Good money management requires two types of literacy: the financial part of knowing how to save, invest and manage your cashflow and portfolio. The other part is the behavioural part since money management like a healthy diet, like frequent exercise, comes down to real actions.
For these reasons, could ‘Loud Budgeting’ work for you?
Hey, why not!
Even though TikTok is new, the concept is not
For GenZ, and others, the TikTok social media platform in recent years has become many people’s go-to source for entertainment, style, travel and more.
It even hosts personal finance advice.
In an example from TikToker Lucas Battle, who has been credited with coining this term, ‘Loud Budgeting’ isn’t just about declining a dinner date but instead adding the qualifier why:
“Sorry, can’t go out to dinner, I’ve got $7 a day to live on.”
Loud budgeting not only helps describe what personal saving or investing goals might be, but how you feel about it, in a public-transparent way.
To frame it better from an article we read on this term/subject:
“The words you use to describe what you feel as it relates to your savings and spending and investing and borrowing and all other forms of financial activity — that’s a different skillset altogether, and one that we are even more lacking in” – CNBC.
So, while TikTok is newest platform to help a younger generation of savers and investors budget the concept of talking about your goals is certainly not…
Before social media, GenZ might be aware that GenX (and older generations) simply mentioned to friends or family members:
“I can’t afford it”
“Sorry, not now, I’ve got other priorities at the moment”.
I’ve used these replies many times in the past and I’m sure I’ll continue to use them as I get older. These replies are not meant to shame myself or others who might say something similar. It’s about staying true to your values and communicating them – without social media support.
Budgeting takes many forms
We know what people say they do and what they really do can be two very different things.
TikTok is probably a very good example of that most days – i.e., don’t believe everything you see or read on the internet.
Removing any shame or stigma from your own budgeting conversations helps when you’re more comfortable in your own skin. That usually comes with age or maturity.
In that spirit, how get more comfortable with budgeting in general here are a couple of our favourite time-tested concepts.
The 50/30/20 Rule
The 50/30/20 rule originates from the 2005 book entitled “All Your Worth: The Ultimate Lifetime Money Plan” written by U.S. Senator Elizabeth Warren and her daughter, Amelia Warren Tyagi.
Referencing over 20 years of research, Warren and Tyagi concluded that you don’t need a complicated budget to get your finances in check. You need some rules and discipline. This was their concept:
- 50% of your net income goes towards needs.
- 30% of your net income goes towards wants.
- 20% of your net income goes towards savings and debt repayments.
Here’s a practical look:
- 50% needs include rent/mortgage, groceries, utilities, insurance and other essentials.
- 30% wants may include travel, dinner out, events, festivals, other.
- 20% savings and debt repayments also include emergency funds and retirement savings.
We I like these rules because they are simple.
You don’t need much work in the form of a spreadsheet or app to figure out where all your money should be going.
The key problem we have with these rules is we believe they are difficult for most young adults to distinguish a want versus a need.
Here is a good example from a few years ago.
I needed a car to get to work efficiently each morning, from where I used to live outside the city. (No workplace managers near me embraced any work from home concept pre-pandemic! :))
More than one of my fellow co-workers back them suggested in recent months I get a new car – after comments to me in the parking lot such as “that thing still runs?”
Yes, yes it does.
(My Own Advisor older car owned for 17+ years.)
Beyond cars, what might be a need for someone could be a want for someone else. Clothing is a need. Maybe some nice clothing is a need. Lots of new clothing every week is a want. You get the idea.
What would we suggest instead?
Just save 10% of your net income and never stop.
Simple. Super effective.
No Google sheets or other tools to worry about and you can TikTok that goal to your heart’s content.
Just save 10% (or more as you get older if you can) of your net income every month, automate those savings, and spend the rest as you please.
Using this rule, you can start saving early. You can save often. Then you figure out what you can afford from there.
What you can afford from there probably includes:
- Short-term debt obligations
- Dinner out
Start with your net income, calculate 10% of that, siphon that 10% into savings and long-term investments so you never see it nor spend it until decades from now.
That’s our best budgeting rule of thumb.
The beauty of this approach is you don’t have to worry about messing up needs with wants.
You don’t have to worry about finding 20% savings amongst everything else in the 50/30/20 rule.
As David Chilton so nicely popularized it years ago “just pay yourself first” and everything else will fall into place in good time.
You can do this by setting up automatic bill payments or transfers from your savings accounts to your investment accounts each week or month. The frequency is really up to you.
Automating and saving 10% off your net income means you get into the habit of stashing cash.
Could Loud Budgeting help you retire?
My Own Advisor has highlighted numerous times on his site over the decades that maxing out your Tax-Free Savings Account (TFSA) for investment purposes should be your #1 GenZ financial priority.
We both still feel that way unless you want to save for a home (and not retirement) using the new FHSA (First Home Savings Account).
As long as you pay yourself first, and you continue to do so for decades on end, you might just find that you can retire using your TFSA alone.
From the article for a disciplined couple using the TFSA:
How much can they spend in retirement if they retire at age 60? Again using our projections software, the most they can spend annually after-tax (in today’s dollars) throughout retirement is $74k/year after-tax! This is enough to fund their lifestyle and a small buffer!
Could Loud Budgeting work for you?
We believe at whatever age or generation, using TikTok or not, you’re never too young or too old to respectfully decline any invitation for financial reasons.
It’s your life, your plan and only you can hold yourself financially accountable.
If putting your financial goals on social media helps you with the mechanical and behavioural sides of personal finance and investing, like many bloggers do, then feel free to post and publish away.
Using emotional intelligence to get to your desired outcomes can be very valuable tactic but a reminder for today’s post that developing your EQ is rooted in self-awareness – something we should all work on and that personal development shouldn’t anything new.
Need any help with understanding your cashflow or retirement income needs?
Developing and managing a well-diversified, investment portfolio (beyond budgeting and saving basics) is going to be your key to a successful retirement income plan.
Should you ever need any assistance with that, we have LOTS of free content on our site to help you out.
Simply check out our Archives page or use our handy search bar to find what you are looking for.
If you don’t find something of interest, Contact Us, we’d be happy to explore your idea for future content.
Beyond ‘Loud Budgeting’ and saving, we also help aspiring retirees and many current retirees with their portfolio drawdown plans.
We answer client questions like:
- What registered accounts do I draw down first?
- How much income will my investments generate?
- Can I afford a large purchase like a new car or new house during retirement?
- Do I have any idea how long this income might last?
- What amount of taxes will my RRSP withdrawals incur?
- When should I take my workplace pension?
- Is it more beneficial to draw down non-registered money before RRSPs and TFSAs?
- And much, much more…
Knowing how to demystify the retirement income puzzle is not trivial work but it’s absolutely something we can help with – we continue to help many DIY investors every month!
If you need some help solving your retirement decumulation puzzle (i.e., how to efficiently withdraw from your retirement accounts), or figuring out if you have enough saved from any portfolio you’ve constructed we’re here to help answer those questions and more!
If you are interested in obtaining some low-cost personal projections for your financial scenario, please contact us here to get started.
We want to highlight we actually have two (2) low-cost solutions beyond our free content to consider leveraging whenever you want:
- Done-For-You – we do the work and data entry, and provide your reports OR
- DIY – whereby you do all the work, you do your own data entries, and you get your own results in the software – we essentially open up some professional financial software for you to use to be your own retirement income planner!
Try finding that anywhere else!? 🙂
Beyond any low-cost services, again, our content is always free and if you have a financial question or comment, just send it our way. We read everything and try to reply to everything.
Thanks for your ongoing readership.
Mark and Joe.