How to make (and stick to) a budget

[MUSIC PLAYING] [[Jenn Lueke]] My name is Jenn Lueke. [SNAP, SNAP] I'm a cookbook author, content creator, and recipe developer. [CHOPPING] I didn't really know a lot about budgeting until I was forced to. [[natural sound]] Ground black pepper. [[Ally]] Gina, break down how to build a budget. [[Gina Gillespie, Fidelity]] Money Unscripted Budgeting AUDIO We can tackle this in three easy steps. [[Jenn]] I do want to know where I'm at, what I'm spending, what my expenses are. [[Gina]] Little things and small steps can make all the difference. [MUSIC PLAYING] [[Ally]] Today is a good day to take control of your money. Whether you've tried budgeting before and it didn't stick or you've put it off as too big a hassle, this episode is your fresh start. Hi, I'm Ally Donnelly, and this is the Money Unscripted podcast. Fidelity has a new budgeting guideline, and VPN financial consultant Gina Gillespie is here to show us, step by step how to prioritize our money and build a flexible budget that works for us. But first, meet Jenn Lueke. She's a chef and content creator with a new cookbook out, Don't Think About Dinner. It's focused on budget-friendly, no-waste meals for busy lives. [[Jenn]] It's time to tell you everything. I love to tell people about how they can make their money turn into really delicious, nutritious meals in a way that's satisfying and fun. [[from social video]] Turns out, $60 and a little planning can buy back your weeknights. [[Jenn]] I got curly kale, which we're going to use in a couple of different ways, some parsley. I try to do a lot of veggies as much as I can, especially, this is my budget-friendly week. And one of the meals I'm going to make first is my favorite lemony chicken thighs and rice. [[Ally]] Oh, sweet. I'm excited. Bring me through your cooking origin story. How did you get here? [[Jenn]] Yeah, I always really liked to cook. I would watch cooking shows and go to bookstores after school and just look through cookbooks. And I just was really drawn to it. [[clip from social video]] I like to toast my rice. [[Ally]] You had said that when you started posting on social media, it wasn't an overnight viral hit. So when did it-- when did you start to take off? [[Jenn]] I was working my corporate job and posting on the weekends and at night. And then finally, in 2023, I started doing my "meal planning on a budget" content, and that finally clicked. [SNAP, SNAP] Welcome back to my series where I show you how to turn $50 into 20 healthy meals. The goal is you have nothing left over, so you've used everything. It's very cost-effective. It also reduces waste. It feels really satisfying to use up everything that you bought and not throw away half of an onion that was sitting in your fridge. [[Ally]] Or seven onions that are sitting in my fridge. [[Jenn]] Yeah, exactly. [SIZZLING] [[Ally]] Why do you think it is that budgeting was the win for you? [[Jenn]] I think so many people go to the grocery store and check out and feel discouraged at the end. Like I got 10 things, and it was $100, or whatever it ends up being. So, I think it really resonated with people because they want to feed themselves and their family food that tastes good and is good for them without having to spend so much money on their groceries. [[Ally]] What were you hearing from people? What did they say? [[Jenn]] Yeah. I can read some. [[Ally]] Yeah, that'd be great. [[Jenn reading social comments]] I just wanted to say your grocery series has changed my life. The cost and zero waste is exactly what I've been looking for. We were struggling to cut costs before following you. Every time my husband goes grocery shopping, they're amazed at how much he buys for the price. [[Ally]] That's so nice. [SIZZLING] Tell me more about the importance of budgeting for you personally, not just for your followers. [[Jenn]] I think it's important to everyone. And for me, I think I started budgeting when I absolutely needed to. I was really busy working full time, and my husband was in law school full time, so we really needed to be on a budget. And I've always wanted to be really, well informed about budgeting and finance as an adult because I didn't really get that education when I was younger. I really wanted to have ownership over my own finances. [CHOPPING] I don't want to just not look. And I think I used to feel like that. [[Ally]] Cross your fingers. [[Ally]] Yeah, especially when I just bought a house and figuring out our expenses month to month. Now with this new purchase and everything else that we have going on our student loans and things like that, I like to track in a spreadsheet. I'm going to add the liquid next. [[Ally]] When you're thinking about that plan, where does retirement fall into the picture, if it does? [[Jenn]] Yeah, it does. I have a 401(k) set up with my business now for me and for my employees. [[Ally]] A small business 401(k)? [[Jenn]] Yeah. So I pay my 401(k) to myself just like I pay it to my employees every pay period. So that's the first thing. [[Ally]] So you're getting that company match. [[Jenn]] Yes. Yeah, I am. So that's something that I've had set up for, I think, about two years now. I just have it as an automatic deposit every month. So it's something that I try to just almost not even think about and keep in the background just working for me. [SIZZLING] [[Ally]] What does the future look like for you? And how does budgeting help you get there? [[Jenn]] I think it'll continue to become even more complicated as I continue to grow my business, as I hopefully have a family one day and things get more expensive in the world. But I think I'll continue doing it always because I do want to know where I'm at, what I'm spending, what my expenses are, what my income is. And regardless of where you're at, you know where you're starting from. And I think that's really empowering and important. [MUSIC PLAYING] [[Ally]] From cooking on a budget to getting our budget cooking, Gina, let me bring you into the conversation. How are you? [[Gina]] I'm good. Ally. Thanks for having me. [[Ally]] Jenn is on top of her budget and really motivated to stick to it. Not all of us are quite so great at it. So if I'm looking to get started, walk me through Fidelity's new budget guidelines, 60, 30, 10, plus 15. [[Gina]] Let's first start with the plus 15. That's really saving for retirement before we even touch our paycheck. So first we want to aim to save 15% pretax income for retirement. [[Ally]] All right. [[Gina]] That includes contributions that you make plus your company match. And remember, if you're not there yet, it's OK. Any little incremental change towards that will help over the long term. [[Ally]] Awesome. And then what about the 60/30/10? [[Gina]] Perfect. So now let's get into the guidelines around budgeting. And I know this can be daunting, so as we get started, know that we're going to make it manageable. And we're really going to make sure that it's flexible because this is something that can change over time. So the 60%: We want 60% or less to go towards essential expenses, 30% to go to the nice-to-haves or the extras, and then 10% is going to go towards near-term expenses or an emergency savings. [[Ally]] So that 15% for retirement pretax, 60/30/10 coming out of your paycheck once the deductions have happened and everything else. [[Gina]] Correct. [[Ally]] Jenn's younger. She just bought her first house. And I think a lot of us think about budgeting for if you're just starting out or for penny-pinchers. But that's not true. [[Gina]] No, it's for all of us, even high-income earners. The more money we make, the more money we spend. So this just really helps us to keep things on track. So I think a big piece that we think of is budget can be so restrictive. But that's not what I want us to think this is about. This is helping to really reform where we're spending money and where our cash flow goes. We want to give control and clarity, and so this is how it's going to help us to do that. I think sometimes now we have to get into the minutia, right? How do we even get started? So a couple easy ways is maybe to look through your credit card statement or your bank statements to try to categorize where we're spending money and then breaking it down into the I really need to do these things, like the have-to-haves and the I'd-like-to-haves. So that's a really great place to start because we want our dollars to work for us and really to set out and have clarity over where we're spending money. [[Ally]] OK. Before we dig deeper into each of the 60, 30, 10 buckets, I want to understand. Fidelity says plan your pay. What does that mean, and why is it important? [[Gina]] Let's break this down-- this is so important-- into three different steps. Let's simplify this. So the first thing I want us to do is to look at your pay and your paycheck. So pull out that W-2 that you get from the year before, and look at your employer benefits. I want you to look at those retirement benefits, your 401(k) or 403(b). And make sure that you're at least doing the company match because that's like free money. So that's that first step. Understand how you get paid. Now, step two, that's where we go into the plus 15. So now let's see if we can get towards that goal of retirement savings. We want to put 15% of your pretax-- this is before deductions, right? This is before your take-home check-- pretax into your retirement savings. And remember, this is employee and employer contributions. And then the last is looking at that 60/30/10 guideline of budgeting with your after-tax money. [[Ally]] So let's dig a little deeper into each of the buckets. So 60% for essentials. What does that mean? What falls into essentials? [[Gina]] These are the non-negotiables, right, the things that you have to do. So we need to live somewhere and eat. So think about we can really break it down to housing. Do you have a mortgage or rent? Are we paying utilities or condo fees? So those are essential, right? Things like food-- I know to me personally I've got a busy life and kids, so I always make sure at least two nights a week that I can allocate for takeout as essential. Next thing transportation, maybe a car payment, insurance, car upkeep. One that I think is a big piece that can be an expense but not necessarily forever is childcare. So either are you spending money on daycare? Or we could be on the other end of things and be paying for tuition too. And then the last piece I'll just share is that I think everybody's essential expenses, they're very different, right? So don't go off what your friend does. This is something that's very personal. [[Ally]] Life's expensive, and what if my essentials add up to more than 60%? You mentioned daycare, and those were rough years for me. [[Gina]] Yeah. If they add up to more than 60% today, it's OK. I think that's where we want to get into the more detailed expenses to say, are there places that we can save money? Or are some of the places that we are spending money-- maybe not forever, daycare, tuition. Other things like our mortgage, our fixed-rate mortgage, may not be forever. So remember those pieces. And then also, let's look into and dig a little deeper into those essential expenses. Can we save money in some places? One thing, a lot of companies may have some benefits you can use, maybe commuter benefits or places that you can save. Take some time and spend time to understand those. Another is that something that I actually have done recently is renegotiating insurance. So I called my auto and home insurance company and renegotiated the cost. I hadn't done that in years. [[Ally]] Give credit where credit is due, Gina. Why did you do that? [[Gina]] I did that because as I was preparing to talk to you today, I realized it was something I had not done in years. And I thought I was spending a little bit too much money there just based off of knowing what other people spend. So, I did save there. And you know what? I'd rather spend that somewhere else. [[Ally]] Yeah, go, Money Unscripted. Go, Gina. Let's take a turn to the fun stuff, that 30% for discretionary spending. So what's in that category in general? [[Gina]] These are the extras. These are the things that make life fun. But they're different for everyone. Your I'd-like-to-haves or nice-to-haves, well, it could be going to have experiences. Maybe there's restaurants that you love to go to or a sports team that you really love to go see every year, experiences that make life better. My family, we like to ski, but not everybody likes to ski. That's what I put into that discretionary bucket, spending there each year. So remember, these are things as you look that could be very different than what someone else spends money on. But put your 30% there. Could be the travel. When you look, remember, these are things that bring you joy. [[Ally]] Yeah, I love that we're building in for joy because that's not necessarily top of mind in every budget. But I like that. What about that final 10%? [[Gina]] That final 10% is for near-term goals or emergency savings. So let's first take a step back. If you haven't started an emergency savings account, then I want you to start there. [[Ally]] OK. [[Gina]] First start with at least $1,000 or one month's of expenses. Our goal is to get to three to six months of essential expenses set aside in a separate account. That's to go tap into if something unexpected happens. So remember, that's step one if you haven't gotten there yet. If you're there already, now we can take that 10% to go towards near-term goals. What does that mean? It could be things like car repairs or maybe some home repairs that we put off for a little bit. It could be things like maybe a bigger vacation or a new car that we're saving for. Maybe we're saving in a college account or another type account for something in the near term. Keep this money separate. And I always say that because we have longer term accounts, and then I want us to keep this as more of a shorter-term account. Yeah, and why is that? I think we're less apt to touch for things that are not important. Maybe we'll put more money on a credit card or pull it for something else. No. If we keep it separate, I think we're less apt to touch it for things like that. [[Ally]] That's smart. That's smart. OK. We've talked about the 15% a couple of times, but tell me why that's such a priority in our day-to-day budget. [[Gina]] I think one of the things that we need to think through is paying ourselves first. So before we spend money today, let's pay ourselves first for the future. The younger that we start to save, compounding can make a difference. So making sure that we can make that a priority right off the start before we even see the money that we touch on a monthly basis is a really good habit to get into. But our goal is that 15%. Set that aside first for you for later. You can't borrow for retirement. [[Ally]] Mm, your future self, I love it. So what if someone doesn't have access to an employer retirement plan? That's a great question. So we could be saving an IRA if that's an option. Automate it, just like while you're working where it comes right out of your account, maybe every month, setting it up just like coming out of a paycheck, right? So make sure you simplify that for yourself. If you work for yourself, you may be able to do a SEP IRA or a self-employed 401(k). And again, set up automated payments. Make it simple for yourself. Anytime that it's set up automatically to just happen for you. I think you're much more apt to do it, right, simplifying things like that. If those aren't options for you, then we can save in a separate account. It can be a nonretirement account, but one that we're seeding for the long term. [[Ally]] Dedicated. [[Gina]] Dedicate it there. And remember, I think the most simple way to think about it is don't let not having a 401(k) or a 403(b) account inhibit you from saving, right? You can do it. Just do it in a different way. We're all hopefully going to retire someday. So you need it. [[Ally]] We've talked about the categories. We understand those. And we talked about the why behind budgeting. Let's get to it, Gina. What are the first steps I should take to build a budget? [[Gina]] I think this is a really great way for us to say, OK. We started all these things. Now, where do we go? Where do we go from here? Fidelity has lots of really great tools and resources for you to help to organize everything, but I think the first great step is to look at where you're spending money and break it down. Break it down into the I-have-to-haves and I'd-like-to-haves. And then you can get even more in the detail of really understanding where everything is going. And then we can categorize them. Are we falling into that 60/30/10, and how do we look today? [[Ally]] Yeah, I got to go back to waste, right, because Jen's talking about food waste. You're talking about not wasting your money on a car insurance payment that's too high. It is ferreting out that waste that I just really love. [[Gina]] I think organizing it, that's when we can see things, things that fall through the cracks. So this is that first step. Really start to organize. You might notice things that you didn't before and say, ooh, that's something I really got to take care of. [[Ally]] Oh, that's awesome. OK. So if folks are walking away from this conversation, what do you really want them to take with them? [[Gina]] I want them to understand their numbers, what they get paid, what they spend. And remember, small incremental changes, even 1% better will make a difference over time. So start. Start today. I hope hearing this gets you motivated to start. [[Ally]] That's awesome. Gina Gillespie, thank you so much. [[Gina]] Thanks, Ally. [[Ally]] I'm going to recap Fidelity's 60/30/10 plus 15 budgeting guideline one more time before we go. First, aim to save 15% of pretax income for retirement, and that includes any employer match. 60% or less of your take home pay goes to essential expenses, 30% for nice-to-have extras, and 10% for near-term goals and emergency savings. If you want more help to start a budget or better plan your pay, we have links to articles and budgeting tools on our website. It's fidelity.com/moneyunscripted. Be sure to like, follow, subscribe to the podcast, and we'll see you next time on Money Unscripted. It's your life. Get your money's worth. [MUSIC PLAYING] [Disclosures] Investing involves risk, including risk of loss. Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. The views and opinions expressed by the Fidelity speaker are his or her own as of the date of the recording and do not necessarily represent the views of Fidelity Investments or its affiliates. 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