Plain English Finance

EP. 13 | How to Set Up a Cashflow System That Actually Works

• Tre Bynoe • Episode 13

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Most people “budget” by looking backward at what they’ve spent. That's reactive.

In this episode, Tré walks through the exact system he and his family use to manage their money proactively — with multiple accounts, a clear spending structure, and zero guilt. Whether you’re a couple or managing solo, this framework gives you total control without obsessing over receipts.

You’ll learn:

  • Why tracking expenses is backward, and what to do instead
  • How to set up your accounts for true financial clarity
  • The one rule that keeps your spending and goals in sync
  • How to budget without ever saying the word “budget”
  • What to do with the money left over after monthly expenses

Follow, review, or share the podcast if you’re ready to stop reacting to your money and start directing it.

Tre:

Hello, and welcome to the Plain English Finance Podcast, the podcast dedicated to helping you make smart financial decisions. I'm your host, Trey byo financial planner with TC Wealth Management and Aviso Wealth. For more information or send in your questions, check out the show notes at trey byo.ca/podcast. And if you want to learn more about me, start with episodes one and two. Okay, let's get into the episode. This episode is around, I said that we were gonna do a series on what we do. There's so many variations as to what I would recommend somebody do, uh, but we follow my own advice, so mm-hmm. We, the principles are there. So I think in this way we will. Be able to cover their principles and people can adapt the principles to themselves,

Sierra:

or at least have like a starting point if they wanna just copy something. Yeah, if they want to, right? Yeah. Like to have something really clearly laid out.

Tre:

Yeah, exactly. So the way that I thought we'd do this, you want to know why I wanted to? For you to get a pen and paper,

Sierra:

because I made that comment on the last one about doing your budget on a pen and paper. I don't know. That was the

Tre:

net worth on a pen and paper. Oh yeah,

Sierra:

that's what it was.

Tre:

No. Um, because I wanted us to draw it out and I figured that if I can get you to draw it out without looking at what you're drawing and you come up, you get the same structure as I'm trying to explain, then I can't have done a terrible job of explaining it. Oh,

Sierra:

okay. So you're gonna explain something and I'm gonna draw. Ooh, this is like a fun activity. Okay,

Tre:

so I'm going to explain, we're gonna talk about what we do, but then I'm going to, uh, no, no. We'll, I, we'll, we'll draw it out first. Um, what the structure is. So this episode is around budgeting. So cashflow management. People don't like the word budgeting. Um, cashflow management's probably more, actually more appropriate because it's not people, when people think of budgeting. What do you think they think of?

Sierra:

They think of like, I, when someone says, oh, I'm going on a diet, it's like,

Tre:

yeah,

Sierra:

you're like, I don't wanna be eating like plain chicken, breast and broccoli every meal. You know? It's like the, yeah, like you're, you. What's the word? It's not fun. Yeah. You're limiting. There's negative connotations stuff. You're limiting yourself. That's what people think budgeting is. It's like, oh, I, I'm spending too much, so I have to like cut back.

Tre:

Yeah. When, I'll tell you now, for some people, the budget has been to spend more. Hmm. So it's not a case of limiting yours. It's not, not none of that. It is, we are going to learn a system of how to manage finances. Mm-hmm. Whether that system leads you to bankruptcy or not, it's your decision. Okay. It's the case of this is the system you'd use, and then when you have this system in place, then you can make adapt. You can make it. You can adapt things, adaptations to make it fit your personal finances, your personal financial situation. But I'm going to you this system.

Sierra:

Okay,

Tre:

so there's two things that I like to say. Two sayings that I have. What are they?

Sierra:

Closing your eyes doesn't make the demons go away. Okay.

Tre:

Different one. Um.

Sierra:

Oh no. Decision is still a decision.

Tre:

Different one. Tracking expenses.

Sierra:

Oh, tracking expenses not or no, don't track expenses. Set expenses.

Tre:

That's the one.

Sierra:

I just said this when I was making, I was doing a little skit earlier, making fun of Trey in the podcast. I was, this is like a side story. I don't know if anyone cares. You can skip ahead if you don't wanna hear this, but I was like doing the intro. Hello and welcome to the Plain English Finance Podcast. My name is Trevino, certified Financial Planner Pole. I did it and then I was going on pretending to be Tre talking about, um, exactly this. I was using all this quotes, and that was one I used anyway, not important.

Tre:

Okay, so the, the, yeah, so I say, so that's one of them. Um, don't. Track expenses set them, and that's really important to get your head around. I, the people that do budgeting, like in the traditional sense, well, I feel like they're just crazy. Like I, it's so much mental load to like, I get some, especially like my older clients, which I love them. I don't know how they do it. Like they will come in with a book of like every single receipt and every single thing that they have spent and they keep track of it with a pen and paper, and I don't know how that would, it would drive me insane. And I'm a, I'm a financial guy. Like I could never do that for my entire life. And I know that. For some people, that's what they would have to do. If you're bad with money that's pro like really bad, that's probably what you should do. Mm-hmm. But ultimately, there are better ways to spend your time and energy, in my opinion. And the only way you'll get to that point though, and still be really responsible is if you have a system in place.

Background:

Yep.

Tre:

So let's talk about the system. So we are gonna start with, um, how do I do this? Okay. We're gonna start with a circle.

Sierra:

Okay.

Tre:

In the top middle of your piece of paper. Okay. So you have a a four piece of paper and it's folded in half. Yeah. Yep. And we have it like vertically. Yep. So not, yeah. So in the top hot

Sierra:

dog, not hamburger. If anybody remembers that from school. Remember I told you about this like not long ago, and you were like, what is that? I still, I don't know if anybody else did that in school. When they told you to fold a paper, they would say, fold it hotdog or hamburger, and it was like vertical or horizontal anyway, like if anyone knows it's hotdog style.

Tre:

Okay.

Sierra:

Okay.

Tre:

Um, okay. And then the top, let's say the top fifth of your. Page, wait.

Sierra:

So do I draw the circle right now?

Tre:

Yeah, but in the top fifth. So think about your page split. Split into five sections. Okay. Like vertically from top to bottom.

Background:

Yep.

Tre:

Um, and in the top fifth, you're just gonna draw a circle in the middle of that fifth. Okay. Okay. So you should have a, a circle the size of like a toney ish. Okay. Yep. Okay. And then in that circle, I'm gonna get you to write income. Okay. And then, okay, below that circle, in the second fifth of the page, I'm going to get you to do another circle to the left of the page. Okay. In that same fifth.

Sierra:

Okay.

Tre:

Okay. And then in the

Sierra:

same fifth, sorry.

Tre:

In the second fifth. Oh,

Sierra:

sorry. Yeah.

Tre:

In the second fifth.

Sierra:

Same size tooney.

Tre:

Yeah, touni size. They'll all, all be touni sizes. Okay. And then I'm get you going to get you to draw another circle directly below the income circle.

Sierra:

Okay.

Tre:

And then another circle to the right of that circle.

Sierra:

Oops. My circle is. Little wonky. Oops. Okay.

Tre:

Okay. And then in, uh, so you have the income circle. Then below that I'm gonna get you to write house.

Sierra:

Okay. Okay. Oh, I didn't write it in the circle. I wrote it above the circle because you said below that.

Tre:

Oh, okay. In the circle. Okay. In the circle write house. See, this is why I can't see what you're writing, so that we can clear this up and people can follow along. Yeah. Okay. In the circle to the right of the house, you're going to write it would be spending.

Sierra:

Spending,

Tre:

yeah. Okay. And then the left circle. You're going to the furthest left circle you're going to write. I don't know what, how you would describe this easily. Uh, we're going to write net worth with an up arrow. Okay.

Sierra:

Net worth up. Up arrow, sorry. Okay.

Tre:

Okay. And then below the house account. Mm-hmm. You're going to draw another circle

Sierra:

in the third of the fifth

Tre:

in the third fifths? Yep. In third. Fifth. Got it. Yep. And then in this one, you're gonna write groceries.

Background:

Okay.

Tre:

Okay, and we're gonna stop there. That's, there's some more elements to it, but we'll discuss them. Okay. So a key principle of the way that the system that I use is that it is really important to separate your income. From your expenses?

Sierra:

Is that your second quote? That was my second

Tre:

quote. That was my giving, my second quote. Yeah. Um, so separate your income from your expenses, and that's really important because when you create a gap between your income and your expenses, that's where you learn or not you learn. That's where you gain the ability to, to build something, right? Whatever it is, that's where you get the ability to achieve goals. You get the ability to, to dream bigger. Okay. And not, and kind of get out the, the rat race as it were. Mm-hmm. Okay. Um, and this system allows you to do that very easily and it works. So all income levels, and it is, you do this no matter what the numbers are. Okay. So the way that it works. So your income, so these are four different accounts, but. Five different accounts by the way.

Sierra:

Okay, so like five checking accounts. You're gonna have,

Tre:

well, four checking accounts.'cause wealth up, I'll explain wealth up.

Sierra:

Oh, okay. Net worth up, we have it.

Tre:

Net worth up. Yeah. But so four checking accounts.

Sierra:

Okay. Okay.

Tre:

Basically, so you have the hou, the account, the checking account that all of your income goes into. So if you're a couple, both of your incomes go into this account. If you are managing your money together. Yeah. Um, if you're a single person, your income goes into this account. It's really important that this account doesn't have a debit card to it. You never take money out directly to spend it. It is separate. It doesn't, this account gets reset to zero every single month for us. Mm-hmm. Um, your point of this account is purely to collect your income. Hmm, that's it.

Background:

Yep. Okay.

Tre:

No matter how your income is sourced, if you have 10 different jobs, all 10 go into this account. Doesn't matter.

Background:

Yep.

Tre:

Okay. Income goes here. Any income, any income goes into this account. Then below that we have house account. So into the house account is you are going to transfer what it costs for you to live. So the way that way we build this is we have a super, super simple Excel document that lists any expenses that we have for the year, not for the month, not for the week, for the year. And it's really important that you annual analyze it. Mm-hmm. We are creatures of habit and this doesn't include big discretionary expenses. Uh, we look at that separately, but this is just. Basic living, like what it costs for you to live.

Sierra:

Why don't you read some of the examples?

Tre:

Okay. So here we have, uh, your car insurance. My car insurance, we have a grocery amount, so we decide on a grocery amount. Uh, remember annualize it. Mm-hmm. We then have fuel. We do similar type of things. Uh, utilities, internet. Your phone. My phone. Charitable contributions. Netflix. Life insurance. Life insurance. Visa. The music streaming thing. Yeah. We don't use Spotify. I know Mike. I feel like.

Sierra:

Nobody knows what diesel is. Yeah, it's just us on there.

Tre:

Uh, mortgage payments, taxes, seekers, food, Costco membership, credit card membership, uh, coho, which we'll get to Disney streaming, uh, cleaner. Uh, money for RESPs, for Ari's budget that she gets and us spending money, which I'll get to spending money in a minute. That's everything listed on that account.

Background:

Mm-hmm.

Tre:

And it's really important that you annualize it this amount. In order for it to change, you need to sit down with your significant other and make a decision in order to change it. Mm-hmm. We set this up once a year. We sit down in January, and then if there's something that we want to add. To this list. These are like ongoing expenses. We sit down and we talk about it in January. Yeah. If we, if we did without it for the last 10 years, we can do without it for another six months. You know, like we sit down in January and make our decision then. Okay. So that's, that's that dollar figure. Um, we, I divide that dollar figure by 12 and that's the amount that goes from our income account into our house account. Every single month.

Sierra:

Right.

Tre:

Okay.

Sierra:

So basically you have the spreadsheet, and I'm just gonna use the grocery one for example, because that's the one you have to set yourself. And I feel like everyone can list like, okay, how much does my Netflix cost? It costs 10 bucks a month, whatever, and times 12. Okay. That's easy to annualize, but I find people get kind of stuck on the food one, like groceries, like setting an amount. So. I, I think that's where people start tracking. Yeah. You know,'cause they're like, okay, what am I spending? So I know what to set the amount to, which is fair. But then like you have to, you have to just do it like a few times and, and set, set it, sorry. Set it once it's. Once you figured it out.

Tre:

Yeah. And you, you can spend whatever you want on groceries.

Sierra:

Yeah.

Tre:

You gimme a number. You

Sierra:

can be like, I'm spending a thousand dollars a week. That's crazy. But you can do that if you want.

Tre:

Yeah. If that's, and it really depends on, there's a lot more to it. That's why I'm saying, I'm not talking about specific numbers here. I'm talking about the system. And it is important that you set an amount.

Background:

Mm-hmm.

Tre:

It's one of the biggest variable expenses. Uh, it's important that you set an amount, and that amount couldn't be a thousand dollars a week. That's. Cool. That's fine as long as you are setting the amount. And that's why I said it could lead you to bankruptcy or, yeah, or either way it's important that like, you can't just, you know, I could pick a million dollars if you don't have a million dollars coming in, and obviously the budget's not gonna work, right. So it needs to, it needs to be reasonable and, you know, there would be some playing around here to figure out what your numbers, what's appropriate for your numbers, right? Mm-hmm. Um. Okay, but that number goes, that amount goes from the income account into the house account.

Sierra:

So what you do is you take the entirety of the year, so you make sure everything is. Uh, like if you have the Netflix at whatever,$10 a month times 12, right. You make sure everything is annualized, each category or each item. Yeah. Right. And then you add it all together and then you divide that total by 12.

Tre:

Correct.

Sierra:

Because that's a monthly amount, the house to go into the house account.

Tre:

Correct.

Sierra:

Okay. Sorry, I'm just, you know me, I'm a clarifier.

Tre:

Yeah, that's good. That's good. Clarify away. Um, correct. So then you have your amount. So for. Argument's sake, I'm gonna use, uh,$6,000. Okay? So you have$6,000 every single month going into the house account. I dunno what it is, but we're gonna, that's what we're gonna do, okay? Yep. Part of this calculation into the house account is your spending money, and this is really important for you to have, even if you are paying down debt. No, people will say lots of different things. Uh, it can be small if you're paying down debt, it should be small. Uh, but you need to have an amount. And this is where it's, again, it's not really about the amount, it's amount, the fact that you have an amount. Mm-hmm. So when we were first married, the amount was what,$30? Yeah. Or something like that.$60 a month. It was like we had no, we had barely any room, but it was important that we put aside. Money to be spent on anything we wanted it to be spent on. Right. And doing that again and again. Uh, will it, you sh it shouldn't be so high that you can spend. Unlimited amounts of money, it should be an amount that even if you have a higher income, that you still have to make decisions about what's important to you. Mm-hmm. Because ultimately you need to align in your, where you spend money with what's important to you. But in a couple, it's really important that each individual has this amount, has an amount because. That the vast majority of marriage breakdowns happen because of finances.

Background:

Mm-hmm.

Tre:

And that resentment that happens, I see it happen with tons of people where, oh, she spent money on this, so he spent money on that. And I don't really like, I didn't really want money being spent on that. They didn't like that is poison for our relationship.

Background:

Yeah.

Tre:

So it's really important that, especially. Especially millennials, I would say, because we are more independent than the generation was above us. Mm-hmm. Uh, and they had issues with that. I feel like I see it a lot, like more issues with our generation than I do even, even with the previous generation. Yeah. It's important that you have some something that you can spend without. Feeling guilt or anything like that. Yeah. It's like

Sierra:

this is my allowance. Like that you've both, if you're in a couple that you've both decided on. Yeah. You know, like if you, again, depending on your situation, let's say it's$500 a month that you're like, this is money that I can, I can go to the store and spend all$500 on one thing if I want, I can, you know, do whatever I want with it. And your spouse has that too, and it gives you like the ability to. Just do whatever you want, you know, as an individual, if that makes sense. Yeah.

Tre:

Also, don't talk about numbers. Don't use, try not to use too many numbers. Sorry.

Sierra:

Because I

Tre:

don't want people to either assume that's what our numbers are or associate that with like a place to start.

Sierra:

Yeah. Sorry. So

Tre:

don't start with 500. Start with a conversation between you and your spouse. I know. On, on what makes sense.

Sierra:

I just sometimes, okay. For me, all like. Finance and anything like that. I'm like, I need an example. Like I need an example to un understand it or visualize it. So that's why I'm doing it. But yeah, you're right. That's fair.'cause

Tre:

we'll, we, we'll use$500 for this illustration, like sure, this numbers, but just, it's not$500. It could be do the work, it could be$10,000. I'm just, you make a decision, you have a conversation about it. Okay. Um, so that's part of what goes into that house account. Okay. And then from that house account. You pay those spending accounts, so we had that spending account on the right here.

Background:

For

Tre:

us, we have a spending account each.

Background:

Mm-hmm.

Tre:

First off, I would say, uh, all of our accounts are joint. Every single one of our accounts are joint, but they are labeled. Yeah. Right. So I have an account called Tray's Spending. CS has an account called Ceases Spending. We have a account called House Account. Mm-hmm. Okay. We have an account called Income Accounts. So. Everything is joint, but there are accounts that C can spend from whatever she wants. I can't say anything about it. I have an account that I can spend from she, whatever I want. Si can't say anything about it. If I wanted something really big and it, it was more than one month of allowance, I would have to save up for that one thing. If I wanted to put nice brand new rims on my car, I would have to save up for those rims if these wanted to go buy the nicest. MBTI book, she could find what MBTI book is, but she wanted to go buy that type of book. She would just save up and go buy the book. Okay. Um, so that's really important that there's a spending amount. And then the grocery amount, as we already spoke about, is the, is the one that tends to fluctuate the most. So when I say you don't track expenses, you set them. This is where it really shows between these two. Discretionary categories. So we use a company called Coho, and it's basically a prepaid MasterCard that in a moment's notice, I can bring up on my phone and I can see how much we have left for groceries.

Sierra:

Mm-hmm.

Tre:

And, and not just

Sierra:

groceries, we also do like, like

Tre:

food.

Sierra:

Any food. So if you're like, oh, I'm just gonna swing by like. Bar on the way home.

Background:

Yeah.

Sierra:

That's coming outta the food account, right? Yeah. Like we budget for the groceries. Any eating out, any restaurants, any food or drink consumption?

Tre:

Yeah, pretty much. And if we, we, we can absolutely go over that amount, but where does it come from?

Sierra:

Our own spending.

Tre:

Exactly. It does not then come from the house account. The house account is sacred. You do not touch the house account secret unless the, the, unless that expense is listed on, on, on your Excel spreadsheet, right?

Background:

Yeah.

Tre:

That's be on be all, end all of it. Right? Like you do not touch that account unless that's the case.

Background:

Yeah.

Tre:

So that's what we get transferred into the groceries and it means. Food is an area that you can spend whatever you want on. So it means that there are always trade-offs. There are decisions that we have to make, but we have shrunk the consequences. Instead of being, because we'd made this decision, we can't meet our financial goals, it's because we made this decision. Now we have to wait two days to get our money back into that, that grocery account. Yes, we've shrunken the, the consequence of our actions because. And it allows us to correct course very quickly. Yeah. Right. And I would say we, there are oftentimes that we go over the grocery amount

Background:

mm-hmm.

Tre:

And we just pay for it out of our spending account. Mm-hmm. Never once though have we gone over the grocery account and gone over our spending account because they're the only two places that you can, we can take money from. And we haven't, at this point, we have a high, high enough amounts going into, into them that. We, we we're covered.

Background:

Mm-hmm.

Tre:

So again, the point is that you set the amount. That account, we can watch it go to zero, goes to zero every two weeks is what we, not

Background:

every week,

Tre:

most two weeks. Yeah. It goes to zero. We spend it all and that's absolutely fine. It's great. Yeah. Um, to

Sierra:

be fair, have you seen the prices of groceries? Yeah,

Tre:

they've gone up. We do need to increase that a bit, but then saying that we've also done fine, so I dunno. Yeah, that's 22. Um, okay, so that's those accounts. The last account that I spoke about is net worth up. And this isn't really an account, this is. What this money needs to achieve. So everything left in the income account goes into this, I'm gonna say account for now. So I hear you say what's in that account?

Sierra:

What's in that account? Drake. Oh, great question.

Tre:

So this account would be if you have consumer debt, that's where this is going. Right that entire amount. If you, uh, if you still need an emergency fund, that's where this money is going. Once that emergency fund is capped, though, no more money goes into that emergency fund and it goes into a. Portfolio, it goes into an investing portfolio. Doesn't go specifically for retirement. Doesn't go specifically just in case the car breaks down just in case the furnace goes. No, that is when, when you are, you are thinking way too small. When you are thinking, oh, I need to save money for

Sierra:

specific what ifs, for

Tre:

specific what ifs. Because that then what ifs will happen eventually, but that money has also been sitting around doing nothing for a very long time while you figure out what those, what ifs are. Mm-hmm. You want to get to the point where you have enough in your emergency fund to cover those what ifs and when you end up, when that end up, when that that happens, when that what if happens, you instead of that net worth up account. Being put towards, or what's left being put towards your TFSA to max it out? Let's say you would refill your savings account, your emergency savings account.

Background:

Yeah.

Tre:

So this, when I say net worth up, the point of this is that it's everything that doesn't need to be spent today goes into this account. And then big decisions are made annually with your financial planner. So, for example, I'll sit down with clients and we'll decide how much we're doing. Into RSP contributions, but we'll make that decision based on what optimizes taxes, not just putting an arbitrary amount aside for retirement. Mm-hmm. Because your retirement will be funded not just by RSPs. It'll be funded by your, your

Background:

portfolio.

Tre:

Your portfolio, what your financial assets. And that doesn't mean that. There is one perfect place for those assets because there's lots of things that you can be investing for that aren't retirement. Mm-hmm. And I, I work with a lot of people that, uh, especially when they first work with me and I'm very big on, yeah, you max out your Ts and then we start a non-registered account. Which is like, most people don't even know what that is. Mm-hmm. Uh, but it's just investments that aren't in a registered account. Like that's literally what a non-registered account. But it provides flexibility and the point, the reason I stress doing that type of thing is to learn. You don't just invest for retirement. Mm-hmm. Investing, building a portfolio is not for retirement. It's for your next vehicle. For, to take the kids on vacation to, to, to buy a nice account what, whatever, whatever the heck

Sierra:

you want it to

Tre:

be.

Sierra:

Basically like, I love the way you describe it as an opportunity account where you have the money that's, it's doing what it should be doing. It's not just sitting there for you like it's working still because it's invested. Sorry. I don't know why I'm like, it's the smoke. It's very smoky here right now. I think I'm really sensitive to it anyway. Um, having the opportunity to like, take advantage of things that come up, like your dream house that just came on the market, for example, and you're like, oh, good thing I'm saving or not saving for this, but the opportunity has. Arisen. I don't know if that's the right way to say that, but now I can take advantage of it because I've set, set aside this money to grow my net worth and I can use it for what I want.

Tre:

Exactly. And it means that decisions about spending from that and made together jointly, like you are wearing the pros and cons that yes, you could go and uh, and spend the money on. Or whatever, whatever, like let's say you wanted to, to landscape your garden.

Background:

Mm-hmm.

Tre:

I would, well, we'll talk about this in the, actually in the next podcast,'cause that's gonna be the$400,000 plus. But the way that you want to run your finances and make spending decisions isn't based on let's spend every min, every single dollar that we possibly can. You want to say, will this make me happy? Will it impact my long-term financial goals? The answer is good for both of those things, then you can make a decision. But if you do not learn to be content with what you have, you will never be content.

Background:

Mm-hmm.

Tre:

I would much rather be the individual with a million dollars in my account spending, uh, whatever makes me happy than being the p. That's a bad way to, let me rephrase that.

Background:

Okay.

Tre:

The individual who earns a hundred thousand dollars and spends a hundred thousand dollars will feel poorer than the individual that earns$80,000 and only spends 70 because that's all they want to spend.

Background:

Mm-hmm.

Tre:

If you never hit that point. Of, this is all I really want to spend. This amount of consumption makes me happy. No matter what you earn, it will never be enough.

Sierra:

Mm-hmm. You'll never be happy. You'll never be happy. You're just never what you have. You're gonna chasing high, like you're

Tre:

chasing the next thing and the next thing and the next thing. You will not be happy. The cars will not make you happy. Right. Like there, as, as humans, we know there are certain things. That make us happy. And a lot of that is connection. It's family. It's, there's, there's lots of things that do make us happy. Money makes things a lot easier.

Background:

Mm-hmm.

Tre:

Guaranteed. But there is a level of consumption that is enough.

Background:

Yeah.

Tre:

Right. It, it is enough. And if you're the type of person that you just, you know, it's the love of, the love, love of money, the love of stuff. Like you always must spend everything that's coming in. Uh. You have other issues. Mm-hmm. Like it, it is, and I know people will say like, oh, but nobody has money to put aside. And it's, it's just, it's very sad to hear it because it like that, like that individual that's earning a hundred thousand dollars, let's say, and they're like, well, I don't have any money to set aside. Well then that would mean that the individual earning$90,000 would have to be in$10,000 a debt.

Background:

Yeah.

Tre:

That's just not the case. That's not how, that's not how it works is the fact that the person, if they had earned$90,000, guess what? They'd to spend$90,000. Mm-hmm. If they'd earn 110, guess what? They'd to spend?

Background:

Yeah.

Tre:

110, 150. Guess what? They're to spend 150. And it's that constant, just spending everything that you possibly can is the complete lack of self control. And that's the, that's the kicker. That's the part that it's, it is self-control. It is, but it is easier, much, much easier with a system. For sure, because then it means that as your income, so as this first, this first account goes up, as your income goes up, it's not automatically applied to your expenses and your spending. Mm-hmm. And if it is applied to your expen expenses and your spending, it's say, this decision. Yeah. And that's really important. That's really what this system is about, is it's about the, the pause, the easiest thing. Yeah. And the easiest thing being the, like it going towards your net worth, that being the automatic thing. And in order to interrupt that, you have to make a movement to interrupt that. Mm-hmm. You have to do something that physically intervenes with that. And normally for people, it's the other way around where the, the thing that they have to physically intervene to do. Perfect. We got interrupted, so we will try to remember where we left off. Uh, I think I was talking, I don't even remember now. But anyway, that's why you keep it separate. I guess the, the net worth, um, is, should be the easiest thing for you to be funneling your excess money towards versus it just going to consumer, uh, to, versus you consuming it and you consuming it is not a problem. As long as it is a decision, and you can, and we have so much great technology, we can basically look into the future and see the consequences of that decision. So it means that you can, everybody can be making an informed decision, okay? And a lot of people will say, well, what do I do with this money? There is, that part is the easy part. I know it's difficult for a lot of people to conceptualize, uh, but what to do with your money? That you don't want to spend now can be automated. It can be very simple, very easy. You just have to do it. Just, that's a different, different podcast, different topic that we will get to at some point. But yeah, it doesn't have to be hard, but this is the fundamentals of it. Separate your income from your expenses, automate it. So you have your, you have the money going into your house account, and then you have the money in your spending. So. The other part to this is credit cards. Let's talk about them. I love them. I know a lot of planners and stuff don't love them. Uh, for lots of different reasons. If you're not a person that can pay off your credit card in full every single month, do not have a credit card not worth it. Uh, but for people that can, if you can, if you can use it well and you don't pay interest, et cetera, et cetera, they're great. How do we, how do we use credit cards? So. This is the one manual process that I have to do every single month. There. There are other ways, if you wanted to make it as easier, but you are, there are trade offs. Mm-hmm. So the way that I do it is I download the, the transactions, the statement into Excel, and then I separate. Just like we have accounts here, I separate out columns in Excel and I just drag the amounts into the appropriate columns. So if it's under your spending, if it's under my spending, if it's under our like spending that we, so for, so the way that we manage house stuff, for instance, is. We just split 50 50 basically. Yeah. So it's something like, if

Sierra:

I'm like, oh, I wanna put up these sli edge shelves, and you're like, yeah, fun.

Tre:

But, but that is a discussion that we'll have, right? Yeah. So some things, if it's not as valuable for me, or I want something that you don't really want, uh, maybe we'll split it 70 30, what, whatever it is, it's, it's a conversation that we have, but. Those transactions go into, uh, the appropriate column. Again, they're just added up and the credit card is paid from, like, we pay it from the, the income account because by that point it's at zero. And then we have to transfer into that account anything that we spend. So it comes, you know, from the house account for any, like all of the, all of the. Streaming services and all that stuff, you know, let's say it comes to$500 for the month, well, we'll take$500 from the house account into the income account. Yeah. If there is a thousand dollars of spending, uh, each of us for the month, then we'll take a thousand dollars from your spending account. A thousand dollars for mine, but the numbers will be exact, so whatever it is, it's on an Excel spreadsheet. We equals sum opening bracket, highlight all the lists, close it, bracket, hit enter. You dunno how to use the sum function. And that's your number. That's what goes in. Uh, and it gets paid credit card infill every single month.

Background:

Yeah.

Tre:

Okay. So this structure is very similar to how a business operates. Businesses have been running for a very, very long time. You will never see a successful business the way that manage, the way that some people manage their personal finances, where you just hope and pray that the money does is in the account. Yeah. That you'll often find that, like department heads for instance, are assigned a budget that isn't directly correlated to how much income is coming in. They have a budget that they, they can spend. Can't go over budget, right? Mm-hmm. And it's a very same similar principle that there is an amount that can be spent on these line items, can't go over that budget. Yeah. But if you decide those line items can't stress how important that is. Yeah. And this works, this system works. If you had a hundred thousand dollars a month going into that income account

Sierra:

or 20,000.

Tre:

Or well, not you still went, went with the high number. I was going with like a low number, like$2,000 a month. Oh, sorry. Going into that income account, you're like,

Sierra:

that's still gonna high. Yeah. Yeah.

Tre:

Um, so any, any amount this, this, this works, this, this works through all different types of income levels, use it. I don't know. It's, uh, and it might take a little bit for you to get the hang of it. Um, a lot of people won't like it because it forces ownership very quickly. Mm-hmm. Like, you can see if you are overdoing it, you know, and you, the consequences are quick. They, they happen very quickly. If you overspend in your spending count, you can't go out and spend more. There's no money to, right. And again, this is partly where the self-discipline lies, but it will get easier. Uh. You, once you spend it, it's spent like, there's like, yeah, there is no, there is no like, but you, you, you make it in shorter term. So it's not as, you know, there's, I don't know, do you know, do you know what I'm saying?

Sierra:

Yeah. Basically like you have to learn how to say no to an extent. If like back at, you mentioned our early marriage days, people would, uh, like say, Hey, do you wanna come out for supper at this expensive restaurant? And we would say. No, sorry. We can can't, but we meet up

Tre:

afterwards.

Sierra:

Yeah. I'm like, let's go for a walk. Let's do, you know, like, let's play cards. Let's do something that doesn't require spending so much. So, you know, like you can't always do everything free, but, or Oh, let's go for coffee instead. Like something smaller we would do. You have to like, think more creatively instead of, and again, it's, it's not that we didn't want to do, do those things sometimes. It was really hard to say no, I'm not saying that. We were just like, nah, like we don't want to. Anyway, a lot of those things I was, you know, it was hard to say no. To, but we had to say no. You have to say no to something. A saying that I like, a trademark ceasing, since we've gone through some of trays, is every time you say yes to something, you are saying no to something else. So when you keep that frame of mind. Remembering that what you say yes to has to be important to you. It should align with your values, like you said, in in everything. But in finance specifically here, it'll make you happy. You'll find that contentment that we talked about. Mm-hmm.

Tre:

But, and back then it was, we wanted to go on vacation,

Sierra:

right? Yeah.

Tre:

So it was a case of like, it truly was a direct. If we say yes to this, we're saying no to that. Well, that is a lot more important to us than this. So we picked what we felt was more important to us. Yeah, and it this, this model allows you to do that. And this is why I say. Like this, doing it this way, you don't notice the impact immediately. And a lot of people will be like, but you're not saving for those, like, specifically for those like scary items and things like that. It's like, I, I agree. That might seem scary, but most people's income goes up and you should be, as long as you keep this structure. As your income goes up, that gap will just get bigger and bigger, and you'll go from, in that net worth up account, you'll go from it being$200,$50, a hundred dollars to well. Lemme rephrase that. You'll, it'll go from being$128 and 36 cents.'cause it, if it's a round number, you're doing it wrong.

Background:

Yep.

Tre:

Uh, to$243 to$576 to$1,341 and 16 cents like you'll find. It will, it will go up. That is, that is where, that is, that gap that you'll build. That's really the, the power behind it. Yeah. But that's what we'll cut off this episode. Uh, the next episode will actually be, I did want to do a few more, but we're gonna do the, like what we do episodes, but we're gonna do the$400,000 in up budgeting. So we'll, we'll cover that off and finalize, finalize those ones. And then the following ones we'll do. Like investment products and investing what we do. Uh, and we'll talk, we'll talk about that and, and go through, go through what's in, what's in my portfolio, what I, what I use. So yeah. Perfect. Well, we will see you in the next one. Bye.

People on this episode

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Tré Bynoe CFP®, CIM®

Host
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Sierra Bynoe

Co-host