[00:00:00] Speaker A: Lao budgeting is a personal finance trend that has taken over TikTok and social media in recent months. In this episode, we share why Lao budgeting, as constructed, may not be as effective for first and second generation high income earners, but how with some subtle tweaks, you can make it something that could be worth implementing in your finances.
[00:00:17] Speaker B: Let's get started from new money new problems. It's the new Money New Problems podcast, a, uh, show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen.
Negotiating compensation. Purchasing your first investment property. Helping your family with money, the highs and lows of, uh, entrepreneurship. New money brings new problems that require new solutions. Join us as we work through them together.
I'm Brenton Harrison, and this is the new money new Problems podcast.
[00:00:57] Speaker A: Hello. My name is Brenton Harrison of New Money new problems and your host for the new Money New Problems podcast. Today's episode is about the new financial trend of the day, and ah, it is just the continuation of this increase in awareness when it comes to financial literacy. With the advent of things like TikTok and just the growth of the space at large, we've talked in past episodes about concepts like fire, financial independence, retire early. We've also shared that there have been many iterations of that movement. There's the fat fire movement, there's the lean fire movement. And as people get more interested in financial literacy, partly because it becomes so much more difficult to live financially in this economy, you're starting to see these trends kind of not just take shape, but blow up really quickly and then move on really quickly. Last year we had the quiet luxury trend, and over the past couple of months, you may not traffic in the same financial news articles that I do, but if you're a person who somewhat pays attention to the financial literacy space, the loud budgeting trend has been inescapable in the past couple months. If you're looking on screen, and we'll put the link to this article in the show notes we're reading from a CNET article titled Loud Budgeting is the TikTok finance trend that pushes back on overspending, and experts love it. And in this article, it shares the definition for loud budgeting. And the idea behind loud budgeting is that it encourages you to talk openly about your money goals with friends and family, while rejecting societal pressure to spend. This strategy can also help you make money decisions that better align with your values. An example would be if you were to go out with a group of friends and everybody is planning on ordering appetizers and an entree and a dessert and drinks. You might say, hey, guys, I'm trying to make sure I don't overspend because a big goal that I have for this year is to max out my IRA. So I'm going to have the entree, but I'm not going to have the appetizer. Uh, a dessert or drinks. That would be an example of loud budgeting. And there are a number of reasons that financial experts love this trend. Chief among them, you're bringing community into the experience of progressing financially, and you're also taking some of the stigma out of being the one in the room who's not caving to the pressure to spend that we can sometimes feel from our friends. As a matter of fact, there's a woman quoted in the article, Shawna Martin of seedling coach, that says it represents a move towards transparency and community and financial management, and that's crucial for demystifying budgeting, debt repayment and saving. You're not only holding yourself accountable by vocalizing your money goals, but you're also letting others in on your financial goals, which can encourage them to cheer you on. The people you share your money goals with may have tips to help you reach them faster. And when friends and family members clearly understand your financial priorities, they may even plan budget friendly outings to ensure you can join in. I don't know about you guys, but I think it's a common experience that especially when you're earlier in your career, there may be things that you just want to make sure you don't miss out on. Like when your friends start getting married and you want to go to destination weddings. Or if a group of your friends from school have decided that they're going to go on a trip together and is going to a place where the cost of getting there or the cost of staying at the place where they want to stay is something that's outside of your budget. And the younger you are, the bigger the pressure may be to look at those things that your friends are doing and spending and make sure that you're not the one that's left out. As social media has evolved and has kind of become this place where people post these curated bits of their life, where they're sharing the nicest places that they've traveled and the experiences they're getting to have, it's only made that pressure even greater. Even if you're not talking about someone with which you have a close relationship, if you're reading on screen, there's another article, and we'll put all these in the show notes. That says half of millennials say social media drives them to spend money they don't have. And a continuation of this trend is that the younger you are, the bigger that pressure may be. In fact, research has shown that 44% of people aged 16 to 24 say friends put pressure on them to keep splashing out even when they run out of money. Splashing out was the wording of the article author, by the way, that's not typically my lingo, but there you have it. And I think my perspective on this is a little unique because I have both been on the side of feeling that societal pressure where there's a trip or there's a dinner where everybody's going and you don't want to be the one to say, hey, I don't want to spend that much money. But I've also been on the other side where I've looked at hundreds of people's finances over the years and been able to realize that, statistically, most of the people that are at that dinner or at that wedding financially shouldn't be spending that money either. You also have to consider that we all have our my money story. That's the reason that we share them. You've listened to episodes on this podcast where there have been people who have talked about being impoverished as a child and making sure that when they got to an adult, there was never a time where their family or their children would have those same experiences. We've talked about people who have seen things that their parents have done, good and bad financially, and they feel that same urge or desire to do it, even at the expense of their positive financial behaviors. Hey, my mom gave money to this person. My dad gave money to this person. And now that's my expectation to give as well. And I give and give and give. Beyond what may be financially responsible, you could be a person who was one of the only few in your friend group who wasn't able to participate in certain field trips or buy certain pieces of clothing or shoes. And now, as an adult, when there's the opportunity to not be in that outcrowd, there's an almost visceral reaction to make the purchase that makes you feel like you're in the in crowd if you don't think these things are strong. That draw is something that is emotional and it is subconscious, and in many cases, it takes a dedicated effort to avoid it. And that's why, in an ideal world, I think loud budgeting is one of the best instances that I've come across of, uh, being able to acknowledge emotion by letting your friends know that you're telling them that you have a barrier because you really don't want to be left out. But the reason for the barrier is that there's something that you're trying to accomplish or something that you need, and you're trying to make sure that they respect and hold you accountable to that barrier. But it's not an ideal world. So after the break, I'm going to tell you some of the elements of loud budgeting that make it tougher for a person. The older they get, the more money they earn and the less money the people around them earn. But how you can make some subtle tweaks and implement them into the loud budgeting strategy in a way that still makes it worthwhile for your financial life.
[00:07:23] Speaker C: This is the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen. We'll be right back.
[00:07:42] Speaker B: Are you wondering what new money problems you might be overlooking in your financial life? If so, we've got great news. We've crafted the new money new problems gap finder to identify potential weaknesses in your finances in areas ranging from budgeting, investments, insurance, and even the threat your extended family's finances could pose to your household. Please head to newmoneynewproblems.com gapfinder to complete it today. Again, that's newmoneynewproblems.com gapfinder to take the assessment.
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[00:08:31] Speaker A: So what are some of the elements of loud budgeting that make it difficult for first and second generation high income earners, especially minority first and second generation high income earners, when they're trying to implement this strategy? Well, one of the first things that makes loud budgeting difficult when it comes to your friends and your money goals is the fact that the older you get, your friends are less and less capable of influencing your spending in the first place. The fact of the matter is those same friends that you might have gone out with when you were 27 and you're trying to avoid with them ordering an appetizer, entree, dessert, and a drink by the time you reach your each of those friends have so much going on in life that that group you used to go out to eat with once or twice a week, you now may see once or twice a quarter if you're lucky. And because your life and priorities have changed. Even if you still love those people, they are less and less impactful when it comes to the pressure behind how you spend. Going back to the article we referenced earlier in this episode, you'll recall that 44% of those aged, ah, 16 to 24 said that friends put pressure on them to keep spending even when they run out of money. But here's what the next sentence says, and I quote. This influence diminishes as years go by, with 23% of 25 to 34 year olds swayed by friends, and only 13% of those aged 35 to 44 years old. The main reasons given by respondents for not saving more were not enough income and too many existing demands on finances. So essentially, the reason these people haven't saved goes further and further away from what their friends did, and more and more towards just elements in their financial life that made it difficult to do so. So that's the first reason that pull that your friends have on you financially gets weaker and weaker as the years go by. But the second reason loud budgeting can be difficult is because it's not your friends that are the only ones doing the pulling. As a matter of fact, the older you get and the more that you make relative to your peers, specifically your family, the financial pressure of supporting the family around you can become the thing that has the biggest financial pull. And this is not a matter of your family being impoverished and you being a millionaire. It's the things we talked about in the last episode, like an aging parent who needs your financial support and doesn't have the financial means to self fund an expense that, as we talked about last week, can be over $4,000 a month on average. Studies show that almost 25% of the people in this country are part of the sandwich generation, which means that they're financially responsible for an aging parent as well as a child. And when it comes to supporting the children, 65% of parents say that they give their adult children some kind of financial support. Again, the older you get, the more money that you make. You're now getting pressure from two sides of your family, and your friends have gone farther and farther into the distance. And if you're a minority income earner, those statistics are even more bleak. I'm reading from an Atlantic article from a few years back. Again, all these links will be in the show notes, and it says that upwards of 80% of black parents and 70% of hispanic parents expect to be supported financially. And most studies show that, uh, a primary reason why people of color are unable to save as adults is because they give financial support to close family. And if you're someone who's found yourself in this situation, you're aware that there's a big difference between what people who have never experienced it believe that you're dealing with and what you're actually dealing with. People who have never had to deal with this probably think that, oh, it's the difference between your family member wanting support for things that they just want to do, and they're asking you when they shouldn't be asking you. They're not aware that oftentimes this is something that a person needs. They need this money, or else there is an emergency that's not covered. There's a health expense that goes unaddressed. And it can be the difference between good health or comfort or even, in some cases, shelter, not the difference between the level of home or the level of health or the level of shelter. When you see 80% of black parents who expect their children to help you financially, they don't want that to be the case. They're talking about situations where they just simply don't have the money, and they're hoping that their children can make up the difference. And the reason that that distinction is so important is because loud budgeting is built on the premise that all you have to do is tell your friends and family that you can't do something because you don't want to, because of other goals, and they'll just be able to say, oh, I support you. I acknowledge your boundary, when in reality, there may be cases where you can say, hey, I want to make sure I save 15% of my income towards retirement this year. And your family may say, I understand that, but if you don't give me $500, I'm going to get put out next month. Or you have a mother who desperately needs round the clock care or to go to an adult daycare facility, and you can't as easily tell her, hey, I'm not going to get you this care. I'm not going to put you in a place where I feel safe because I made a goal to myself to max, um, out my IRA this year. So, in an ideal world, the Lao budgeting works. But in the real world, when you're a high income earner and one of the few that's around you, the ods are that you cannot do it as easily as constructed. So here's my tweak to loud budgeting that I think would be helpful and still makes it something that's worthwhile. Instead of focusing the loud budgeting on ways where you can tell your friends and family your financial goals. Instead, tell your friends and family your financial needs for security. An example may be a sibling who needs financial assistance from time to time, and the odds are that you're going to give it to them from time to time, but you may share with them. Hey, this year we're trying to make sure that we've established a budget for financial support to family. And while I am willing to support you when it's an emergency, I am not able to do so if it goes above and beyond this budget. You may have other situations where you can't avoid helping family financially, but you can share with them. Hey, here's how much I'm able to give because one of the things I've talked about in my household is not giving so much that we deplete our emergency fund. We need to have at least three months expenses set aside at all times. And I can give, but only to the point where we can make sure that we keep those three months expenses saved. You may have a cause that people consistently lean on you to support. And you may say, hey, this year I do want to make sure that I give as I'm able to give, but I'm not going to go into credit card debt to do so. Because this is something where once I've gone past this line, I'm putting my finances and possibly the finances of my family in jeopardy to make sure that you're not in jeopardy. And if you implement these tweaks, I think that loud budgeting is still something that's worth doing. And to be clear, you have to be realistic. The fact of the matter is, if there's a health emergency and you're the only one that can cover it, you may still have to go beyond that line. Sharing your financial needs for security does not mean that life won't happen. But what it does do is it at least makes your family aware of the fact that there is a line. Beyond which point, if you make sure that they're secure financially, you're doing it at the expense of your financial security. And when there are situations where you can choose between the two, establishing that barrier can be something that's helpful, in the same way that letting your friends know that you're saving for a down payment can be helpful when you're 25 or 26 years old. So if you're interested in loud budgeting, we'll put some links and resources in the show notes that can help. We'll even link to some videos that give you scripts on conversations that you can have with your friends and family to help articulate those goals. And if you're like the people in the second half of the episode who have some concerns that can make it more difficult as life goes on, I encourage you to write down your list of financial needs for security and feel more comfortable sharing it with the people who might need your support to start the process of establishing those lines with the people you love. See you next week.
[00:16:06] Speaker B: From new money new problems this was the new Money New Problems podcast, a show for successful professionals searching for the tools they need.
[00:16:14] Speaker A: To navigate financial opportunity.
Bye.
