The Power Of Focus


Show Notes

Tyler has a breakthrough in saving for his true expenses, and it's about more than just rearranging the financial deck chairs.

What are the benefits of focusing on one goal at a time? Why do high net worth individuals still benefit from budgeting? And why does Steve allocate some of his "fun money" to an emergency fund?

  • (00:00) - Dog talk
  • (03:06) - Too many goals
  • (06:44) - Doubling down on an emergency fund
  • (11:41) - A reverse debt snowball
  • (14:32) - Steve's fun money emergency fund
  • (16:46) - A tool for understanding opportunity costs



Dog talk

[00:00:00] Tyler: So Steve, we recently established that both of us are dog owners. We've got canine companions in our households, and I wanted to share with you a hack, if you will, that I discovered a few months ago. I don't know if you've noticed, dog toys can be expensive and it's irritating to me that you They all share the same ultimate fate, which is just to be destroyed, at least in the case of my dog.

[00:00:24] Steve: You know what? My dog does not destroy things. Which I, it's probably unusual. It might be her age. I don't

[00:00:32] Tyler: How old is she? She's a little older,

[00:00:33] Steve: a seven, eight, something like that.

[00:00:35] Tyler: Okay, so she's probably just chill and happy to be hanging around.

[00:00:39] Steve: Yeah. But yours is, yours is pretty young.

[00:00:42] Tyler: Yeah, so I've had him since he was a puppy. He's two and a half now, but so we've been, we've been through some stuff. But, uh, one of the hard things for me was finding stuff that he would enjoy as a chew toy. And so I'd buy all these chew toys and they were expensive and it was annoying. They get chewed up, whatever.

Uh, this is really not going to be news to anyone who has a dog, I suppose, but you can just go to the butcher and get like, beef marrow bones. And they're a

[00:01:06] Steve: Oh

[00:01:07] Tyler: cheaper. I mean, they're really cheap, like a buck or so a pound, right? You just get a bag of them and you can throw them in your freezer. I guess you're not dealing with this issue specifically, but I'm sure she would love it. I'm sure your dog would love a beef marrow bone and you know, anyway,

[00:01:22] Steve: Okay. There is a, there is a good butcher. I've heard, uh, pretty close to me. So

[00:01:29] Tyler: oh,

[00:01:29] Steve: I don't know. I feel kind of intimidated going in there. I went, uh, a friend took me in there once and I was like, whoa, this is, uh, I don't, I don't understand what's going on here.

[00:01:38] Tyler: I can relate to that a little bit. Just ask a lot of questions. I've, they should be helpful, right? Anyway, but

[00:01:43] Steve: Okay.

[00:01:44] Tyler: so there you go. Cheap, cheap things that dogs love that are not overpriced, over engineered. You know,

[00:01:51] Steve: Just if they want a bone, like just give them an actual bone. I mean, that makes sense when you say it that way.

[00:01:57] Tyler: yeah. And disclaimer, you know, make sure, you know, supervise them while they're chewing, et cetera, et cetera, but yeah.

[00:02:03] Steve: Oh, well, okay.

[00:02:04] Tyler: Some people are really against giving your dog bones because it could be dangerous, but I don't care.

[00:02:12] Steve: I'm not steeped enough in dog culture to know these things yet.

Still trying to figure out, um, etiquette for walking the dog near other dogs.

[00:02:22] Tyler: Oh, that's a tough

[00:02:24] Steve: Is it okay if they bark at each other? Do I need to keep them away, or not? I don't know. I don't know these things.

I need to, I need to watch some YouTube videos.

[00:02:34] Tyler: Oh, it's a rabbit hole. Everyone has a different opinion, but

[00:02:38] Steve: Uh huh.

[00:02:44] Steve: Dear listener, hello. I am Steve.

[00:02:47] Tyler: And I'm Tyler and this is It's Not About The Money, where we discuss a wide range of topics related to creating and running small businesses.

[00:02:55] Steve: Tyler and I are both small business owners ourselves. And we are here on this podcast. Just trying to make sense of the world one episode at a time.

Too many goals

[00:03:06] Tyler: So Steve, today's episode is going to be about personal finance and

[00:03:11] Steve: I'm shocked.

[00:03:12] Tyler: yeah, I know. Specifically, it's going to be about something that's been weighing on my mind a lot lately in my own personal finances, in my own budget. And it's basically, I'd summarize it as the power of focus when it comes to approaching financial goals and what happens when you're not focused.

So if it's okay with you, I just kind of wanted to start sharing this, uh, journey that I've been on lately with how to approach this. And, uh, we'll just see where it goes from there, if that's okay with you.

[00:03:42] Steve: yeah. This sounds interesting. Power of focus.

[00:03:45] Tyler: yeah, power focus. So, um, this is something that did come up in our episode when we talked about The Total Money Makeover, because Dave Ramsey is a big proponent of focus, Uh, when it comes to financial goals, he talks about like gazelle intensity, right? And when you, when you're tackling your debt and things like that, but this is a different application for me.

So, uh, I've kind of waffled back and forth over the years between how much of an emergency fund I should have versus how much I should be saving into specifically named budget accounts for true expenses or things that I know are going to happen, like replacing my car when it dies. Or an appliance, or a roof or, you know, kind of these larger expenses.

I don't know when they're going to happen. I don't know how much they're going to cost, but they will happen. Like it's a guarantee pretty much. Should that come out of a giant lump sum of emergency fund? Or should I be kind of putting money away towards those in named accounts? Like I said, right. And I've gone back and forth.

And I've, I've really wrestled with this question and I think that's kind of funny because at a certain point it does come down to it, you know, you're, you're just using different words to describe the same thing. As long as you're spending less than you make and like, continue to save, that's good. Oh,

[00:05:03] Steve: Yeah. The money will be there in, in some bucket somewhere.

[00:05:07] Tyler: some money will be there at least. Yeah.

[00:05:09] Steve: money. Yeah. Well, that's true. Yeah. So the, I think there's still a lot of power in planning. Like if you need to replace your car, you know, it's going to be roughly in this ballpark, so let's set a goal for that, that fund to be about that much kind of thing.

Where some emergencies, you don't know what it's going to be, but some of them you can plan.

[00:05:32] Tyler: But here's my question is like, how many, how many of these true expense categories do I have? Do I have a separate one for the washer and the dryer? And the refrigerator and the furnace and the car. And pretty soon, like you're not spending money anymore, right? Like you're not going on vacation or you're not doing something fun because you're like, so worried about your furnace breaking down in 12 years or something.

So, uh, maybe, you know, I'm revealing some neurosis or something here on these topics, but anyway, for me, it's been kind of a struggle. And what I realized is I actually think I did let the pendulum swing too far for me personally, toward all these named accounts. And also I wanted, I wanted an emergency fund.

And also I wanted to be a month ahead, two months ahead, actually. And so what I found is that I was very unfocused and I was frustrated at the pace of the progress that I was making. Right. So I could argue that I was making progress toward all of these goals, but some of the categories, it was like 20 bucks a month.

[00:06:30] Steve: So

[00:06:30] Tyler: And so the,

[00:06:31] Steve: five years from now.

[00:06:32] Tyler: Yeah, yeah. Which

[00:06:34] Steve: But, but if you're spreading it, if all of them are on that, you're going to get, you'll reach all of the goals five years from now.

[00:06:40] Tyler: right.

[00:06:41] Steve: too far out in the future to be practical.

Doubling down on an emergency fund

[00:06:44] Tyler: And the one that was particular, the category that was suffering the most for me, at least, was the actual emergency fund. Right. And you might be wondering, well, why do you want an emergency fund if you're already having all these named accounts for things that could go wrong? And I suppose my answer to that would be, that would be my, my emergency fund for me was an income replacement fund, right? So if I lost my source or sources of income, what would I live on in the meantime?

[00:07:11] Steve: Right.

[00:07:13] Tyler: That's its own type of emergency, I

[00:07:14] Steve: Yes, and I think that is a really good reason to have one. But I've also been thinking lately, uh, having kind of the true expenses sort of categories is also super useful because I'm more likely in the near term to run into one of those than I am to lose my job. You know, although in the, you know, over...

10 years or something, I will probably lose a job at some point in that time, just because of the way markets go. But you know, I'm also going to run into these true expenses. And so I shouldn't, what am I trying to say? The, just, just having a big pool of money where everything comes out of, uh, becomes a little too undefined for me where it's, it's just like, Oh, this is the slush fund.

You can just pull it out of there. We'll, we'll replace it eventually. Mm

[00:08:02] Tyler: And that's what was happening to me is I kept pillaging my emergency fund to roll with the punches, you know, to when I would have a priority change, it was just really easy to, Oh, it's been so many months and my emergency fund has only made it to this level. And so it really is not so much of a loss if I just take some money out of there.

Cause it's really not even there in the first, you know, there's not much there in the first place. So, and you know, I just got trapped in this kind of cycle where I realized that I wasn't really making the progress that I, that I wanted to make and it got frustrating. And so, what I did next is I kind of, actually, this happened pretty soon around the time where we recorded the podcast episode about Total Money Makeover.

Cause like, again, Dave Ramsey wrote that book. Dave Ramsey talks about focus, power of focus and his seven baby steps, et cetera. And we talked in that episode about how it kind of triggered, reading that book again, triggered in us both kind of like this desire to just kind of relook at kind of, kind of deconstruct our approaches to our personal finances and look at it with a fresh set of eyes.

So I did, and I decided, okay, I'm going to, I'm just going to focus. I'm going to pick one of these things. Only one. And it's going to be my emergency fund. And I'm just going to have that be my one financial goal. I'm going to stop saving for my true expenses until I get this done. And then I can check it off the box, right?

Then I can move on with my life and, and fund my true expenses and it'll be great. And you know what? It's funny because I had been funding all those true expenses for so long. It actually only took me about a month and a half to fully fund my emergency fund because I just stole the money from all of, you know, from the new washer and dryer and I, you know, the new car, the new computer in five years, like, you know, I had been kind of putting money away, but because it was so dispersed, it just felt like nothing was there, but really it was there.

[00:09:57] Steve: you gather it all in one place and you're like, oh, wow, there it

[00:10:00] Tyler: yeah, yeah. So it was pretty awesome. And I was able to top off my personal goal for having a, an income replacement type emergency fund really quickly because I'd been saving in all those categories for so, for all that time. Um, the trade off. was now I don't have any money saved for all those true expenses that are bound to happen sooner or later.

Right. So I kind of got to start over there, but it doesn't matter because I feel really good about like achieving my goal. And, um, I don't have to save an emergency fund anymore. Like it's, it's done. There's something about that completeness that like feels really good.

Like I've been struggling to have an emergency fund fully funded forever. And it's just been like weighing me down, but now it's done.

[00:10:47] Steve: And now it, it's also probably very easy to see, like, if you do pull something out of there, it's very clear, like, this has dropped below the, the target amount. We need to replenish that as quickly as possible so that it can just go back on the back burner and I don't have to think about it anymore.

[00:11:02] Tyler: Yeah. And you know what? It's actually a lot harder for me psychologically to steal from it. Now. I've been tempted

[00:11:07] Steve: huh.

[00:11:08] Tyler: at least three or four times, at least three or four times to buy something that I wanted, didn't need, wanted, have the money for it sitting there in my emergency fund, right? Could have bought it in cash.

But I literally, I was just like, Ooh, it feels slimy. I don't want to like, I worked so hard to get that topped off. And so I, you know, I, I kind of like moved the category and budget all the way to the very bottom where I won't see it, hopefully

[00:11:32] Steve: Uh huh.

[00:11:33] Tyler: very often. And I kind of collapsed, I put it in its own category group and like collapsed it.

So it was kind of like out of sight, out of mind.

[00:11:39] Steve: Yeah.

A reverse debt snowball

[00:11:41] Tyler: anyway, and I don't know, I guess that's why I wanted to talk about the power of focus in this episode, because again, financially I'm essentially in exactly the same spot that I was a month ago, like I didn't, I didn't just like suddenly have thousands and thousands of dollars that I didn't have before, right?

[00:11:58] Steve: Right. Your savings rate is still probably the same.

[00:12:00] Tyler: Yeah.

[00:12:01] Steve: Your, your balances did not change dramatically.

[00:12:05] Tyler: yeah, exactly. But psychologically I'm like on fire. I'm like stoked about my progress now, and it makes me think of the debt snowball. This is like a reverse. Savings snowball, sort of.

[00:12:18] Steve: Oh,

[00:12:18] Tyler: the, all the, like all the money that I was stashing away, like every month into that emergency fund.

Now I can like apply that to these other cool goals that I have that I'm excited about. And then

[00:12:29] Steve: you can say like the new, which, which one of these is most likely to, which disaster is most likely to occur

[00:12:36] Tyler: sure,

[00:12:36] Steve: short order. And let's fund that one first and get it out of the way. So.

[00:12:42] Tyler: Yeah. Yeah. And I think it's going to be my car knock on wood. So yeah, it was just, I, I found a great power. Like that was a really cool experience starting back with that episode about total money makeover, and now it's kind of culminated, uh, not that it didn't take much time either for that to kind of play out, but, and now I'm thinking of this as my new, like having that emergency fund funded and like in the bank, I'm trying to mentally think of that as my new zero, right? Like I never, I like my new zero balance basically. Right. Like I never want my balance to go below that. In theory.

[00:13:18] Steve: Right. Yeah. Okay. In my budget, I have the account that holds the emergency fund in it. It's in a separate savings account at the bank, but it's a Non, what's it called? It's a

[00:13:34] Tyler: You have a tracking account.

[00:13:35] Steve: it's a tracking account, but not a budget account. So it doesn't even show up in the budget line items. And then, so if I do need to move money into or out of it, there's, there is a line in the budget for that, but I have to go do a bank transfer in order for it to show up in that category.

So it just increases the friction. Like the money is still there. If I need it, I can get it, but it increases the friction.

[00:13:56] Tyler: Yeah. No, that, that, that's really a smart idea. Do you want to know why I didn't do it that way?

[00:14:02] Steve: Oh, yeah. Why?

[00:14:05] Tyler: Cause I wanted my age of money to go up, Steve.

[00:14:07] Steve: Oh, yeah. That's okay. That's a, that's a good reason.

[00:14:11] Tyler: I mean, it's a vanity metric or whatever. It doesn't really matter, but, but yeah.

[00:14:16] Steve: you're beyond 30 or 45 or something, it kind of doesn't matter anymore.

[00:14:20] Tyler: Yeah. 30 if you're a cash spender, 45 if you're a credit card spender.

[00:14:26] Steve: Right. Yes. Yes. To be clear. That's where I got those numbers from. Yes.

Steve's fun money emergency fund

[00:14:32] Tyler: So anyway, yeah. Thanks for listening to my little monologue there about that experience. I, I hope, you know, that that could be useful to anyone who's struggling with this feeling of like not making fast enough progress and all their financial goals. I, it's kind of my testimonial, I guess, toward this concept of just picking one and going at it with intensity

[00:14:51] Steve: Mm

[00:14:52] Tyler: builds momentum for your future goals.

And, and. You know, not all of my goals are saving for boring things like a new appliance. Like I also want to like, I, I, I do want to do some fun things that I've been

[00:15:04] Steve: also do fun things. Yeah. Right. I can second that, uh, that testimonial. I think I mentioned before where I have, uh, my fun money thing, it's in its own budget

[00:15:19] Tyler: Oh yeah. Tell us about that

[00:15:20] Steve: fund line, which is, you know, ridiculous overkill cause it's, it's just my spending money, monthly spending money kind of thing.

But I have an emergency fund line in there. And also I'm trying to get. The, the last couple of months I cut the, well, I was trying to get a month ahead. And so I treated the income as like half of what it was and put the extra half into the, into the future month. And then it's also got a bunch of true expenses categories of like, I have a subscription to whatever that comes up once a year.

And so you save $2 a month for that thing. So that it's just there when the bill comes.

[00:15:57] Tyler: So just to be clear, we're talking about true expenses in your fun money sub budget.

[00:16:03] Steve: Yes, this is, this is how much of a nerd I am.

[00:16:06] Tyler: Okay. That's why we're

[00:16:08] Steve: turtles all the way down. Yeah,

[00:16:09] Tyler: Yeah.

[00:16:10] Steve: uh, right. But, but, oh, uh, my point in bringing this up was that, uh, the, the focus of the last couple of months was getting a month ahead. And so it's kind of motivated me to be like, well, no, I don't, I don't have to Go out to eat for lunch this week, because I would rather

[00:16:31] Tyler: Yeah.

[00:16:31] Steve: not have to pull the money that I already allocated to next month.

I don't want to like go back on that now. So let's just stick within what I've got here because next month I will feel a great sense of accomplishment.

A tool for understanding opportunity costs

[00:16:46] Tyler: you know, when I heard you say that about, Oh, I might not want to go out to lunch here because I want to do this other thing instead. It just, I occasionally, not occasionally, I often run into people who are like, why would I need to budget? Like I have no problem living below my means.

[00:17:02] Steve: Mm

[00:17:03] Tyler: always have enough money. I'm like, well, good for you. First of all, good for you. Right. Well done. You've, you know, and there's a lot of truth to that. If you are consistently spending less than you make, I mean, if you can follow that rule your entire life, you're going to be well off, right. No matter how much money you make, it doesn't

[00:17:18] Steve: the main thing. If you can do that, you'll be okay.

[00:17:22] Tyler: And so I had to, I actually had this conversation recently with someone who is in that situation. They make really good money. They're never having a, you know, they don't have, they don't have any debt. Like they're kind of just accruing money because they're spending less than they make. So like, why would I need a budget?

I'm like, well, okay. Like, it depends on what you mean by need. Right. But so many people think of a budget, especially people who are maybe struggling financially, as a restriction, like a mechanism that restricts spending, right?

I don't view it that way at all. I think what, what should restrict your spending is just simply the amount of money that you have, like spend it until it's gone and then stop.

[00:18:02] Steve: Right.

[00:18:02] Tyler: people can go beyond that with credit cards and debt, unfortunately, but right, like, but so what I view a budget as is it's just a tool to help you understand, evaluate, and choose your opportunity costs. Because even people with so much money, they don't even have to think about money. It's still an opportunity cost.

There's an opportunity cost to letting that money sit there in your savings account versus investing it. There's an opportunity cost to, you know, uh, spending money on things that you kind of enjoy, but they don't bring you, like, You know, you don't need to, it's just whatever, right? Uh, you could be spending that on something that that's much more meaningful to you, or you could be growing that money through starting a business or investing it somewhere.

So like, I guess my point is, uh, there's always opportunity costs, regardless of how much excess you have. And, uh, and to me, that's why, uh, budgeting does still make sense for higher income individuals.

[00:19:01] Steve: Yeah. It's really a, a values exercise of like what. Uh, what are the priorities that I have for this finite supply of money coming in? And, yeah, I like that idea of opportunity cost.

[00:19:17] Tyler: and also I, you know, I'm, of course, I'll be the first to admit that there are different personalities out there. Right. And I, I think, uh, I'm an optimizer. So, like, I'm going to want to tweak things endlessly until I feel like they're, you know, there's always room to go. You can always be more optimal with these things.

And not everyone's like that. Some people just want to live their lives and not worry about it.

[00:19:37] Steve: Yeah, right.

[00:19:39] Tyler: anyway,

[00:19:43] Steve: yeah, well, that's good. you can email us at hello@notaboutmoney.Com if you feel so inclined. Uh, and if not, then don't. Both are fine. But, uh, at any rate, we'll see you again on another episode of It's Not About The Money.

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