Budgeting vs. Cash Flow Management: What’s the Difference?

[@corvette1023]

Rebe behind the mic 👌

[@treesarecool]

I clicked this video so fast when i saw her in the thumbnail!

[@sapatosgirl22]

love Rebe!

[@ElloAsty]

Rebe rules

[@misssophiamae]

Really appreciated the cash flow conversation. I am more of a budgeter, my husband likes to forget money exists. Cash flow helped us get needs met and not worry about every tiny detail. As long as we are saving/investing 30% I am happy, and if we ever have to tinker it’s time to cut back. I’m 37, 30% is our benchmark because we are playing a little bit of catch up after being very low income for a few years, and it gives us some cushion to 25%. If I was younger or had a lower income target savings rate would be different for us.

[@rudyfonseca2582]

I feel like y’all don’t talk about budgeting and this topic often for newer folks or those starting their financial journey. So, very happy to see this!

[@lizeebath]

Happy to see Rebie at the table! 😊

[@beckya2939]

I love this show! I was such a hardcore budgeter for so long. I like teaching people about it. Now that we are many years into it and getting busier and busier with our family, I’m trying to move to a cash flow management situation. I was finding myself slacking on it anyway. It’s actually stressing me out trying to make the transition, but I love giving it a go!

[@BigBearHugs4All]

20:59 Yes Rebie!! Thank you for bringing Brian’s energy to the FOO!

[@charlieosko4151]

First time listener, what a great show! You've answered a lot of my questions right off the bat!

[@tool.follower2813]

The comment about what you save for your future self should be more than what you spend on your past self was a great one. I follow that, but never thought to explain it that simply.

[@amitychief3061]

The budgeting vs. cash flow is interesting ,but before you even get there, you have to understand where your money is going. Early on I thought utilities were huge, but then when I started looking at spending closely I realized there are a lot of other things that are way bigger. Groceries for one, entertainment (streaming, cable, internet, etc.), and dining out where huge, and those are the areas where you can adjust and save. Particularly dining out and entertainment. I realized how much buying my lunch (and sometimes breakfast) everyday was and was able to save a ton on that, as well as those subscription services that you hardly use.

[@thedude5040]

Depends. My utilities are huge. Water is by far my most expensive utility. My water bill is sometimes $500/mo. Last month was $315

[@Zorlig]

Nice answer on the cash flow vs budgeting. We went cash flow when cash flow when positive, and would go back to budgeting if that stopped being the case.

[@DallinBunnell]

Budgeting helps us to plan for future expenses. In our budget, we have sinking fund categories for things like car repairs, future vacations, tuition, etc. We also have a tendency to overspend on eating out or on Amazon shopping, so having a budget conversation helps us stay within the bounds we need to be in.

[@Bnhuskins]

Appreciate the feedback you guys, my name was Nick asking about the student loan and car loan. I think I’m going to move forward with paying off the car first. I have a higher payment with the car loan over the student loan and the interest rate is 1.5% higher with the car loan.

[@Lucky008aau]

...and get the employer match.

[@Muriel-1112]

Great video, bills are piling up again! I feel like I'm constantly juggling money

[@MONROEJACQ]

Tell me about it. I tried budgeting, but it feels so restrictive.

[@Robby767]

That might be better. But with this inflation, it's hard to keep track!

[@mariadrukker2557]

Preaching to the choir! Everything costs more these days. Ever h3ard of Eric Paul Elmer though?

[@mariadrukker2557]

Speaking of finances, have you guys heard about this advisor Eric Paul Elmer?

[@Bigwilli123]

I wouldn't mind having someone manage my investments in this crazy market.

[@dryfus423]

Budgeting really helps us track where expenses are growing and having an efficient way to know just how much we can responsibly spend on vacations. I personally enjoy the mental gymnastics of trying to decide where certain things go, but I also don't get concerned if a current category ends up high in a given month.

[@neverclevernorwitty7821]

Seems like cash flow management is just macro budgeting and frequently comes with wishful thinking forecasting. Either system will fail if you aren't tracking your expenditures and since it's so important to understand your expenses going into retirement and concretely defining your goals. I would guess some doing "cash flow management" will have a difficult time dialing in that number.

[@vaderwashere365]

I think you hit the nail on the head. Either method works, but realism and goal setting is a huge part of both methods. Even in college, all my wife and I have ever done is cash flow management. We never had to bucket expenses or anything, because we didn't have many expenses as poor college students. Our crystal clear goal was to buy a house - and we did at 23. Increasing income really helps if you do cash flow management. Now we have far to much spending to realistically budget (similar to Bo), but we are still able to hit all our savings and spending goals with cash flow management.

[@sd0753]

Cash flow works when you spend a lot less than you make. At that point spending a few extra thousand in a budget category doesn't make a difference to the bottom line.

[@CharityKamau-y1z]

More Rebie! Love it

[@thedude5040]

I came two watch two old money guys. Lol great episode anyway!

[@HeyitsMarioDiaz]

I always knew you were writing down info when the questions were being asked, but I chose to believe that y’all were doing your best Jackie Treehorn impersonation from the Big Lebowski.

[@CHRNESFWE]

Y’all should have an alternate live stream waiting screen with Rebie’s face poorly cut out and pasted over Brian’s face. I personally think that would be hilarious.

[@CharlesReinmuth]

I personally agree 💯😂

[@RobertBeedle]

Agreed. If not just a rockstar photo with Rebie and Bo.

[@michaelswami]

Reby is the best!

[@cory966]

4:31

[@CHRNESFWE]

@ what?

[@Adnanhasb1]

THat is so so true With a change in lifestyle .. Expenses changes too

[@colegreene2153]

I categorize all my transactions every month. I don’t think I need to but it’s nice to look back and know on average what I spend on gas / groceries / going out

[@jacobgeerlings2123]

"May it never be!" Love that phrase in defense of budgeting. 3:51 Sounds Pauline: μη γένοιτο!

[@J-GMORE]

I never thought about the cash flow saving aspect.

[@chadlee76]

Never thought about the difference.. but I do both. I have an Excel with my Budget by Payday and what comes out when by Dates set already for every month of the year. But I still Cash Flow Manage the day to day expenditures as they come out to make sure everything is covered.

[@victorbaird8220]

I am SO EXCITED 😊

[@AgentGWG]

Great information as always

[@sandrakaylindsay952]

@Massimini Trains When calculating Social Security do not forget that it is currently calculated based on your top 35 years of earnings. Their website plans on your income sustaining but will allow you to re-calculate based on less future earned income. Also, remember that there will have to be either a change in how SS is run, or a reduction of benefits due to reduction of the Social Security reserves, and how that will be managed is not close to being decided. I would be hesitant to spend down your FI money based on your current Social Security site estimate.

[@jellyrcw12]

37:41 not the 4 loco LOL

[@jacobpierce6153]

Regarding the question at 32 minutes: if you earn so much money you have $1M in retirement savings in your 30s but can’t write a check for a minivan, something’s out of wack. Edit: I agree that you should invest early and get those dollars growing. I just revoke your financial mutant card if a water heater or cheap car purchase destroys your savings account even if you’re “retirement rich”

[@Jerpent_The_Serpert]

If they started saving aggressively at 18 or 20 and now have gotten to the messy middle and don't have enough liquid to buy a minivan I think that is pretty normal

[@jacobpierce6153]

@@Jerpent_The_Serpert quite aggressive for under 20 years of growth. You’re listening to Money Guy so you might’ve heard of being “retirement rich” where you invest so much you have no margin elsewhere. That’s really what I’d tell myself not to do

[@Dogberto999]

or they're lying.

[@Crockerfeller]

Retirement assets are locked up until age 59 1/2. Untouchable without taxes and penalties unless you withdraw ROTH contributions. So it's not that out of whack at all. I hit the double comma Networth club at age 35, but I couldn't afford to buy a car outright by writing a check, but I could afford a loan payment.

[@thedude5040]

I'm 32 at half a million in retirment and I could only write a check for a minivan if I choose to wreck the emergency account. Also depends how expensive is this minivan? $10k not a problem. 15k is a frowny face. $20k and a ove will start to eat into the emergency fund.

[@frank-the-tank75]

I keep it simple. Single guy. $3200/month. $300 goes to me for fun. The rest go towards investments and expenses. Even with pay raises, $300 is plenty for me to have fun and do the things I love.

[@thedude5040]

When you get married, sometimes you get $20

[@frank-the-tank75]

@@thedude5040 Exactlt why you don't get married. Women love to spend your hard earned dollars

[@clytanf2178]

​@@frank-the-tank75Consider getting married, but don't jump in until you find the one you think won't leave you with $20 😅 Then you have kids, forget about fun in the first place, just kidding!

[@frank-the-tank75]

@@clytanf2178 Exactlt why you don't have kids. Children require you to spend your hard earned dollars

[@jm9565]

The other consideration for the student loan vs car loan is the student loan interest deduction that reduces the interest rate of the loan effectively. It's an above the line deduction, so you don't even need to itemize to get it. (Unless you're quite high income and don't qualify for the deduction)

[@grega2362]

Cash flow management is called "pay yourself first". You prioritize savings to where what is left is necessary to cover the bills. You set goals instead of having sinking funds which works out as the same thing but if you have a variable income you can make it happen faster. It works better when you have a very delayed gratification mindset. EG, You are close to paying off your car loan, you have a bunch of overtime opportunities, you reduce the spending at the store to the point you are eating the 5 for a dollar mac and cheese and walking past the ribeye. You pay the car off early and go get a steak on the next paycheck. As to the Efund interest. You are making interest because of inflation. Your Efund is still the same in todays dollars as it was in last years dollars, leave the interest alone.

[@jessemeier3447]

It's felt like I have been living paycheck to paycheck for the last 2 years but that's because I've been living on 36% of my income and fun money only comes from the second job. The windfall from the market rising has helped, but it surprised me that it didn't take long at all to feel like I am on track with my finances. And when actually doing a quick analysis, (if the market doesn't rise or fall) I just realized that I will cross over the $100k liquid asset mark next year at 28 years old. When I was 23, I had a co-worker tell me that he crossed $100k in retirement before 30, and I thought that was the most insane thing ever. Yet here I am. Thank you Money Guy team and good mentors! I also feel the same about E-funds. I have mine with Fidelity in FDRXX. Any interest is supposed to account for inflation, even if my actual monthly spending doesn't increase that much. Or if I do have to dip into my E-fund, that's just that much less I have to replenish in the future.

[@grega2362]

@@jessemeier3447 Keep grinding. There will came a point in life where you will have to roll back but those dollars that are in there will grind on their own. @100K you can really see them start working for you which is a really cool day. Later they will make more than you do which is another really cool day.

[@simplejacksparro]

Not the seltzer can cracking to start the stream!

[@alext6702]

Brain is watching

[@ipa4270]

@15:20 The Emergency Fund question missed the consideration of inflation on goods. The inflation rate has been outpacing the high yield interest rate such that your current 3 month emergency fund would not be enough for 3 months soon or later even after the added interest. The math is not adding up

[@TR-lh9yz]

Inflation is often higher than HYS yield. If you go back to pre-COVID when inflation was under control, HYS were yielding below 1%. Good news is you don't need to worry about inflation rate at all for the emergency fund. Say you want to have six months of expenses in the EF, you just make sure the balance stays where it needs to be to cover six months. As inflation (high or low) causes your expenses to increase, you just add a bit more cash there so it still covers six months. Very easy.

[@DanMay777]

For me, it feels like I can do cash flow management when you have predictable cash flow for the next 6 - 12 months. If we’re not sure what’s coming in, we have to get into the gritty and budget month by month.

[@beelee1394]

If you cash flow, going through a layoff can be more work. Budgets make it easier to understand the levers of your burn rate.

[@raim-jh7hg]

FSA isn't limitless. It was otherwise sound advice. 2024 limit is $3,200. I use this because I also don't have access to an HSA. It saves about $800-$900 on your tax bill.

[@raim-jh7hg]

Also another thing that was missing from this conversation is FSA isn't 100% use it or lose it. For 2024 you can rollover $640 to 2025. Both the contribution limit and rollover usually increase year to year.

[@alcubierre-drive]

Yeah I wish we had an HSA. FSAs are super lame in comparison.

[@alcubierre-drive]

Cash flow management is a lot like Ramit’s Conscious Spending Plan.

[@emoney1231]

Budget/cash flow management is the cause. Net worth is the effect.

[@sallyprzybil2404]

For the car, what about going through an indecent leasing company that is not associated with the dealership.

[@sallyprzybil2404]

Independent

[@ctndiaye1]

Seems to me if I am saving and investing amounts that I want and paying credit cards off every month then budget vs cash flow doesn't matter

[@sallyprzybil2404]

Personally I’d pay off the student loan first. My reasoning is with the student loan you can pay extra on the principal and with most car loans you cannot pay extra on the principal, you can just make extra payments (which also include interest). Being able to pay extra on the principal changes the landscape of the scenario. You save a lot more when you can pay extra on the principal because you are also saving all the interest you would be paying on that amount. Before you make your decision on which to pay first take a look at how the loan is structured.

[@lisajackson3743]

It’s not unusual to pay extra on auto loan principle. You might have to specifically ask them to apply the extra to principle and follow up to make sure it’s done that way. Also, I haven’t encountered an auto loan with early payment penalties either - I would ask about it and decline that one.

[@Burning.Phoenix]

@41:32 How many ops you really got? I mean, it's too many options.

[@madisonhypes7221]

reebee ripped

[@michaelswami]

Bo talking about swimming. Hilarious.

[@glasshalffull2930]

I’m somewhat new to TMG and was wondering what the 458000 counter on the shelf means?

[@valerieproctor517]

I've been wondering this too! I'm pretty sure it's a follower counter.

[@curtissouth916]

That is their follower counter

[@Zorlig]

Yeah you can date videos by comparing that to the current number.

[@glasshalffull2930]

Thanks guys! Maybe it would be cool to have a second counter of an anonymous/average viewer and have the counter show the ongoing balance in their 401K. The ups and downs as the market moves.

[@kyliecallaway5273]

Can you be in the middle? I use budgeting to know my fixed expenses as well as a guide for categories like eating out, groceries and entertainment. Then I use more of a cash flow approach to everything else!

[@burkles4456]

PERSONAL finance! If it ain’t broke don’t fix it.

[@eldersprig]

Brian was unusually quiet for this livestream. Hawking the book must be taking a lot out of him. :)

[@bettedavis9261]

He's on vacation. He said he was going the last podcast.

[@johnmilner6463]

I’ve been toying with the idea of using your firm for a while now but I spotted that hideous looking monstrosity model truck on your shelves in the background and it’s making me question all of your judgement? I’m hoping it’s on top 2 books that are a list of things of what not to do.

[@johnmilner6463]

Im just kidding, you guys are on point with finance. Taste is trucks …… not so much

[@607AAG]

Rebe is a pro, drop the old guy who doesn’t sleep 😂

[@glasshalffull2930]

At different times, I used extra cash to buy assets outside the 401K/IRA: precious metals/individual stocks that I wasn’t going to hold forever. I made money, but to me it wasn’t worth the extra stress of monitoring the price and deciding when to buy/sell. Much better for me to have all my investments in my 401K for the long haul.

[@GregA-i6l]

Someday, when we are all grown up, “Millionaire vs Millionaire household” will be better defined in all these statistics. Example (the average millionaire crosses over into millionaire status at the age of 49”. Are all these people single?

[@sd0753]

I budget because it's required to keep us on the rails. My wife is a very giving person, she would spend $100s for each person's birthday if I didn't set a limit.

[@CaedenV]

Your employer match IS NOT FREE MONEY. It is a part of your compensation package. Deciding to not take your employer match is just choosing to give your employer a discount. Even if you are on some crazy fire movement "who needs a 401k if you are going to retire early" camp, it would still be worth taking the 401k money and cashing it out with penalty than not taking it. I'm not saying that is a good idea, but taking the 401k out with penalty is better than simply not taking your 401k at all! The single exception to this is if you aren't planning to stay long enough to vest into your employers 401k plan, AND you don't want a traditional retirement plan. Because then you would be paying a penalty on your own portion, which would fight against you. But that is such a crazy edge case.

[@jm9565]

I totally agree. Even a situation where you only vest 20% of your employer match per year, you'd come out ahead after only one year on a dollar for dollar match with the 10% penalty and taxes accounted for. In my mind, not maxing the employer match is requesting to be paid less than you are offered.

[@TR-lh9yz]

Yeah if some nut with TikTok brain wants to try this, the vesting on the match would be the one catch. Need to calculate how much of the match is available by what date and then figure the tax and penalty on the withdrawal.

[@treesarecool]

51:32 wait - Brian has a book?!? Jk

[@victorbaird8220]

Where is Brain? 😊

[@bettedavis9261]

On vacation. He said he was going during the last podcast.

[@Zorlig]

He's really excited about being on vacation :)

[@timm8860]

Doing the same thing he does every night…

[@celularphone]

Cashflow management is for lazy people in my opinion. Budgeting is so easy. Every time I get out of the store I enter the recipt into the every dollar app. Takes very little. If I'm with my wife she enters it on the way home.

[@josec2219]

We’re in a cash flow household. I started as a heavy budgeter which helped us to get to where we want to be financially. But we are doing financially well, debt free other than our mortgage, we fund our retirement, and have a fully funded emergency fund. We dont blow all extra money either. We realized that for us we don’t have to track every single dolar. Both of us like the freedom we randomly give ourselves. We can be spontaneous. We randomly splurged a bit extra last month and we loved it. Won’t do any heavy random extra spending this month. We revisit this every couple of months. Works for us in the time being.

[@michaelswami]

I know within 1 to 2 percent how much I’m going to spend each month. I started out tracking spending to get a baseline. I resent being called lazy just because I don’t need to granularly track how much I spent on coffee.

[@TR-lh9yz]

We were budgeters when we were younger, but do cash flow now. Our true base expenses are about 20% of income now, so no need to track every penny any more. Save first, pay bills, everything else doesn't need to be tracked closely.

[@jakeb1255]

H b bc b