0:02 Who are you? And where are you going? What do you want? [Music] Hello and welcome to People Making Money. I'm your host, Kevin Bemmel, and I'm here every Wednesday at 10:00 a.m. Pacific time to talk about job hunting, starting and running a business, and building wealth. So, all of the uh financial aspects of life that that is
0:38 uh what this show uh is devoted to. So today, and I've been promoting this all week, today I'm going to be talking about something called lifestyle creep. Now, this is not some, you know, weirdo who follows you around, i.e. creep cap. Uh um this is lifestyle creep. C R E P. It's how our expenses kind of it seems like almost under the radar end up exceeding
1:16 our income. And I I I can tell you that I've I as much as I work to guard against this in my life, I see it happening. And it's it's quite insidious uh because so much of our financial lives are on sort of automatic pilot. Uh the this this sort of lifestyle creep ends up happening and we don't even realize it. It's just all of a sudden we feel like every month we're we're
1:53 falling behind or strapped for money and yet we don't perceive that we're doing anything significantly different. Okay? So that's not to say that all of lifestyle creep comes from sort of automated finances. Sometimes automated finances can be the solution to it. But, uh, that is I I know for me that's often times where it where it comes from. Um, because in order to be more productive, I I have most of my financial life set up that things get paid automatically
2:28 and then, you know, once once a month, you know, I pay my credit card bill and, you know, kind kind of done, right? Um, but that can that can be a problem as well. So, so you know classically lifestyle creep occurred where as as your income increased your expenses increased more right so we have a tendency to want to reward ourselves as we progress financially right so I know
3:03 uh when back when I had my real estate company before I was in the Navy I think I've told this story maybe once before so I I was driving uh a car. It was a nice car. Um but I had always wanted a convertible BMW. And finally I got to the point where I could afford one. And so I bought it. And then I felt tremendously guilty, right, for rewarding myself, rewarding myself for my financial success by buying, you know, such an expensive car. you know, a car that probably cost twice as much as
3:38 any car anyone in my family had ever owned, right? And and it took it took some real sort of soularching on my part um to to become comfortable with with driving the car around. And and in this case, I could afford it. So, it wasn't an issue of lifestyle creep where I couldn't afford it. I was saving money for, you know, for in my retirement account and I, you know, no trouble paying my rent or anything like that. Um, but but that's just, you know, that that's that's kind of the mindset though is well, I did well or I got a raise, so
4:15 I'm going to do, you know, X for myself. um you know these kinds of things if we're not careful our finances get out of out of hand and we like I said we wake up one day uh you know a few months or a couple of years later and we realize we're we're in over our head and now we have to make some very significant changes. So, uh, one of the I I I I mentioned this, um, uh, at the beginning. One of the ways that lifestyle creep uh is so
4:50 insidious is so I I saw this um I think it was toward the end of last year, beginning of this year. I noticed that uh the cost of phone and internet services had roughly tripled since when I had originally signed up for them. And I I I'm looking at this like, how can I be spending what amounted to uh in total about $400 a month for uh Wi-Fi service and cell phone service.
5:25 And I looked at them and I realized that uh in in the case of the internet services, the cost was double what I had originally set up, you know, signed up for. And in the case of phone service, it had gone up by I think something like 2/3. So, you know, I started looking for a less less expensive alternatives. And when all was said and done, I was able to find an alternative by switching companies that saved me 75%
6:00 of the monthly cost for those services. So, they went from uh over $300 a month to $80 a month. Okay. And I was I was talking to someone at the car the the cell phone carrier that I had cancelled because they didn't do the cancellation right. And she said, "Well, why why didn't you call us? We would have, you know, reduced the price." I said, "I did call you. Not not her. I I called the company and I told them I needed to reduce my costs and all they wanted to do was sell me more services. They didn't want to discuss
6:36 reducing the cost. And she said, "Well, you know, the company that you moved to, they're just going to increase you in a year." And I said, "Yeah, I already anticipated that. I put a reminder in my calendar. 11 months from now, I need to sh start shopping for new telephone and internet services, right? because I'm going to get a big increase and the same kind of creep is going to start happening again unless I you know in in an aware way in a conscious way make sure that my expenses are staying controlled. So, you know,
7:13 this this is where having certain of our expenses on autopilot, I think, is problematic because the cell phone companies, the the internet service providers, they they increase prices. They may notify us of them. I I I presume they do. I don't know. I don't recall ever seeing them, but, you know, it's I'm sure it's in their contract. They're permitted to do it. And by the way, I'm not saying that they're, you know, bad or evil for increasing prices. If if they can increase prices and people pay it, well, hey, I guess that's that's that's fine. But I know for me, the
7:51 reality is um knowing their cost structure, right? That, you know, the cost of operating their businesses, you know, didn't double over the, you know, four years that I had service with the particular companies with with which I had service, right? So I I'm not willing to pay more for it. And there are enough companies out there and there always seems to be one that is, you know, trying to grab business from the others. And so I can always switch to that one. Now, there was one time when that wasn't the case. For some reason, all the
8:26 companies were holding their line and and they weren't giving big discounts. But okay, so that particular time I Okay, that's what it was going to cost me, right? I shopped it and I was like, "Okay, well, there was no no point in changing because I wasn't going to be able to reduce my costs." Uh, but in general, I think there are opportunities for us to reduce those kinds of expenses that we tend to have on autopilot because they just build to our credit card each month and and and and thereby, you know, stop the lifestyle creep. So,
9:03 uh, you know, these are these are the the the kinds of things that that make lifestyle creeps so sneaky. And so, we've got to outsmart it and ourselves by putting systems in place to prevent this from happening. So, um, on on this side of my computer over here, I I can click onto here. I have my my Apple reminders. And at the moment, I have 166 scheduled. You may say, you know that's like blowing your mind right but those are my reminders over the next year right so they they you
9:40 know and in some cases there are some reminders that only happen every two years certain you know filings I have to make for you know to maintain my business entity right so by setting up those kind of reminders I don't have to be you know worrying oh should I be checking my the cost of my self cell phone service I know it'll pop up on my reminders at the appropriate time and so I can go on about my regular day or take care of, you know, more important business and when it's time for me to, you know, take the next step in checking lifestyle creep, it'll come up on my
10:17 reminders and I'll take care of it then, right? And I and I always give myself advanced time because I I don't want to be in a situation where like this is the last day, you know, you have to do it today and now I have something super important so I can't get to that particular task. So, you know, I give myself a month's leeway in order to take care of something like that. So, but but that's why it's so sneaky because these things happen kind of outside our cognizance, right? and and it and it builds up and and the other thing is small expenses. So when I say small
10:52 expenses, I mean things like, you know, eating out. Okay. Uh although eating out has gotten, you know, significantly more expensive over the last few years. Uh especially if you're a you know single person like me, for one person to eat out, what is it? It's I don't know. I mean, kosher food eating out is more expensive than non-coosher food. even kosher food, you know, it's $30, $40, maybe $50 if I'm having, you know, an extra dish from the uh, you know, from Bodhi Thai or something like that. Um, and, uh, you know, it's so convenient
11:29 now. We can have food delivered. We can schedule it in the morning to have it delivered in the, you know, in the late afternoon when we're done working. And we, I know for me, you know, I'm done working. I've had my shower. I've had my, you know, whiskey and soda. And now I can just relax, have my dinner, maybe watch, you know, a movie, and then uh, you know, uh, read a little bit and then and go to bed or whatever. It's such a nice light and such a nice uh way of treating um myself. Um it's but what I realized is that while you know 30 40
12:04 even $50 once in a while is no big deal to start doing that multiple times a week two three four times a week it adds up really quickly all of a sudden you're talking about several hundred a month. Okay. And because each individual uh expenditure is relatively small, it it doesn't affect us the same way as if we had to pay, you know, like $300 a month for eating out, okay? Or $400 a month or whatever it whatever the total monthly tab would be for eating out, right? So
12:40 that's that's another reason that lifestyle creep is so sneaky is often times it comes through a series of what seem to be reasonably small expenditures and that are made you know each time and we don't realize until the bill comes at the end of the month like why is my credit card bill so high right so for those reasons we need to be diligent about keep you know making sure we're not falling prey to lifestyle creep. Now
13:15 maybe I should have started with this. You know look if you've got a huge income and you know you you you already own your own house if you want to you you know you you have money you're putting money away so you have savings you have a rainy day account you've got you know money set aside for whatever. Okay. And so then and and and if it's falling within your, you know, monthly or annual income, so then maybe eating out every night is fine, you know, because it's you're not that's not really lifestyle creep within your overall finances.
13:51 Okay? Where where lifestyle creep is is so insidious is where it's pushing us to the point where we really can't afford the lifestyle that that we're living. Okay. So, so the the the the the psychological triggers behind lifestyle creep, it's important to understand them. Okay. So, part of it can be social pressures. So, you know, if if you if if you have a group of friends and they eat out all the time, right? The you may feel like
14:26 you've got to eat out all the time, too, to kind of keep up. leaves call it keeping up with the Joneses, you know, the poor Joneses over the decades, you know, this much maligned, you know, fictitious family, right? But that can be a problem. Or if if you're you know, you know, again, if you're you're single and and you socialize a lot and so you're you're going out for, you know, cocktails all the time or whatever. I mean that that can be very expensive if if and if especially if you're the person who um likes to pick up the check. This was something that I did
15:01 back in my 30s and 40s uh you know when I was you know doing you know well financially uh before I joined the Navy. I would think nothing of picking up the check for several people. It it made me feel I think it made me feel frankly like a big wig like hey I'll pick up I'll I'll I've got this. don't worry, you know, enjoy kind of thing, right? Um and and you do that, you know, a couple times, three, four times a month, and it's very easy to exceed your income, you know, especially if if you habituate your friends that, hey, I'm not going to have to pay for this. Kevin's going to
15:36 pay for it. So, you know, so there you go. So, you know, my experience from that time taught me, okay, that that's not, you know, that that the kind of dopamine hit, I guess we would call it, that I get from picking up the check, you know, got to find another way to satisfy it, okay, than picking up the check. So, you know, I I I train myself not to do that anymore. uh you know other things are you know for most of us life is tough right uh
16:11 you know it's stressful uh sometimes we work very long hours uh you know living in a city like Los Angeles you drive there's traffic uh in the summer it's hot I mean even worse in the southeast where it's hot and humid so just moving around your day is you know it's it's it's trying right And so we and we live in a culture that basically says you deserve whatever it is. And I have to say that message as a consumer message is incredibly destructive. It's absolutely
16:48 insidious. The fact of the matter is we don't deserve much of anything. Okay? We we we deserve what we can afford and earn. That's the reality. Okay. If we can't afford it, if we didn't earn it, we do not deserve it. Right? That's the part of that message that's left out. U but I hear it all the time whether it's when I'm watching uh you know, Tuby, you know, a commercial on Tuby that that's the free uh entertainment service I use. Uh or whether it's on some sort of you
17:23 know, something on social media. Oh, you deserve this. No, we we we don't. for the most part we don't deserve most of the things that people are telling us we deserve. Uh so but you know we've been trained to believe oh I deserve I deserve uh you know a vacation at a you know five-star spa in uh I I don't know um in bo not Boca Raton that's not that's not Tony enough it's a nice place but it's not a Palm Beach that's the
17:58 place I was trying to think of a little bit farther up the coast right I deserve that you know well no probably Not I mean if you can afford it so then you can afford it but whether you deserve it or not who who knows right. Um but because of the stress of of daily life and and the blaring consumer messages we get. So it it trig it really almost compels us into lifestyle creep into taking on financial u burdens really that we we can't afford
18:34 or financial obligations is really the better term. Financial obligations that we can't afford that are inappropriate for where we're at. financially. And so again, we need to be aware of the financial triggers and do things to counteract them. So one of the things I do is is is I've learned to detest this word deserve, right? Because it's trying to get me to do something that probably I should not be doing. That's really what it comes down to, right? uh you know is it deceptive marketing within
19:10 the definition you know of the law like the um u I can't think of the there's a federal agency that deals with deceptive advertising um I I mean I I don't I don't know don't care but what I do care about is marketers are trying marketers sometimes they're they're trying they're trying to present me with something that will help me live a better life but oftentimes They're just trying to sell their stuff. Whether it enhances my life or not is is immaterial. And that's fine. I'm not
19:45 saying that, you know, they they they shouldn't do that. All I'm saying is it's up to me. It's up to us to decide whether a particular product or service is actually beneficial for us. Okay? and and and there starts the the the real root of dealing with lifestyle creep. It's it's it's one of the initial steps into adulthood, which which I recognize is not something a lot of people in this country really want to do. They don't want to be adults. Right? If you think
20:21 if you have children or if you had h if you had children or you've been around children, children are wants embodied. I want this, I want that, can I have a this, can I have that? Right? Look, they it's it's part of just human nature, I think, that we are acquisitive, meaning we want to acquire stuff, right? So while with children hopefully there is a parent around to help them learn to control that behavior for those of us
20:57 who are already adults we need to control the we need self-control with respect to that aspect of life. Okay. And so, uh, this part of of of not becoming subject to lifestyle creep is to sit ourselves in an adult role and then make good decisions about really what is it in life that we need and want that will really enhance our life. I'm going to talk more about that in in a few
21:33 minutes. I want to talk about a couple of other things though before I get to more deeply into the remedy. Uh, okay. And we're going to take a sponsor break. When life brings unexpected changes, managing inherited property shouldn't add to your stress. Magnum Properties specializes in probate and trust real estate management. We handle the complexities while you focus on what matters most. From property maintenance to tenant relations, from legal compliance to maximizing value, we're
22:09 your trusted partner through every step. Magnum Properties, Inc., turning property challenges into peace of mind. Call us today at 213-264-4396 or visit magnumprops.com. So, this is People Making Money and I'm your host Kevin Bemel and we're talking about lifestyle creep. And I was talking about some of the psychological factors behind it, the triggers, the way marketing will try and convince us that
22:45 we deserve something, we need to have something. uh and and and and how we as adults need to make decisions about really what it is we need and want that will truly enhance our life. So um I want to talk uh next about what is the impact on our long range financial well-being because of lifestyle creep. Right? So if we if for example one of the things you want to do is own your own home,
23:20 well so then presumably that means saving up enough money for a down payment so you can afford to buy the home. So the average or the median home price in the United States, I think is getting getting around $500,000. Okay, $400 plus,000, right? So, a 20% down payment is going to be close to $100,000. Okay, think about that. That's more than double what it was when I was a young man. I'll put it to you that
23:55 way. Okay? And that's a lot of money to save up. And lifestyle creep can mean that you just aren't going to be able to save up that much money, right? So you'll you won't be able to own a house if that's your goal. And by the way, that's that's just a median house. Now, in some markets, I when when I do my economic echoes, I oftentimes look at Omaha, Nebraska. So the median home price there is more around $400,000. But even there, 20% down is $80,000. That's a lot of money, right? Here in
24:30 California, the median home price is over $800,000. So, a 20% down payment is uh 160. It's going to be closer to 170 or close to $170,000 for a 20% down payment on a median home here in California. Okay. So, we're we're talking about a lot of money that needs to be saved and lifestyles creep will essentially take away our ability
25:05 to buy that house. Okay. If you like to travel, you and and you feel having experiences that that open your eyes and and and enrich your life. If those are important to you, right, and you want to save up for, you know, a a a a one month vacation or something like that, lifestyle creep is going to prevent you from being able to save up that money to take that amazing vacation. Okay? So, it really gets away uh from meeting our
25:42 long-term goals. Another one is if you're planning on retiring where you're actually, you know, don't want to have to work. Well, if you're saving for retirement, look, most of us today, we're not going to get a defined benefit pension the way a lot of people did 75 years ago, okay? Back in the 50s and on into the 60s. Okay? Come the 70s, the way pensions worked started to change. And so now most pensions are what are called defined contribution pensions where we decide how much each pay period
26:20 or each month or whatever the periodicity is of the payments. We decide how much that payment is going to be and then when it comes time to retire whatever pot of money we have available that's what we have available for retirement. So if if if you are not among the very small group any longer that has defi a defined benefit pension mostly government workers and and people in unions, okay, which is which is actually
26:56 not a large percentage of the overall workforce. So you probably have a defined contribution pension. Lifestyle creep can prevent you or diminish the amount of money you're saving for retirement, which means you may have to delay retirement andor you may not be able to retire at all. Right now, I'm not saying lifestyle creep is the only thing that can that can cause that to happen. There are other factors. Things happen in life, right? But the most important aspect of saving for retirement is to put away money on a
27:31 periodic basis, at least monthly, so that it builds up over time. And so unless so if you're letting things like eating out too often or increases in your basic monthly unnecessary increases in your basic monthly expenses like uh you know internet uh service and telephone service if those start taking large parts of your income especially if they're pushing you
28:06 to where you're spending more than you're making. So, you're not going to be able to save up for those long-term to meet those long-term financial goals. You're not going to be able to save for retirement. Okay? So, uh you know, thought I'd share with you th this is this is kind of an extreme example. Um but it it it's one that I think really illustrates the point. So, I know someone who uh for most of this person's life um you know lived off of uh this person made you know somewhere in the
28:42 very high five to low six figures uh each year. So, you know, on on balance around $100,000 a year. Now, that that's a nice income. Okay? It doesn't go particularly far here in Los Angeles, but in a lot of places that's that's a very nice income. Okay? and and that's the lifestyle that the person could afford. But the the person always felt compelled to spend more than that income. And at one point uh the person's uh father gave her gave the person money uh periodically and and and so the
29:19 lifestyle creep was being funded right by a third party. Okay. So now uh the the person there there's no one in the person's life to to help this person control the spending. So the person's spending first doubled to about 20,000 a month even though the income earning potential didn't really change. You know very very low six figures now
29:54 120 130,000 a year. Okay. the spending doubled to 20,000 a month and then in another year and a half it was up to $50,000 a month. Okay, so you may be saying, "Well, wait, the person can only make $130,000 a year. How can the person even afford to spend $50,000 a month?" Well, the person inherited money uh when the person's parents passed away. And so this person had a big chunk of money that that is being spent. Okay. Most
30:33 recently the person started spending $75,000 a month. Okay. So that's $900,000 a year. Okay. Here's the problem. The person's inheritance is rapidly being spent. So instead of holding on to the money this person inherited and living off of the income of the capital to enhance this person's life over the whole length of of of of the
31:09 you know person's remaining life. the person is spending all the money and it's completely unsustainable because once all the money is gone, the person still only has the earning capacity of about 130 $140,000 a year. But now the person is habituated to an enormous lifestyle. So the other question you may ask is what is this person spending money on? Well, the person eats out virtually every day, okay? buys a lot of clothes, pays for things for other people in this person's
31:44 life, right? But again, it's completely unsustainable. But this is this is how insidious lifestyle creep can be. And you know, like I described for myself when I used to pick up checks, I think the person gets a dopamine hit from being able to spend all this money. The problem is when the money runs out, okay, what's going to happen then, right? So, the person is really setting himself up for, you know, disaster is really what it's coming down to. This is
32:20 how bad it can get. And you, but you can see h, you know, how it how it got out. It the person had a problem with spending all this person's life. Okay? A parent bailed the person out while the parent was alive. Then the parent died. Both parents died. Actually, left a nice a nice inheritance. Okay. But there was no one around to help the person control the spending. And so the inheritance only exacerbated the lifestyle creep. Okay.
32:57 And what a shame. What a shame, right? because the person could live a relatively could have lived a relatively comfortable life if the person hadn't gotten so deeply imshed in lifestyle creep. So now you say, "Well, well that that's crazy. That doesn't happen to most people." You're right. It doesn't happen to most people, but it does happen to a lot of people when they get a big chunk of money. So there the the people who win a lottery uh you know
33:32 lottery winnings right there it's a very high percentage of people that within a few years have spent all that money right so when we get a windfall that's a particularly important time to be focused on not letting lifestyle creep take us over. Okay. We don't want to be like the person I described. We don't want to be like a lottery winner and and and and blow all the money and now we're used to a a much higher lifestyle than we can
34:07 afford. Uh and and we we don't have a you know slightest chance of sustaining that lifestyle. So the these are real life examples of of how things get out of control. And and I do I do find it so I I'm a big fan of uh Hollywood, classic Hollywood really in particular, the you know 30s through the 50s Hollywood. I I love the movies of that period. And it's so interesting to read about various famous people. So one of my favorite actors is William
34:42 Powell. Okay, he did the the Thin Man movies with Maloy. Okay, if you haven't seen them, by the way, you got to watch these movies. I'm gonna have to do a jiggers's place on The Thin Man, I think. So, he was a very popular actor and he did he wasn't in the most, you know, the very top tier. He wasn't, you know, Clark Gable or Carrie Grant, you know, or John Wayne, you know, these are these were the top top top actors of of of all time, but he was kind of in the next tier below that. And I I read his the
35:18 one biography I could find about him. And interestingly enough, you know, he was he was he lived a very financially disciplined life. So that uh you know when he decided to retire, he retired to the Palm Springs area. He had I figured out the numbers. He had at the time the equivalent of about $7 million. Now you may say $7 million doesn't sound like a whole lot of money for a top Hollywood actor, but for the time in which William Powell was in Hollywood, it was a nice number. Okay? and he was able to stop
35:54 working and live in a nice home in the Palm Springs area with his wife. And he lived a he lived a very comfortable life and he really enjoyed, you know, kind of the later years of his life. In contrast to so many other actors who made a lot of money, you know, in their day and at the end of their life they they they could never stop working because they had spent all their money because the Hollywood lifestyle can be very lavish.
36:29 And so people have, you know, huge houses and they throw big parties and all the kind of stuff that you you hear that seem like they're cliches, but but they're not. They're they're real uh in in the Hollywood. And the social pressures oftentimes to keep up with that lifestyle is very high. So you can see that some people are able to handle it. Others, you know, they get into making a lot of money and lifestyle creep takes them over. no matter how much money they made, they they never have enough. So the the the counterpoint to that is
37:05 Peggy Lee. So I'm also a big music fan and I read a biography of Peggy Lee, very very popular singer, uh especially in the 50s and 60s, but but continued to be very popular throughout, you know, the rest of her life. She could never control her spending. No matter how much money she made, she was always spending more. She lived in houses that were too big and fancy for her lifestyle. She spent money on all kinds on on clothes and pets and booze and and all kinds of things and
37:41 and people would would borrow money from her or they would come live with her and and she would spend money, you know, taking care of them, right? and you know she made you know tens of millions of dollars over her career and had virtually nothing left uh in the end, right? And so, you know, you could argue, well, look, she she spent what she made. She had a great time in her life. Okay, that may be the case. Um, and I'm not saying that, you know, Peggy Lee lived differently than what she intended to do. I don't know. I never got to meet her, unfortunately. But that
38:18 that's the sort of counter example to to William Powell, right? So these are the things I think we need to keep in mind when we start to prosper financially, you know, what are we really going to do? Okay, so how do we control lifestyle creep? Going to take a break and come back and talk about that. Probate and Trust TV, your curated source for the most useful and insightful content on estate planning
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39:32 making money. I'm your host Kevin Bemel and we're talking about lifestyle creep and we've talked about what it is, why it happens, the psychology behind it. We've looked at some uh practical examp some some real real world examples. So now I'm going to talk about how do we spot it and control it or stop it. Okay. So, one of the things we need to do is track our expenses on a regular basis. I recommend at least monthly you track
40:08 your expenses. Okay? Uh, you know, you don't you don't need I mean, unless you unless you're making a lot of money and and you have a lot of expenses uh coming in, I don't think you need to do it more than monthly. Um, on the other hand, if you have a very modest income and you don't have a lot of expenses, maybe you only need to look at it quarterly, okay, every three months. But in any event, you need to set up what we what we call in the military a battle rhythm for tracking your expenses and where you're at financially. So, I know for me, I track my expenses uh monthly. I I
40:44 reconcile my checking account uh or my checking accounts and my credit card accounts and I see you know where have where have I spent money and is anything you know getting out of hand. Okay. Now so that that's number one. We need to be uh we need to periodically check in financially and and by the way it's not fun. I mean I'll admit that it's not fun. Okay. But part of being an adult is we do things that are important to do regardless of getting pleasure from them. Okay? And so to be a responsible
41:22 adult is to be financially responsible. And so we need to balance our checking account and reconcile our credit cards on a regular basis. You know, for most of it's probably going to be monthly. Okay. So that's that's one thing we need to do. Now again, depending on how complex our our spending is, we may need to create a budget, okay? And and and and see whether we're and then when we do our our periodic uh assessment of our financial situation, we need to see are
41:58 we on track with our budget. Okay? So again, if if you're on a a a modest income, a fixed income, your expenses are well under control, um almost all the time. So then maybe you don't need to have a budget because you're you're you're you're already habituated to living within the financial constraint of your income. Okay? But if you're if you're younger, if your income is growing and if you have certain financial goals that you're
42:35 seeking to achieve, then budgeting is important. Okay? Because while you can track your income and expenses on a let's say monthly basis, whether you're adhering to to the the discipline that will help you reach your goals is a matter of knowing well what should I be spending in various categories and am I staying within those spending constraints and that's what bud budgeting will allow you to do. Now, if you use a tool like Quickn, which is
43:10 which is what I use, I find Quicken to be uh very frustrating at times, but on the other hand, there isn't anything particularly better. Uh then, you know, Quickn has a budgeting function in it, right? And so, you maybe you can do a budget pretty pretty easily and quickly. Okay? If not, just you know, get an Excel spreadsheet out and and use and and and put your put your budget in an Excel spreadsheet. By the way, with tools like Chat GPT, although I haven't tried this yet, I I realize in retrospect I should have tried this in
43:45 in preparation for today's show, but I bet you that if you were to tell CHAP GPT, hey, my income is, you know, $8,000 a month and my, you know, my rent is X and my car expense is Y and my food expense is Z or, you know, whatever your expenses are and I want to save up to buy a house that costs, you know, $600,000 and I want to be able to do that in the next five years. I bet you chat GPT would come up with a budget for you
44:20 that's going to be pretty close if not spoton to to what you really need to do. And and let me just I I use chat GPT just because that's the that's the large learning model that I use most regularly, but you could use Claude, you can use uh the one that's on X Grout or Grock Grock, I think it's called. So different different large langu language models are better at certain tasks. Okay. So, just just as an aside, I recommend you start playing with all of them, the free version of
44:55 all of them. But use use the tool the the AIS and when when I say AIs in this context, I mean large language models. They are they have improved so much over just the last year. They're tremendously powerful and they can help you avoid lifestyles lifestyle creep. won't prevent you from doing so, but they can definitely help you. So, so track your expenses, budget, and have clear financial goals. Okay? So, if you say,
45:30 "Well, I want to buy a house." That's I have a goal to buy a house. Okay, that's fine. But where is the house? How much is it going to cost? How much do you need to put how much of a down payment do you meet need to make? Now, that that can a down payment can vary. If you're a veteran like me, I qualify for a VA loan, which means I need to have a down payment of zero as long as the house I'm buying is at the median home price or below for the area in which I live. Okay? In some areas, you can get an FHA loan where the
46:07 down payment is roughly I say roughly because it's not exactly, but it's roughly 5%. That's very different. That's a very different financial goal if you're going to buy a house using an FHA loan than it is buying one with a conventional loan where the down payment has to be or typically would be 20%. Right? So, be specific. Be clear in your financial goals. When do you want to buy the house? Well, I want to buy a house. Well, when? Well, eventually. Okay? That's not a goal. That's a wish. Okay? A goal has, among other things, a a
46:42 specific date by which you want to achieve it. You say, "Well, I don't know if I'm going to be able to do so by then." Well, I get it. I get it. Set the date anyway. Set the date that you think is reasonably achievable because that will help you build the discipline to meet the goal. Even if you miss the date on your goal initially, you'll be much better off having set the date than if you just keep the goal vague. Okay? Uh and and then the last thing is be mindful in your spending. Okay? So when
47:18 you when you're in a store, especially when like when you're you're you're in the grocery store, let's say, and they've got all that stuff there that you can see to to it's it's usually like candy and magazines and that kind of stuff. And it's meant it's there because that is the key place for impulse buying, right? And this is one of the reasons, by the way, um I use selfch checkckout because it's it's harder to imp it's harder to um impulse buy when you're selfchecking out because you're not standing there waiting to be the next person to check out surrounded by
47:55 stuff that's tantalizing to buy like a Snickers bar, right? Or, you know, a magazine with some you know article that looks interesting to read or whatever it is. Okay. So, uh we want to be like like when I what I when I go into a store, okay, I already have if not actually written down on paper in my mind, okay, a list of what I want to buy. And if I if I pick up something else that's not on the list with the with the thought that I will
48:30 buy it before I put it into my cart or my basket, I think, okay, wait, do I really need this? Is this something I I that that's going to make my life better. And that may sound highful, but oftentimes the answer is no. And so a lot of times I look at and go, well, it would be nice to have, but you know, no, put it back on the shelf. Okay. The place that I'm most challenged is when I'm checking out at Ralph's and and at the at the selfch checkckout, they have a a kiosk of crispy cream donuts, right? It's like, oh, just kill me now, right?
49:06 Because I love crispy cream donuts. They're right there. It's just easy to pick up a box of them. And I've had to train myself, don't pick up the crispy cream donuts, okay? Your waist doesn't need them. Your health doesn't need them. Your pocketbook doesn't need them. Right? So once in a blue blue moon like like for K H K H K H K H K H K H K H K H K H K Hanukkah the the Jewish holiday that's that's usually in December, right? I get donuts because one of the practices of the holiday is to eat donuts, right? So I say, "Okay, well I have to wait for Hanukkah until I get donuts." Okay, sometimes for, you know, Thanksgiving morning, I'll I'll get a,
49:41 you know, couple of crispy cream donuts to have while, you know, because it's a it's a holiday, but other than that, you know, I've had to train myself. Don't impulse buy crispy cream donuts because you just don't need to waste money that way. And and it's also not good for other reasons. Okay? And and by the way, this is not a knock on crispy creams. They're fantastic. Okay? All right. So, we need to have these practical strategies, okay? Especially if you are saving up for a to meet a long-term goal. So, I it's uh um I I've talked about this
50:18 book in a previous show, The Richest Man in Babylon. And the philosophy there is pay yourself first, right? So, let's say you're saving for retirement. So, you should have your finances set up. So, when you get a a paycheck, which is you're probably getting it electronically, the next day, there's going to be an automatic debit out of your account of money to go into your retirement account. Or maybe it's going through your payroll service. So, when you get paid, the money goes directly into your
50:56 retirement account. It never comes into your checking account ever, right? So, pay yourself first. Again, especially if you are working on meeting a long-term goal, retirement, buying a house. Okay? So, you you know, depending on the payroll system that that you have, if you're in your own business or that your employer has, often times you can set up automatic deductions to a retirement plan. Okay? Maybe not though for something like saving up for the down payment of a house, but for you can have
51:31 a separate savings account where you save up for your down payment and if you know that you get paid, you know that that that your your salary goes into your account, let's say on the the first and the 16th of each month. So, you know, on the 2nd and the 17th, you can make a debit of the amount each pay period that you want to save up toward that down payment. Just set that up automatically. Okay? And that way it goes out of your account and and and you're done, right? Pay those pay those things first. Okay? All right. So, look,
52:09 what are some ways that you can upgrade your lifestyle? Okay, without falling into lifestyle creep. Okay, so one of the things I think it's most important is to really understand what is important to you in life. And this is really the essence of the way to wow shows and it's really what the three pillars of attainment are are is there to help you figure out. Okay. s what success looks like for me and
52:46 what success looks like for you are probably different. Okay? And and unlike when I was a a a young man and and and earlier where society pretty much said what success was, right? success was graduating high school, going to college, getting a good job, getting, you know, earning ever more money, getting married, buying a house, having children, and retiring when you were 65 and not having to work ever
53:22 again. That's what success that's how success was defined basically culturally. Okay. The problem with that is it worked for the post for the people who fought World War II and for essentially their children, my my parents uh people my parents age. Okay? It didn't work for anybody before that and it it's not it's not going to work for for the b for the baby boomers or any succeeding generation. So we have to determine what success looks like. Okay.
53:57 Now maybe that that traditional definition of success uh is is your definition. I think by the way I think many parts of it are good. The idea of getting married, creating a stable home, although I don't know that you necessarily have to own a home. It really depends on where you're living and why you're living there. Okay. Having children, okay, and building a life together with someone. I think those are to my mind those are very important aspects of success that I think society
54:35 we should still support because of what they mean for the overall quality of life for everyone in in in the United States for that matter in the world. Okay. Uh but on the other hand should should we all have a goal to retire at 65? No I don't think so. Number one, it's not practical anymore. Number two, there are a lot of people who they retire and they miss the activity of work, the social interaction of work, the purpose that work gave them. Okay? And I I I was having this conversation
55:10 with uh some some friends yesterday and and you know I I'm next month I will be 65. Okay. So in theory I guess I'm supposed to be retiring then. But I was saying to the friends, you know, I might like to slow down once I hit maybe 70, okay? But I don't think I'm ever going to stop working because what I do helps give my life purpose and meaning, okay? It's I have a mission in life as as you might imagine, right? And so um I
55:47 have no intention of int of of retiring at age 70 let alone age 65. Okay. So we each need to figure out what is truly important to us in life. And then we need to craft our finances in a way that supports the purpose and mission we have in life. Okay. So if if it's very important for you to be a world traveler, okay, to join the traveler century club, okay, that's a it's a club where to to not not to belong to it, but
56:25 to to sort of reach the the goal in the club is to travel to a hundred countries essentially. Okay, by the way, I I I think that's a great goal. I I'm at 18 right now. Okay. So, I thought I would be farther along, but for various reasons, I'm not. Okay. So, there's a certain cost to doing that. Okay. My my friend uh Bruce and uh his wife Terry, I I think they're way beyond the century mark in terms of countries they visit. They've been to all seven continents and they've been to
57:00 I think over a hundred countries at this point, right? It's important. Travel is an important part of their life. It enriches them and and it enriches their marriage as well, I think. Right. So, they've crafted their finances in such a way that it allows them to take a big trip each year after tax season is open because Bruce Bruce is my accountant. And so, you know, like most accountants, tax season is grueling getting all the tax returns done or getting as many done as you can, putting the rest on extension like me.
57:35 And um and then he and his wife uh you know Bruce and Terry they go on on a trip. Okay. And and so we need to craft our financial discipline to meet what it is that's most important to us in life. And that starts with understanding our purpose and our mission in life. Okay. And then we can build in using some of the tools I discussed whether it's tracking expenses, budgeting, uh setting clear financial goals, um we
58:10 can build in those defenses that will prevent lifestyle creep. Okay. The final so so uh you might do what's sometimes called a value audit. Okay. So when you look at something, it's like, is this is this really going to add value to my life? That's the question I ask myself often times now as when when I'm, you know, contemplating a purchase. Is this going to add value to my life? Okay. So I'll
58:45 give you just a small example. Um there is a um you know good dental hygiene right I floss every day right now you know I am as as some of you know I am not an environmentalist okay environmentalism is not my religion Judaism is okay but I've been a conservationist my whole life okay well pretty much my whole life since I was I think seven or eight years old okay and it turns out that uh regular dental floss gets into the
59:21 ecosystem, okay, and it causes problems for wildlife, especially if it gets into the ocean. And that that bothers me, right? And so, um, over the last year, I've started buying a type of dental floss that disintegrates once it's essentially put into a trash dump and it disintegrates quickly. Now, it's a little more expensive than just, you know, regular dental floss. Okay. The trade-off is because I use dental floss
59:56 that's a little bit more expensive. I one of the things I don't I don't eat out very often. Okay? Not even once a week. Okay? Because it's more important for me to do something that I think improves the overall um natural environment than it is for me to eat out or eat out a lot. Okay. So, that's a tradeoff I've made based on my values. Now, some of you are listening to this and going, "Okay, I gotta stop listening to this guy because he is a fool." Okay,
60:34 uh fine. You know, I'll own it. Um although I do think black dental floss is just cool. Just it's just cool. That's all I can tell you. Aside from its, you know, it's better, you know, conservation uh position. But these are the kinds of value audits that we need to make on small things and large things. Okay? You know, do we really need a $100,000 car? I I don't know. I mean, I'm not saying it's wouldn't be nice to have one, but I don't have one. I don't have any plans to buy one. I I
61:11 know someone several years ago like what he his goal was to buy a Bentley. Okay. Now, fine. And by the way, when he bought it, he could afford it. Good for him. I'll never have that goal. I I don't I like cars, but don't it's not in my values to own a car that expensive. Okay? It doesn't do anything for me. For me, it would embarrass me, frankly. I I drive a Jeep. Okay? A four-door Jeep, but a Jeep. Okay? So, these are the kind of value audits that that we need to make. Okay? And we need to be ever
61:48 diligent in staving off lifestyles creep so that we can live the lives that we truly want. Okay. So, thank you so much for joining me today especially my live viewers. If you have questions, comments, thoughts, please share them in social media or you can email me. Uh all of those will the uh social media links and email address will be in the show notes when the episode posts on YouTube. So feel free. Tomorrow at 5:00 p p.m. Pacific time is
62:25 my show Jiggers's Place. It's my every other week show and I'm going to be talking about etiquette. Okay, one of my favorite subjects. Um, if you saw my if you saw Jiggers's place uh a couple of months ago, my friend uh Steve Fox was on when I when I talked about why you should read 19th century literature. Steve is going to be there uh tomorrow, Thursday. I don't know if he's going to join me for the show. I'm going to try and entice him to and I think you will see even greater consternation as I try to convince Steve why uh etiquette is
63:00 important. So, so you know, join me tomorrow, 5:00 p. p.m. Pacific time at Jiggers's place. We'll have a cocktail and a smoosh. And then Friday this week is Independence Day. So, there'll be a special edition of the Way to Wow Show for the 4th of July at 10:00 a.m. Friday. I hope you will join me for that as part of your celebration. I hope you'll fly your American flag. Uh, I know I have my I'm going to give him a free plug. I don't know anybody who works there, but I got my Allegiance American flag. It's beautiful. I love
63:37 being able to fly it. So, I hope you will consider um putting out your American flag and and celebrate uh celebrate the United States uh on Friday, July 4th, and join me uh for a special edition of the Way to Wow Show at 10 a.m. Pacific times. And then next week on Monday at 10 a.m. Pacific time is my show Trust and Estates Weekly. And Tuesday at 10:00 a.m. is my show, Business Lessons from the Military. And then a week from today, I'll be back with the next edition of People Making Money. So, I thank you very much for joining me, wishing you a wonderful rest
64:13 of the day, and signing off as I always do. Marie darling, you are