An effective budget is not just a list of bills. If you want to reach your money goals, it is essential that you know your numbers and how you spend your money. Things like getting your hair done, going out to eat on date night, or sending thank-you gifts to clients seem like small expenses, but can have a major impact on your overall financial goals.
In today’s episode, I share how to identify fake expenses and why your spending needs to align with your budget. This process is about helping you better understand how to plan for your desire to spend money so you can reach your financial goals faster.
The main points I talk about in this episode are:
[01:30] Exposing fake expenses
[06:55] Three thoughts that cause you to overlook expenses
[09:39] Client example of fake expense (business perspective)
[13:36] Client example of fake expense & credit card payments
[15:30] What can you do to avoid fake expenses
[19:42] Choose financial curiosity
Tune into this episode of Money Files to learn about fake expenses and why aligning your budget spreadsheet and spending plan is essential to reaching your money goals.
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
IF YOU LOVED THIS CONVERSATION ON WHY YOUR BANK ACCOUNT DOESN’T MATCH YOUR BUDGET, CHECK OUT MY EPISODE ON HOW TO BUDGET FOR CLARITY & CONFIDENCE!
Transcript for “Why Your Bank Account Doesn’t Match Your Budget”
Intro: Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work every day with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello and welcome back to another episode of Money Files. I am excited to be talking with you today and thank you so much for tuning in and taking me on a walk, listening to me at the gym, or if you’re cleaning your house or getting ready in the morning, I am excited to be with you. So today I want to talk about fake expenses. Most recently in my coaching, I’ve been saying to my clients, that’s fake. Yep, that’s fake too. And I say it with a grin on my face because I want to shed light when I’m talking to my clients about fake expenses or something being fake, I am really shining a light on the fact that we’re ignoring something that they actually enjoy doing or we’re ignoring something that they spend money on. And it is the biggest gap that I see that I address as a coach because the people that I work with, they make good money, whether it’s in their business or in their nine to five but there are just literal gaps that they don’t pay attention to with how they manage their money.
They’re not taking in new information from one pay period to the next, one launch to the next and so they have a lot of fake expenses.If you follow me on social media, I talk a lot about, a list of bills is not a budget, it’s just simply not a budget. And it’s not a budget because you know how to pay your electric, you know how to pay your mortgage, you know how to pay your rent, those aren’t the things that are generally tripping you up. What’s tripping you up is, oh, I want to go on vacation. I’m not sure how I can budget for the plane ticket or I’m not able to consistently save every single month because it’s the last thing I do and it’s only if I have money left over you.
You get into a launch and you are getting the money from a launch and you feel really good about having a six-figure launch or a $50,000 launch. But when you actually go and put the money in your business and you decide to pay yourself and you decide to pay out expenses, you have little to no savings, you are stressed out and feel you need to launch again within a shorter amount of time. And it’s simply because you have fake expenses that you haven’t acknowledged. And this can happen for business owners. It can happen on the personal side that you have these fake expenses and you don’t know how to account for them.
And so this episode is definitely for you if you’re like “yeah, I’m really good at paying my bills” and you’re probably really good at managing lump sum payments as well. But I want you to think about where are there fake expenses in your life and where do you not think about those infrequent expenses or you don’t think about maybe small amounts of money. And small amounts of money is so relative because what you consider small and what I consider small are two different things. But if we don’t think about what our infrequent expenses are, if we don’t think about these small amounts of money, those are the things that put us into financial ups and downs and where we experience financial waves.
My goal as a coach when I’m working with clients in my five-month coaching partnership is to get them to be flatlined. If you think about being at the hospital, you don’t want to be flatlined, but in your financial life, I do want you to have a flatline. I want you to experience the fact that even if you have an expense that’s higher than normal, it doesn’t make you waiver. You just say, “oh okay, that’s interesting. It’s a hundred dollars more, it’s $200 more.” The best example I can give you is a client recently, she makes commission and her commission check was maybe about a thousand dollars less than normal. It was somewhere from 500 to a thousand dollars less than normal. And so she was “Hey Keina, am I going to be able to pay myself the same? What’s going to happen to my business expenses?”
And I was like “oh that’s not a problem because we manage your commission this same way every single time, we had some, over the last three, four months we’ve been working together, your commission checks have been higher than average. So we don’t actually have to worry about this lower commission check.” That’s why we do the same thing all the time. And so I mean in that example, she was worried about paying herself, which isn’t a fake expense. But there are other expenses in your life whether it’s in business you need to do something for your clients, maybe you need to print a workbook for your clients and you’re trying to figure out how you’re going to print the workbook for your clients, or you need to make a one-off investment to help create a system in your business. And something like that can make you feel like you have a peak in your expenses and you can spin out about it and feel you don’t have any money.
But when you actually learn how to shift from fake expenses to real expenses, those things, you may still have to print the client workbook, but it’s not going to cause you that same level of financial overwhelm where you start to feel in your body, in your chest or in your stomach that you’re like oh my goodness, like here I go again. I’m having to pay for something that I didn’t consider. I didn’t think about what does this mean for my overall revenue. Am I going to be able to pay myself? Am I going to be able to pay my team? And so that’s why I want to make sure that we are considering all of our expenses so we really have a picture of how we enjoy spending money, whether that’s in our personal life or whether we’re thinking about our business.
So oftentimes when I am working with clients, what I have found when it comes to fake expenses, whether that’s not accounting for the fact that we get a facial every three months or not accounting for the holidays or in businesses not accounting for client gifts or not accounting for the fact that you do a photo shoot twice a year, whatever that looks. What I often find when people aren’t accounting for these expenses is that there are usually three thoughts that hold them back. They think about like it’s not a big deal. They also think I don’t have the money or they’re thinking like I don’t do this often. And so those are the three thoughts that generally drive them not considering the expense. And so behind these three thoughts, I believe is really an underlying belief that they have that budgeting is restrictive.
And so if they included every single expense in their budget, they would just be doing too much. And so I get a lot of, sometimes I get pushback from clients and they’re like oh, but Keina I don’t need to do that, like it just seems like we’re doing too much if I include it. I’m yeah, but if we include the fact that you go on three trips a year and you get your hair braided three times a year, when you go and get your hair braided, it’s going to feel so good to just hand over $300 and know that you don’t have to think about that. You’re not going to have to worry about where that money is coming from. And one of my clients who I interviewed recently, if you go back, she’s a couple episodes before this one, her name’s Sarah, but she said something really brilliant when I interviewed her and she was reflecting on the transformation after working with me. And she was saying that, before working with me, she would write out her list of bills. She had her credit card balance, she would have her mortgage, whatever, and she would just pay everything, she’d check it off and pay everything.
And she said that she realized that she was actually creating restriction in her life now that she actually knows how to budget. And where she realized that she was creating restriction is that some months when she went to write her list of bills, she would have to think about what she actually needed to cut and what she couldn’t spend money on because some of her spending was more than usual. So in the next month she might tell herself, okay, well I can’t go get a pedicure, I can’t get a manicure because I don’t have the money to do that because of last month’s spending. And so she was taking herself in and out of these cycles where sometimes she felt very abundant or sometimes she didn’t feel she had any money and it’s because within that list of bills she wasn’t accounting for how she like to spend money. She had what I’m calling fake expenses. And she’s only capturing one part of her life. She’s not capturing the entirety of how she likes to spend.
So just to give you another view of fake expenses and to tell you about a couple of clients, I have a client right now who has a mastermind and she sends welcome gifts. And so I was observing her last launch and I realized, I was like, oh my goodness, we didn’t actually include her client gifts in her business budget. And so I am observing what’s going on and how she’s spending money not from a judgmental way, but just client gifts can be something that can catch you off guard. If you are spending a hundred dollars per client and you have 30 clients, 40 clients, we’re talking about thousands of dollars that we’re not paying attention to. And if you have a mastermind that you are launching two or three times a year, so now we’re talking about okay, thousands of dollars at three different points in the year at two different points in the year. So say that you are my client and you’re launching your mastermind three times. You have 30 people in each launch, you’re spending a hundred dollars per person on your client gift.
Well, if you don’t account for that in your budget, that’s $9,000 that you haven’t accounted for because it’s $3,000 a launch. And so it’s a great example of a fake expense because you’re like “oh, it’s not that much money,” but what is the impact of almost $10,000 on your business? How would it feel to know that you always have that $10,000 available so you can buy the client gifts? It’s not because you’re being nitpicky, it’s not because you can’t afford it, it’s not because it’s a lot of money, but we are trying to remember, create an experience where your expenses are flatlined. Because if you know that you have that $10,000, planned for, it’s like well what else can you be doing with the other money in your account? The harm and the danger of not planning for all of your expenses and ignoring what I call fake expenses is that when you’re ignoring that, these are where, when you tell me like “oh my goodness Keina, I make a lot of money and I just don’t know where it’s going.”
These are the areas where it’s going, $10,000 is a pretty big hole in your business when you don’t know where it’s going. And so I want you to know where it’s going because it’s not so much about the $10,000 that you’re spending on client gifts. What it’s really about is that I know that when we look at your wealth-building goals you have the goal of investing in retirement. You have the goal of being able to work optional by the time you’re 40, by the time you’re 50. And so if we’re not accounting for these things, then they’re never on our radar, you are not going to move towards your financial goals as quickly because you’re not accounting for where your money is going from month to month, where your money is going from year to year and so you’re going to be missing the mark on some of these bigger goals.
You’re maybe not saving as much as you want to. This is where we start to feel guilt about the fact that okay, I have a business that brings in $300,000 a year, but I don’t feel I have anything saved or anything to show for it. Well, if we’re not really looking at our expenses outside of just paying our bills, that’s why we’d feel we don’t have anything to show for it. So it’s not about whether or not the client gifts are expensive, it’s about, are you actually creating a pathway to help you achieve the results you desire to achieve if you want to have $50,000 in the bank, if you want to be able to help your kids in the future, that’s what we’re actually solving for. And what helps us solve for that is to account for your real and your true expenses and how you’re spending your money month to month and year to year. And so that’s on the business side how that can show up.
But also I had a client recently who we just started working together and we were going through her expenses and actually getting her budget in sync with her bank account and what she listed for her credit card payments and what she paid were two different amounts. And she’s like “oh yeah, yeah, I just round up more than the minimum.” That’s just what I do. I said, “okay, that’s fine, but let me just give you a different way to think about it.” So if you’re rounding up your credit card payments and she has a couple, it wasn’t just credit card payments, it was just payments in general that overall things that she’s paying off and she rounds up on it. I said, that’s fine that you’re rounding up, but I want you to account for the true number that you’re paying.
And the reason I want you to account for the true number you’re paying is because if you’re overpaying by 5 to $20 on 10 to 20 different payments, that actually has an impact on your budget from month to month. It could mean the difference of $50 or it could be the difference of $400 month to month. And so if we’re saying that we’re going to be saving $400 a month, but you’re overpaying 20 different things at $20 each, it’s going to actually make it hard for us to save because our math is not right in these places that we’re looking at in your budget. So I always ask my clients, I’m like let’s just be really honest about what the numbers are and we can make decisions moving forward from there. But the more honest we are about the numbers, the better results you’re going to have because you’re going to know exactly where your money is going.
Once again, this isn’t from a place of being restrictive, but this is from a place of actually wanting to account for our true expenses, wanting to be in the know of what our numbers are so we can make informed decisions as six figure earners. So if you’re like “Keina, let me just raise my hand because I do some of these things and so what can I do to shift it?” First I want you to be honest with yourself. How are you spending money? We all have vices, we all have things that we to spend on. And so be honest with yourself about what you’re spending money on, whether it’s in your business or it’s in your personal life, being able to bring in that level of honesty into your numbers will allow you to reach your goals quicker. Because if you’re not being honest, then what’s going to happen is you’re going to slow your progress because you don’t actually know what to correct or you’re not going to know how you want to shift your habits because you don’t actually have a picture of what or how you’re spending money.
The second thing is I want you to use your spending habits to adjust your numbers from month to month. So I teach my clients how to have money dates and one of the reasons I love money dates is because if you have a weekly time to look at your numbers, you’re going to notice trends in your spending. And when you notice trends in your spending, you can reevaluate your numbers. Reevaluating your numbers, it could mean that you’re actually going to add an expense. It could mean that you’re going to adjust how much you have allocated towards an expense. I always think about groceries because sometimes people come in and they tell me they spend $200 a month on groceries, and I’m like maybe a $19.95, but I know you don’t spend $200 on groceries.
And so that might be somewhere that they kind of had a fake expense. And so now when we actually get closer to the number where it’s like “oh, it’s not two, it’s actually more $500 a month.” Their budget just, it works so much better. They’re not feeling restricted. They don’t have to judge themselves about spending $500 a month, like they have an actual picture of what’s going on and it’s going to help them reach their other financial goals sooner. So if you have a money date time, if you have a weekly time to look at your numbers, it’s going to help you actually adjust your plan so you feel like you actually have a true budget. And true budgets are the most amazing thing because they help you actually be “oh, okay, that’s where my money is going. This is kind of cool. Look at that. I have money for my haircut and I don’t have to stress and I don’t have to worry about it.”
And you should also know that I believe fundamentally that you can budget for any expense. And so the money date time is, there’s a difference between a fake expense and an unexpected expense. An unexpected expense for instance, this year my house flooded, well, I shouldn’t say it flooded, my dishwasher leaked. So it leaked into my garage and messed up my upstairs kitchen area, etc. And so I ended up having to pay my deductible with my home insurance. And so on one side you could be like “oh my goodness, that’s unexpected expense,” in the sense of like I wasn’t planning for it, but what I do have in my budget is home repairs. And so I was able to pull from my home repairs, but if you were someone who, let’s say you were just starting to budget and you’re like “oh my goodness, Keina I don’t have anything in home repairs.” Well, what that experience would tell me is one, okay, we’re going to figure it out. We’re going to figure out how to pay the deductible, but also moving forward, how can we start to put some space in your budget for home repairs?
You live in a home, your home probably could have issues. And so even just being in a habit where you’re like I set aside $30 a month, I set aside $50 a month for home repairs will ease the burden of you having to repair something in your home. And that’s how you can just be auditing how you’ve been spending money or the things that have caught you off guard and actually start to plan for any expense because we just know that you live in a house and there’s going to come a day in which you have to fix something on your home. And so it’ll allow you to have some savings that when you do have an expense it doesn’t derail you and make you feel like oh my goodness, now I’m not going to be able to do something else because I don’t have anything saved.
And lastly, kind of going around on that same topic is that I want you to choose financial curiosity. And when I say that, thinking about how you’re spending money, let’s think about when I’m working with people, especially couples. I might ask them, okay like “tell me about date nights. How does that look?” And they’re like “oh, I don’t know. We just,” and I’m like “Hey, if you had to put a number to it, what would it be?” Just think about your best case scenario, what would it be? And so you can do that in your own budgeting practices because it’s going to make your brain immediately more aware of how you want to spend money and you’ll be accustomed to actually thinking about like “what can I do?”
You’ll start to shift from restriction to thinking about like “oh, no, no, no, I can actually spend money on anything that I want and I’ve also created a number to go with how I want to spend money.” So on the personal side, it could be date nights, it could be maybe you’re trying to incorporate massages into your self-care routine and you’re like “okay, I can’t maybe afford to go every month, but what would be the best case scenario?” Maybe I want to go four times this year. How much would it be if I went four times this year? Okay, that would be $800. If I divided $800 by 12, how would that look in my budget? So don’t let that just be something that you ignore if it’s something that you potentially want to do then you can start allocating for it right now.
On the business side, you could be thinking about, if I had to put a number to my business investments, what would that be? And so it’s going to allow you to create space instead of telling yourself, I don’t know, I can’t plan for this. It’s not a lot of money. And just push yourself to be more and more curious about if you had to put a number to it, what would it be and what would that look like? Because you’re someone who manages your money well. So thank you so much for tuning into this week’s episode. I hope that you took something away and I hope that you cut out your fake expenses and get beyond your list of bills this week. So if you would like to take this work deeper, I’m going to extend the opportunity for you to work with me. We’re coming up on the end of 2023 and a lot of times I know money is top of mind for most people, especially as we go into the holidays and some of y’all are out there, y’all are wilding out.
You’re like “Black Friday, Keina, I got Christmas gifts, I cannot work with you.” But yes, you can, actually right now is the best time to work with me because we’re going to nip those fake expenses in the bud and we’re going to be thinking about how much money do you actually want to spend. Let’s make a plan so you don’t go into the New Year with debt that you didn’t plan for, or debt that you don’t want to have. Some of my best client transformations have happened because people start in November and December when it feels very counterintuitive to them. But what happens is that they go into the New Year and they actually have a spending plan, they have a budget that they love and they don’t have to get a budget on their list of resolutions because we’ve already created a budget.
So if that’s you and you have been listening to my podcast, you’ve opened up the application a couple of times, I am inviting you to just go ahead and fill it out. We’re going to talk for 60 minutes. I’m going to give you a three-step plan of how I think that I can help you and we’ll talk about the decision together on how you want to move forward with coaching. So you can go to the link in my show notes or you can go to www.wealthovernow.com/appointment. But I look forward to getting to know you. And until next time, have a great week.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
