm Jamie and I'm here with the founder of the Military Money Manual, the Author of the new book, Spencer. And today, like I said, we're just going to talk about wrapping up the year, how to look over what's happened this year and then look forward to next year and setting goals, things like that.

Before we do though we want to thank all of the listeners of the podcast. We've had a really great response to the podcast so far. 

Spencer, what's it been looking like? What's the response like, and are people. Are they listening or are we just wasting our time here? 

[00:00:47] Spencer: Yeah. Thanks Jamie. Yeah, it's actually going really well.

So we just crossed the 4,000 total downloads mark, which is a completely arbitrary number, but hey, that's a lot of people.

[00:00:57] Jamie: Sounds cool.

[00:00:58] Spencer: I don't know. Yeah, we've got so every, we drop the episodes every Monday, and if you look at them, just a little behind the scenes, I can look at the stats and it looks like we've got about a hundred subscribers right now.

Which is pretty good for a podcast. That's just being produced by two guys who barely know how to podcast. I'm pretty excited about the growth of the podcast. And I've been getting a lot of emails too. I think one thing that podcasting really adds to the conversation is just the human connection of your voice and my voice. And it also provides another means for people to get the message. Financial independence while they're driving to work, while they're working out, that's the beauty of audio, right? Is that what you can do, be doing something else and listen to the podcast at the same time.

Very successful so far.

[00:01:46] Jamie: Good, that's awesome. Very exciting to hear. Last week we Talked about the official release of the book. The Military Money Manual hard copy has been out and I was one of the first ones to receive my ordered copy and it looks sharp and a good response to that so far. And have you been seeing some orders on that as well?

Good success.

[00:02:07] Spencer: Yeah, the book has been a great success, I think so far. So we're almost up to our hundredth order, which I'm super stoked about. Maybe we'll have some kind of giveaway for the hundredth person to order the book. You can get it at militarymoneymanual.com/book and use promo code “podcast” and get a special discount just for listeners of the podcast.

But it's been, it's pretty awesome. I've got a team of little elves in Asheville, North Carolina, who are shipping the books out, media mail to everybody. And they've been including some bookmarks and stuff, which you can throw into the hardcover book there and I've got a copy here, which you obviously can't see because we're on audio, but I'll tap it against the mic.

So there you go. But yeah, it just looks, Jamie's got a really good, unboxing video on his Instagram. And I think I shared it on my Instagram as well. So that's another good place to find out information where I think we're doing a giveaway right now too. Or at least my publisher is.

When does that end? That's a great question. I don't know if my publisher handles everything,

[00:03:07] Jamie: But look at the Military Money Manual on Instagram for Military Money Manual.

[00:03:11] Spencer: Yep. Military Money Manual on Instagram. And we're giving away three copies of the book. I think it ends at Thanksgiving.

So make sure you check it out soon. And if you have any reader questions or if you want to share, tag me on any, anybody who gets the book the audio book is nearly complete and the digital copy, the ebook are also nearly complete. It's funny that the digital versions would actually take longer than the hard copy version, but I guess that's, I guess that's a publishing today and those are coming out, they will be available by the end of November.

So look for those coming very soon. Again, militarymoneymanual.com/book exclusively available there right now, possibly available Barnes and Noble, Amazon in the future, but the best place to find it and the lowest price you'll always find it as militarymoneymanual.com/book use promo code “podcast” to get a special discount.

So Jamie, before we jump into today's episode, I know that we got a reader question here. If you've got a reader question or email info@militarymoneymanual.com. But the question here that we got was let's say the other day, actually.

So Jamie, you sent me a screenshot from a Facebook group that you're in. And somebody was asking about a sinking fund. Which is a concept from YNAB or you need a budget. So I, it's a little bit different than emergency fund. Can you elaborate a little bit on the sinking fund? I think I've been, I actually think I talk about this a little bit in the book, but I didn't call it a sinking fund.

So what is a sinking fund and how can you use it? 

[00:04:52] Jamie: I think Dave Ramsey may have started the term or maybe popularized it, but it's basically just a way to save for future expenses. So if someone's asking what a sinking fund is and how do I use it? Let's give an example for that. So let's say in five months from now, I know that I need to spend $800 to buy four new tires for my car.

So then I could just simply take that goal of $800 divided by the number of months I have. Yeah. Divided by five in this case, and I know that I need to save $160 a month in this case for the upcoming expense, and that prevents it from becoming an emergency. And that's why it's different in the emergency fund and separate.

So this is for known and planned expenses that, at least an approximate dollar amount, an approximate time of when you're going to need to spend it. And versus an emergency you were not expecting that comes out of nowhere. So completely separate from the emergency fund because it's planned stuff.

It can be a line item in your budget or your budgeting software. If you do that, or it can just be something that you have in mind. Even some of the high yield savings accounts on your online banks may be able to let you have different pots of money inside of your one checking or savings account.

So you might be able to just earmark some of the money in there for that. If you pay your car insurance on a six month cycle and that $500 and $700 bill is coming up, you could use a sinking fund to tackle that. It could work for Christmas, but vacations, car repairs, anything that's known in advance.

But what I want to stress, though, is as you grow in your journey towards financial independence, you'll start to find and have a sense that you have fewer emergencies because you have that planning covered. You have more cushion, you can foresee stuff coming up better. Or just have more cash flow to cover the pop up expenses.

You don't actually have to dive into your emergency fund. So that's the summary of a sinking fund. So think about what expenses may come up for you in the next six months, the next few months or a year from now that you could save for a little bit each month. And in the book, I'll Teach You to be Rich.

He talks about the average age of when you get married and the average cost of a wedding is something like 26 years old and $28,000 or some that seems crazy expensive to me. But he was basically saying you could do it. Sinking fund, like approach, even if you're not engaged yet to have your wedding paid for about the time you get there and the earlier you start, obviously the less you have to put in per month.

So that's the summary of a sinking fund, whatever you want to save for, you can put a little bit at a time. Anything to add on that, Spencer. Yeah, I actually do that. I just don't call it that

[00:07:14] Spencer: I do. Yeah. So in the book I talk about it's actually, if you have a copy at home, turning your hymnal to page 52 but I say I recommend having multiple savings accounts.

Here's a few ideas of the accounts I've had to save for specific goals. So an emergency fund and then a holiday and birthday gifts. So that's one that we used to do where we would put a hundred dollars a month into a Christmas fund. And then when we got to December, we had $1,200. To spend on Christmas gifts, which is awesome.

Auto repair insurance and utilities. So one of the things that, you know, is like with auto insurance, it's usually every six months and it's usually a couple hundred dollars. Now, we just have a kind of floating dollars in our checking account that can cover that expense. But back when we were.

Not making nearly as much money as we are now. We had to set aside a hundred dollars a month for auto insurance and it just went into an auto a, like you talked about opening up a sub account in USAA, I think was the bank that we were using at the time. And we would just auto deposit a hundred dollars a month into there so that we would have $600, when the time came to pay the auto insurance also for auto repair. It's a little bit of. Just. Moving, digits around the screen, but rather than having a $10,000 Emergency fund we would just that we would pull auto expenses out of we actually just had an auto expenses account And I would try to keep it at about a thousand dollars because oil change tire rotation new tires It all just adds up and if it ever dipped below, $800 or so then I would just put money back into it until it filled back up to a thousand dollars Charity fund.

That's another one that we've had in the past. I know that you guys do your charity donations monthly though, right? Yeah, it's just part of your budget. Yeah. And then travel vacation funds. So that one's been huge for us. We actually called our love fund. Because that's, that's one of our, I think it's not one of the official five love languages, but traveling and going to new places and exploring new foods and.

It's hard to remember venturing together, adventuring. Exactly. It's harder to imagine how, or remember how good it was before COVID. But, we, like when we were, we lived overseas for two years and I think, and just in the 2019, just in the first six months, we went to 18 countries or something insane.

That's crazy. That's awesome. Yeah, it was great. And that, but that's not cheap, right? So we, what we did is we made sure that we set aside money and that was, cause that was our priority. We wanted to go do that travel. So yeah, I, like I said, I talked about a little bit in the book. I don't call it a sinking fund.

There are those predictable expenses. That will always come up, especially for any kind of, if you got a house and you're not a renter like you own the house, you gotta set money aside for that because there's always something that's breaking. There's always something that needs to be repaired.

And if you have the money there, it just makes it so much easier. Like when your car broke down like we talked about in the first episode. It was easy because you had, yeah, you had to dip into your emergency fund for that. But for me, I would just dip into it, it would probably come mostly out of my auto expenses fund and then the rest would come out of my emergency fund.

So just having that, and then when it, when the account says, auto expenses, And you're pulling money out of it for an auto expense. It's just, it's psychologically easier to do than if the account says, Christmas money and you're pulling money out of it to pay for an oil change or whatever.

I think that's a lot easier to do psychologically.

[00:10:33] Jamie: So yeah, Christmas is coming up soon. You mentioned that. And I think that's one that kind of seems to sneak up on people a lot every year and same day every year. We talked about debt several times in previous episodes. And if you, especially if your budget is tight and you live paycheck to paycheck or you're or behind You have to plan ahead for stuff like you, you have to do something for Christmas, right?

Even if you're in debt, we want you to express your love for your family and your close friends by giving gifts. It doesn't have to be extravagant, but you need to set some money aside monthly then to give Christmas gifts, for example. It's a really good example, but I thought that was a good question and something that's a great concept and a kind of a technique of budgeting and the journey towards financial independence that can help people out even if they didn't necessarily know it by that term. Again, if you have any questions, keep sending them on the blog on social media or info@militarymoneymanual.com. All right. 

So Spencer, let's get in the meat of it now. We're going to talk, like we said, this is going to be a two part episode or two part series about wrapping up the end of year and looking forward to next year.

So what do you do as we approach the end of the year? As far as finances go, what are you looking at and how do you handle that kind of end of year review?

[00:11:52] Spencer: So I run my family budget. My family finances just on the calendar year. It's just easier for me. December 31st is when the tax year ends.

January 1st is when the new tax year begins. It's just so much easier to run it that way. So what we do is as we get towards the end of the year I generate a PowerPoint presentation for my wife every year in December we call it the state of the money. It's like the state of the union address that the president has to give Congress every year.

And because day to day, she's not involved in our investment decisions. I will run any changes by her. For instance, recently I've been looking more at cryptocurrencies, which is not something I thought I would ever be saying, but maybe I've been listening to the right or the wrong podcast. And now I'm thinking a little bit heavier about cryptocurrencies.

And so some of the things that I review for her are our total income from all sources. So we make a little bit of money, obviously, off of selling the Military Money Manual book. We have my military paycheck. She has her paycheck. And, like when we got the, The checks from the government for the various what do you call it?

Stimulus or what? Stimulus. Yeah. Stimulus payments. So there's just all this oh per diem. Per diem is a huge one. I think last year I made over five figures and per diem. Nice. jUst from a single trip, a lot of times, guys in our profession will make over a thousand dollars and if they're not spending all of it, or even if they are spending all of it, that's still income.

So we'll go over the total spending for the year, the total income from all our different sources. And then the biggest things that I like to hit are, I just focus on our biggest spending categories. That I'm a big fan of the Pareto principle, focusing on. The $80 percent solution, focusing on the big three categories that take up $80 percent of our expenses and typically for us, that's housing.

So we live in Hawaii currently and it's expensive to live here. It actually takes our entire BAH. Transportation is actually pretty cheap for us because we paid off our car years ago and it's a very low gas mileage. But you only have one travel. Yeah. And we only have one car in a, as a married couple, we're a one car family, which we've been for our entire relationship.

And then taxes actually take a big bite because my wife's pay obviously isn't tax advantage, like a military paycheck is. And because of my duty location, I don't get tax free that often. And I'm getting more senior in my rank and years. So starting to make more taxable income. What we'll do is we'll just hit the big categories and talk about are we happy, right? Are we happy with what we're spending, like our by the time we leave Hawaii, we'll have spent over $150,000 on housing, just over $150,000 on rent, right? So should we have bought a house? Would we be, $10%? Into paying off of a house in three years and what we've decided is no, like not there, not in Hawaii.

It's crazy here. We have moved furniture in here that has been with us for years and it's falling apart in less than three years because of the humidity, the salt. And just the heat and the house we currently live in doesn't have air conditioning. And most of the time, most of the year it's fine, but guess what?

It gets pretty hot in Hawaii when the trade winds are blowing, it can be pretty warm. So we just like address, and then for the little expenses I don't know, maybe let's say like $2,000, for us, it'd maybe be $2,000 a year on Amazon. We just let that slide, maybe we'll talk about it briefly, but if it's not going to make a material difference on our quality of life, or if it's not, if it doesn't affect the bottom line, if it doesn't move the needle, that's a phrase that we'd like to use a lot.

Then we just move on and we just focus on the things that are actually going to move the needle. Other things that we address in this presentation that I give my wife are our investing goals. Like what net worth we started the year with, what net worth we were trying to get to what we actually got to.

And so much of that is dependent on the stock market, right? Something that's completely out of our control. So a lot of times we'll talk about savings rate instead. And Hey, like we set out to say 40 percent of our paycheck this year. And we did, we saved 40 percent of our income and, or we saved 4$5%, we even beat our savings goals.

And we'll provide, I'll do a net worth update. So I'll say, Hey, December last year, this time we were worth this and December this year, we're worth this. And I'll talk briefly about the investment returns, but. I'm a 99 percent an index fund investor. So whatever the stock market did that year is whatever the S and P $500 did that year.

I'll be within a percent or two of that. So it's actually, it's pretty boring other than just be like this is crazy. Like we've put this money in here and now it's grown 30%. And we didn't have to do anything. That's the magic Of stock market investing. Charitable giving is a big thing.

And that's something that we actually do coordinate a lot on and talk a lot about is giving to different organizations. One that we've really enjoyed supporting in the last two years is charity water. That's charity colon water. If you're if you're Google or you just type in charity water, it'll pop up as well.

But we are a fantastic organization, extremely transparent, 100 percent of all their donations go to supporting their projects. So all their overhead is covered by what they call, I think it's called the well, and it's a group of millionaires and billionaires that essentially pay for all of their overhead.

And then, every donation they get from the regular people goes straight to projects and it doesn't cover any of it. So they're a hundred percent to projects. Yeah. So we, and it's we, sponsor this project. He can, but I'm just going to talk about charity water for a minute. Cause I'm very passionate about them.

We sponsored two projects in Cambodia and one of them was a or we were involved with two projects in Cambodia and one of them, sorry, both of them were bio sand filters. So they pour in dirty water on top of this giant contraption, which doesn't actually take any energy. It's all just like sand and stuff and outcomes, clean water at the bottom.

And it can do a couple hundred liters an hour and it's helping like something like crazy, like 600 people or whatever,

[00:18:13] Jamie: And the village that probably had no clean water resource before

[00:18:17] Spencer: Exactly. So Cambodia has tons of water. They actually have too much water, but so much of it is dirty and so they just need a way to clean it.

And so that's what the bio sand filter does. And they partner with local organizations. So the, so it wasn't just a bunch of, how they were going out from America and building this thing. No, it was all just locals. So we employed people in the local economy and they built this bio sand filter project.

And they also, they built like four bathrooms at these schools where like kids didn't have bathrooms before. So it's just a, it's a really cool project, really cool organization. And they sent us pictures of the kids with the bio sand filter from the schools and the GPS coordinates. So you can go on Google and you can like zoom in and see okay, there's like the local temple, there's the river nearby.

There's some rice pad, like you can see exactly where it is. And it's just a really neat organization. We're big fans of charity water.

[00:19:12] Jamie: So I have a question about that. So a lot of times when the end of year is a great time to look at donation and charity and giving back to the community, to the world or whatever.

What makes you guys give a portion or a substantial portion of your income and your savings to charity. And why do you recommend giving some of your hard earned money away versus just hoarding it all for yourself?

[00:19:36] Spencer: Peter Singer was a big influence on me. I'm a very rational guy. I like logic and people to lay out an argument in their different favorite, in whatever they're trying to save. So one of the organizations that I've been really attracted to is effective altruism and givingwell.org and then The Life You Can Save and The Life You Can Save was a, it's a short book. You can get it for free. I think it's The Life You Can Save.org. Yep. It's right here. And. It just basically lays out the point that like, if you live in the West, if you are wealthy enough to be listening to this podcast right now, you are in like the top 5 percent probably of global wealth. I don't think you realize how poor the rest of the world is until you really start traveling a lot and you recognize that.

Oh, like just having running water in your house already puts you in the global top 25 percent right there to clean wanting clean running water in your house. I don't know what the percentage is, but you are solidly some of the wealthiest people in the world. Yeah, so it was really, The Life You Can Save.

I actually, they, I think they had it on audio book for free downloaded it, listened to it. And it just basically lays out the argument of if you live in the West and you're wealthy enough to have internet access, then you're probably wealthy enough to help out the most poor people in the world.

People live on less than $1.90 a day and that's purchasing power parity adjusted. So think of what you 2 in Thailand, for instance, right? Like you could buy dinner usually. And yeah, but people live on less than that a day. In many countries in the world. I think we just looked at Madagascar as one of the countries that we're looking at supporting next year for a charity water well, and it's like the average annual income is $400 a year or something insane.

[00:21:38] Jamie: Yeah, that's cool. I think it's really nice to have something you're passionate about. Obviously, you guys are really enjoying the water thing. So whatever it is, the end of year is a perfect time to look at, how are we giving? Are we giving? Sometimes when politicians release their tax returns and they're like multi millionaires and you're like, you only gave 2 percent or whatever, and not to get political at all, but like you're a millionaire and your public servant, can you not give, and that's obviously not directed at anyone that happens a lot. With, when it comes out with usually politicians, but any kind of celebrities that aren't donating a lot. So I think you can make a big impact even at our level or at.

The level of you as a listener doesn't underestimate the power, just giving back. And you talked a couple of episodes ago about karma, like whatever you want to call it. It's just good to be a good citizen of the world and a good human and help other people out that need it.

[00:22:36] Spencer: Yeah, absolutely.

Paying it forward and so much of whatever success that you have in life. Is luck. The more successful I feel like I become, the more I just have to attribute it to luck and timing. Like I was born in America, I was born in New England. I went to a pro. Like I didn't choose my parents.

[00:23:00] Jamie: I wouldn't call you lucky for being born in New England. . .

[00:23:04] Spencer: But just the fact that like you out there right now listening to this podcast are in the US military. You have so many advantages over 95 whatever percentage, pick your percent, at least 80 percent of the world would probably kill to be in your position right now.

And So if you're not capitalizing on that, and if you're not like reaching down and pulling everybody else up to, with you, then I think you're doing it wrong. I think you're actually committing a moral wrong if you're not helping the less fortunate and, we should.

Maybe we should start a separate podcast on charitable giving and, what are what are we called to do as humans to support each other from every perspective, religious, non religious, moral and ethical, but I think charity, I think the end of the year is a perfect time to count your blessings and to share those blessings with others around you.

[00:24:01] Jamie: Part of the end of year review can also be non monetary to get us back on track a little bit. Even though we're pretty far into this episode and haven't made much progress, what are some of the non monetary things you guys talk about at your end of year State of the Union address?

[00:24:17] Spencer: So we really want to focus on the monetary goals that are so automated for us.

It's not even, it's almost not even worth talking about, right? Because we're going to say 40 percent of our paycheck or whatever it is for that year. And we're going, or this, our investments are going to return what they return, and there's nothing that we can really do to change that. Like I cannot affect the S and P 500 in any way, shape, or form.

It's just going, it's going to go up or it's going to go down and I'm completely powerless. So, we really focus on what's in our locus of control. And for us, it's what do we want to do? What actions do we want to take in the year? Who do we want to visit? Who do we want to see? Who do we want to spend time with?

So a lot of times we talk about places we want to visit and what we'll do is we'll take the entire year and we'll break it down into every month, January through December and week one, two, three, and four in a spreadsheet. And just in each. Like very general, but in each little block, we'll say, Hey, in, every year, my family goes to Florida for a big family reunion with the cousins, the grandparents, and that's usually the last week in June.

So every year we can just prog out June during the last week of June. We're going to be in Florida and we're going to see the family for a family reunion. And we just type that in there. And then we can, and that kind of lets us know, okay, a week before and after that. We don't really want to travel, that's going to be our trip to Florida.

Or do we want to track and tag an additional trip onto that trip? So we talk about places we want to travel to sometimes we talk about, where we want to take our companies. I've got the MilitaryMoneyManual.com. She's got her own company that she's working on.

And then other things, athletic events are very important to us. So for me last year during COVID in 2020, at the end of the year, I ran a half marathon and then early this year in 2021, I did a half Ironman. And so probably the next step for me is a full iron man. And that might be something that we talk about doing in 2022, but it's also important, if I'm signing up for a half ironman or a full iron man, my wife is also signing up for one as well, because she has to support me during all the training and going to the event.

And she has to sit there on the sidelines for eight hours a day and watch me watch me run it. So it's, yeah. So if it's not, if it doesn't fit into our life plan that year, or, if we're going to be doing more traveling, then we're going to be at home. And so training is gonna be really difficult.

Then that's a good time to talk about the end of the year. A couple other things that we cover at the end of the year, just yeah. Like I said, 99 percent of our portfolio, total US stock market, total international stock market, a couple of bonds and the TSP. And it does what it does. It's cool to be like, Hey, we started the year at a hundred thousand and now it's $120,000.

And we didn't put any, we put what we could into it and, but it just grew 20%, it's pretty awesome. I currently haven't done my 2021 numbers yet, but in 2020, even with the giant 30 percent dip that we saw in March during the, the early stages of the COVID 19 pandemic, we still saw 18 percent returns in Vanguard, 17 percent in our TSP funds.

So 2020 was a great year for the stock market or investment wise for us. And the biggest thing there is just staying the course, you'll hear it from so many people, but the best time to buy was March 20th, 2020. And if you had any cash on the sidelines, if you threw it in right there, you doubled your money.

And I think it was 18 months and. It was tough because it was scary, like the market had fallen 30 percent in 30 days and that, that is for a lot of people that might've been there for me, it was my first six figure loss. I'd never seen my Vanguard portfolio go negative by six digits.

Yeah. And so it was pretty scary.

[00:28:18] Jamie: But we go ahead, you recovered because you continue to keep your strategy. Like you said, it was automatic and the money was still going in your buying and knowing that over the long run, the market's going to recover it pending the end of the world. It's going to recover, right?

No matter what. So you keep doing your TSP, keep doing your Roth IRA contributions and eventually it's going to come back up. So bye. By continuing to buy, you caught some of it when it was low. Probably some of it may have been high, but in the end it all works out. And now you were covered exactly very well.

[00:28:51] Spencer: And then one more thing we'll talk about at the end of the year is our asset allocation, which my wife honestly couldn't care that much about. I'm a very, I pretty much had the same asset allocation for the last 10 years. It's been 70%. U. S. Stocks,25 percent international stocks and then 5 percent bonds.

I think I'm gonna tell a little bit more towards international and add a little bit more bonds just for a little bit more stability. But with the high inflation rate environment, it might make sense just to keep holding the stocks. And when I typically rebalance in May, but honestly, for the last five or six years or so, I haven't rebalanced.

I've just kept my portfolio the same. I might redirect new money towards things that are underweight. So for instance, all of my TSP contributions are going into bonds right now because I have 2 percent of bonds and that's less than half of what I'm. I've stayed in my investment policy statement that I want to have.

Yeah, so that's a 39 minute rant on what we do on the state of the Spencer address, the state of the Spencer address that I have, that I present to my wife every year.

[00:30:04] Jamie: Let me ask you one thing about that review. You mentioned only looking at the big picture spending, were there any kind of big trends that you noticed when you were looking at your 2020 numbers, since you haven't finished for 2021 yet, anything, any big things that kind of stood out?

[00:30:19] Spencer: I think one of the biggest things that we realized at a certain point was that. And this will not happen to you early in your career. And we're only in this position now because I was very disciplined and very strict earlier in my career. But as your career progresses, if you keep the good money habits and you automate your investments and you stick to a budget, you'll build those habits such that you can.

Loosen the belt a little bit as your income increases. And so what we found was. When we went, I think it was the last time we really kept a strict budget. It was maybe 2017 or 2018 and in 2019, we just completely let go and we kept track of where the money was going, but we didn't say Oh, we spent $200 on clothes this month.

So we can't buy clothes anymore. We just split the money basically into, was it a dispenser expense? Was it a wife expense or was it a joint expense and that's how we kept the money separated. And what we realized was our spending only, I think, increased by 5 percent and our, the amount of the number of hours we spent kind of time commitment, the time commitment we say, we call it our budget meeting, but now it's once a month and it takes about an hour and it's just going through the credit card and the hardest part is dividing up the Amazon purchases because the way the Amazon is so bad. It's so bad. It's so bad. They charge the card and they base it on the box based on the order. Exactly. So the receipt doesn't match. The credit card. And it's just, it's so frustrating to figure out.

So that's another thing we've done too, is if it's under a hundred dollars now in Amazon, you just get away with it unless you claim it. So that's which benefits me probably more than her, but yeah.

[00:32:20] Jamie: So I know you guys in Hawaii, I know housing is a big expense. So one of the, one of the great things about having those, the discipline early on and having the good habit patterns is you can then one day willingly.

And intentionally choose, I'm going to go above what I would normally do on housing, for example, like you guys have done for a couple years there or like you're way above where the normal person would recommend spending on housing, right? But you did it intentionally and you have the padding. You're still doing all the basics.

You're still maxing TSP, maxing out your IRAs. And so you have the ability to splurge a little bit, if you will, on your housing budget while you live in Hawaii.

[00:33:00] Spencer: YEah. It was in. It's probably going to be the same in 2021, but in 2020, our housing was 57 percent of our budget. whIch is crazy to say.

It's crazy. It does. Because, in a lot of times, I don't know what it was, it's like the 25 percent or 30 percent, it's the numbers you'll see on CNBC or whatever that, those websites are, whatever, like we. We've completely loosened the purse strings for groceries and our grocery expenditures have gone up by 10%.

Because there's only so much that two people can eat, and you don't want to eat ribeye every night. I tried, you gotta eat some vegetables. Sometimes

[00:33:40] Jamie: it doesn't do well for the half ironman training,

[00:33:42] Spencer: But

[00:33:45] Jamie: What's awesome about it is not only did you guys recognize that you talked about it, you made an intentional decision, but you use that as a way to bring joy to your life and help out, host parties.

You splurge and get a pool and now you have pool parties and you have your friends over and you have. Good food when you have friends over instead of having like crappy, little caesars pizza or whatever, you know? So it's nice to be at a spot where you're able to do that intentionally But again because you did the basics and set the foundation there So if you're just starting out on your journey or you're you know, big time in debt You probably want to look at not spending 57 percent of your budget on Housing but one day with the right next couple steps for you and the right momentum.

You can make those choices if you want to, and loosen the reins a little bit. Absolutely. Yeah. Discipline at first pays off, so much. It's like compound interest and discipline. It's like just a little bit of investment early pays such huge dividends.

[00:34:45] Spencer: And just a little bit of discipline early pays such huge dividends over your entire life.

That's actually one thing I talked about in the book is compounding interest in all things like it's those little daily investments of time, energy or money over long periods of time. Whether it's in relationships, whether it's investing, whether health, fitness, health, fitness, eating discipline, budgeting, time management, like you don't have to become Stephen Covey, seven highly effective habit or, seven habits of highly effective people overnight, like just pick one habit and do that very well.

And you'll put yourself ahead of, again, focus on what moves the needle, focus on the Pareto principle 80/20 rule. You'll be ahead of 80 percent of the population. If you can just get one of those habits, whether it's just you wake up at five and you do, all the little nitnoy things you have to do before six, when your family wakes up and then all of a sudden you're the one and now your brain's going.

So you're the one who's making the coffee, making breakfast. And you've already had that hour to yourself, whether it's cleaning your email out or whatever it is you need to do, you, you've built that habit and now you've got to reap the rewards. Yeah. All right. So I think that's enough time for me.

We'll cover you, Jamie and, and the episode next week, and so next week we're going to talk about Jamie and how he does his end of the year review and how he sets goals for the next year. So stay tuned for that.

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