On this episode of Good Cents, we’re tackling BIG money questions. What is the point of money if you don’t know what to do with it? How easy is it to save your first ten thousand dollars? What do you do after you saved it? Eric speaks with J. Money of Budgets are Sexy about why you should start tracking your net worth, strategies to start saving your first $10,000, and how to get started as a beginner investor. J. Money even gives Payactiv listeners exclusive access to helpful spreadsheets on his site to help you get started.

Listen now or continue reading the transcript below:

Eric Rosenberg:

Hi, I’m your host, Eric Rosenberg. I’m a personal finance expert and consultant. I love all things finance, and I have my own blog and podcast at personalprofitability.com. For a quick heads up, I am not a registered financial advisor, and this podcast is for information purposes only.

Hello everybody. I am so excited to be here with the man, the myth, the legend, J. Money of “Budgets Are Sexy.” 

Welcome to the show.

J. Money:

Hey, thanks for the epic intro there. I like that. I wish all my friends could say that.

Eric Rosenberg:

Well, you’re a great guy. I’ve known you a long time through the financial blogging world. As I mentioned, you have your own site, Budgets Are Sexy, which you’ve been running for a long time now. I know you’re like me; you’re a dinosaur blogger. You’ve been around the block. How long have you been doing your site, Budgets Are Sexy? And how did that come to be?

J. Money:

Yeah. Yeah, I started it in 2008 on a whim. I just got interested in money and budgeting. I actually didn’t even have a budget myself, and I bought a house, no money down. Didn’t really know what I was doing. And I thought it’s probably good I start tracking my money and paying more attention. Found blogging online, I didn’t even know what a blog was and people just sharing their stories, and it just really, I don’t know, I just got connected by the people and their examples.

So I started Budgets Are Sexy to be fun, and budgeting in general, as many people probably won’t be shocked by, is not that exciting. And so I try and make it interesting, make you actually want a budget for the dream lifestyle and whatnot. And so, yeah, it’s been about 10 years, and I actually sold it. And then I actually reacquired it this year, which is a whole other side of blogging in business, but it’s great. I talk to people about money all day and talk to people like you and your listeners. And it’s just fun. It’s fun to talk about something that most of us keep inside and don’t have people to talk to about it.

Eric Rosenberg:

Yeah, I agree. I love talking about money as our listeners know. So we know you know a lot about budgets and net worths. That’s one of the core things that you’re into right now on your site. So for somebody who doesn’t know as much about this, let’s say you’re new to tracking budgets and net worths. Could you describe in your own words, what is net worth?

J. Money:

Yeah, so a net worth is basically just like a financial snapshot of your money. All your savings, your debt, car loans, checking account money, student loans, anything relating to money in your life. There are some that are positive, like savings accounts, and then there are some that are negative, like your credit card debt. And the difference between the two is basically your net worth. So if you have a thousand dollars in savings and $2,000 in debt, your net worth is negative a thousand dollars. So at first, especially if you’re just starting out in the career or you’re young, most people’s net worths are negative, and it’s really scary to sit down and track it. But once you get over that first hump every month going forward, provided you’re paying attention and trying to improve that number should get better for the most part and trend upwards.

And what I like about it is that if you do have debt and that’s your focus, you can pay some off and every time you pay it off, your net worth improves. And then let’s say you don’t have debt. Let’s say you’re into investing now. And every time you invest and do well, it goes up. So no matter what side of the equation you’re working on, it always reflects in your net worth. And budgeting is great too, tracking your money and all that good stuff. That’s only just one side of the equation, cash flow. And so the net worth captures your whole entire financial picture and really takes you five, 10 minutes to update once a month, copy and paste numbers by logging into your accounts.

Eric Rosenberg:

Well, so I was just about to ask you, how often should you update your net worth and where would you find that information? So, you mentioned you do that about once a month and you look at all of your accounts. So, if you were going to go through that process, let’s say you want to do your first ever net worth, you want to do it just pen and paper to keep it easy. Where should you look to find the information for that net worth?

J. Money:

Yeah. So the nice thing is, yeah, you just go to the normal accounts that you log into. So if you have a checking and savings account, you go to your bank, or online website, you log in, you copy and paste your balances, or you write it down if you’re doing pencil and paper.

Eric Rosenberg:

An old school.

J. Money:

Yeah. Let’s go old school here. Yeah, yeah. Easier to do spreadsheets by the way, or Google Docs or something. And that’s what I do, I have little tabs, and I log into my savings, my investing, my credit card stuff, plop the numbers in there. I do it monthly just because it keeps me on top. And I know throughout the month, all right, I’m going to update my numbers. So I better behave. Some people do it quarterly or even yearly, which is fine once you get good with money. But I think starting out, it’s good to do it monthly just so you stay on top of it.

And it’s interesting because over time, even if you’re not actively trying to do anything with your money, let’s say you’re just done with budgeting and done with paying attention to money. But when you’re there and let’s say you’re at a bar or let’s say you’re at Subway trying to get some food or whatever. Every time you’re about to swipe your card, subconsciously sometimes you remember that it’s going to reflect in your net worth. So you start changing your behaviors because of that constant updating, because you could only log in, update your net worth and it keeps going down for a certain amount of time until it shocks you into taking action. So it does help overall get your mind going in the right direction for sure.

Eric Rosenberg:

Yeah. So I know my own net worth, I’ve been tracking it every month since I was in college way, way back when, and around the time I graduated and finished grad school. My net worth was just about zero. And that has been going up steadily ever since, there’s up months and down months. But to me, it feels like a game, like it’s something to win as long as I’m going up, it’s like I’m winning. And if it’s going down, it’s like I’m doing something wrong. But if you don’t feel that way, if you’re not like me or you just can look at the number and feel excited, what are some other reasons to track your net worth? Why would someone care and be motivated and excited to see their net worth go up?

J. Money:

To be honest, the whole point of money really, and earning, lots of people want more money, and they want to be a millionaire. But I think the point is, what’s the point of the money? What does it do for you? I know people that are well into five, 10, or $15 million net worth, but they’re miserable. Their data [inaudible 00:06:37] day. They hustle too hard. They’re constantly working. They don’t go out and enjoy themselves. And every time I ask them, hey, what’s your goal here? It’s like, oh I want to double my network, double my business, double this. I’m like, great. Let’s say you do that. And I’ll say like, then what? And they’re like, oh, I’m going to double it again. I’m like, they’re going to be doubling it for the rest of their life. They’re going to be multimillionaires, but they’re not enjoying life.

So to me, money, the point of it is to craft your ideal lifestyle. When I started tracking my worth, similar to you, I’d been doing it for about 15 years, maybe 14 years, it was lower, and I just wanted lots of money. I thought that was cool to be a millionaire and wear flashy stuff. And I was in my twenties, and I could party and do this. And as I got older, I realized the point was freedom; to wake up and do what I want is important. If I want to work, I can work. If I don’t want to work, if I want just to volunteer or play video games, the ability to control my time and not have to think about money, that to me is just crazy good.

So pay attention to your money for a solid five, 10, or 15 years and get on track. But the beautiful thing is once you’re good at it, just like other stuff you do, you don’t have to think about it. Once you get the ball rolling and compound interest goes and your investments going, you do nothing, and it grows. It’s really sickening and kind of stupid because you want that early on when you get started, but once you get the ball rolling, you’re good. So, I think to answer your question, Mike, freedom to me is the point of tracking everything.

Eric Rosenberg:

Yeah. That just made me think of, we have a mutual friend, Miranda Marquette. And she has this, that she calls planting money seeds because you’re talking about what’s happening in 10 or 15 years down the road. It can feel hard today. And we live in that YOLO world where we want instant gratification. But if you plant that seed today, well, we might not grow money trees, we are able to build a system that can keep running and let us live that life that you’re talking about. Maybe we won’t all be multimillionaires, but we can live a life where we can have a little more control over our time. We don’t have to stress about the next bill. We don’t have to live paycheck to paycheck. So tracking that net worth. Yeah, I agree. It’s just such a great goal and a great way to understand where you’re at. It’s like businesses track their finances; you should too. It’s important to know where you’re at.

J. Money:

Yeah. And I’ll say different levels of your net worth changes too. Your first $10,000 positive. That feels good. That’s probably like so, so, so hard and takes the longest time to actually get to, but once you get to 10, getting to 50 or a hundred goes faster, and really once you hit a hundred, it just multiplies, because you’ve already learned the basics. You’ve already set the systems up. Your mindset is good and this can take years too, by the way, it’s not overnight, but once you get there, if it takes you 10 years to get to a hundred thousand, for example, it might only take you two to get the next hundred or three to get 500.

It sounds ridiculous, especially if you’re just starting out, but it just compounds so drastically once you hit a threshold. So do you start going for your first five or 10,000, and you’ll notice over time it does get easier, at least mentally. It still takes a long time and it’s annoying sometimes, but it goes faster once you get going. That’s really the hardest part is just committing to it and doing it and then trying to challenge yourself first versus what other people around you are doing.

Eric Rosenberg:

Yeah. I often say when I’m writing about money, getting that first dollar saved is so important because that’s the hardest dollar and every dollar after that it’s going to be easier to save. And if you can set up automations, actually through the Payactiv account, if you’re a user, you can automatically save towards a specific goal every month or every payday, whatever schedule you want. So let’s say, you’re trying to build up your first emergency fund. Maybe you want to save 500 or a thousand dollars to make sure if you have a hospital visit or your car breaks down, something like that, you could cover the expense. And I like how you were saying that it starts slow, but it gets faster and faster over time. And there’s a couple parts to that equation. One, we’ve talked, you were mentioning there’s your savings and your checking and then there’s also debt. So if you pay off that debt, you’re not having any money go out towards interest anymore, and that’s just more money you can save. That’s more to go to your net worth.

J. Money:

Yes, yes, yes.

Eric Rosenberg:

And you also mentioned compounding, and that’s something a lot of people don’t know a ton about. So could you explain for someone who’s using a savings account, let’s say, how does compounding work there?

J. Money:

Yeah. It’s really simple. Banks pay you money to hold your money because they go and make money off your money basically. And so they’ll give you a percentage, let’s say, I don’t know, right now, I don’t know, it’s super low, point something, but let’s say it’s just 5% to make it easier, which would be amazing. And back in the day they had 10 or 15% interest too, which is bonkers. I don’t know, 20, 30, 40 years ago or something.

Eric Rosenberg:

Yeah. In the eighties you could get-.

J. Money:

Is that it?

Eric Rosenberg:

… super high rates.

J. Money:

Yeah. But basically just having your money sitting there, let’s say you have a hundred dollars. And the interest rate is 5%, at the end of the year, let’s say. Then now at the end of the year, you now have a hundred plus the 5%, which is $5. So you have $105 there, but every year or month, depending on how they calculate it, the money, the little dollars keep adding on top of it. And then your interest is paid on the bigger number. So every month or year keeps getting higher and higher. And this literally just the same amount of money that you have in there. And actually what you should google is called the doubling penny. It asks you how many days do you think it takes to get to a million dollars or something by just doubling a penny?

And you might think it’s a thousand or 2000 days or something, but I’m not going to spoil it, but you’ll be really surprised how fast millions of dollars adds up by just doubling a penny. And that’s an extreme version of compounding, that’s compounding a hundred percent, I think it is daily or something like that.

Eric Rosenberg:

Yeah, yeah.

J. Money:

Yeah. But it’s bonkers. So that really, you see that chart, you’re like, okay, like I need some compounding going on. And that’s why people invest in more riskier stuff. Savings is super conservative, is guaranteed, the government backs it and all that good stuff. But now you got people in crypto and stocks and all this stuff that in theory could go up super high compounding, but also can go the opposite way as well, compounding negative. And your credit, there’s bad compounding. So your credit card debt, all that interest is doing the opposite for you. That’s why it takes you forever to pay something off, even more than your original amount. If you put $500 in credit card and not just pay the interest for 10 years, that 500 is still there plus whatever else is accumulating. So, it’s scary. So that’s why lots of people harp on getting rid of debt, because it’s going against you. And then that’s why you can put that into savings or investing after and it compounds for you.

Eric Rosenberg:

Yeah. That’s great advice. It’s like the secret rich people have. It’s not that big of a secret. If you have a hundred dollars put away, as you said and earn 5%, then the next year you’ll earn interest on the $105. Then the next year you’ll earn it on a bigger amount and a bigger amount. And that’s what it means when your money is working for you. That’s that’s how you build your wealth.

J. Money:

Literally that same example, you put a hundred dollars in there and let’s say someone puts a hundred million dollars in there. You both did the exact same thing. You put the same amount. You did nothing for a year. You only got $5 at end of it and… Oh, great. What’s a hundred million times 5%?

Eric Rosenberg:

Five million.

J. Money:

Five million, five million. So that dude or girl just earned $5 million for doing the exact same thing you did just because they added a bigger pot to play with. Yeah. The rich does get rich, it’s not that they’re smarter doing anything different. A lot of them are smart, of course, but they are just playing with bigger chunks of money and taking advantage of it. But all of us can take advantage of it, no matter how much we have, but that’s extreme level.

Eric Rosenberg:

Yeah. Yeah. But we got to start with that first dollar, that’s what it’s all about.

J. Money:

Oh yeah. Oh yeah.

Eric Rosenberg:

Once you’re there, you can always keep going.

J. Money:

Yes.

Eric Rosenberg:

So this was great. This was really educational and fun to chat about. I know you’re into skateboarding and finance and doing all this really cool stuff and you are really fun to follow online. I read newsletter and I’ve been a reader of your site for many years, but if other people want to join the J. Money fan club and follow along, where should they go?

J. Money:

There you go. Yeah. You can go to budgetsaresexy.com, which is my personal finance blog. Oh, and I made a link for you guys. If you want to go budgetsaresexy.com/spreadsheets, it links to all these free spreadsheets that you can track your budget and your net worth. I use one that has them both on the same spreadsheet. So if you want to get started, you could do that. They’re all free. And then if you want to learn all about my other projects that I have online, you can go to J.money.biz, which is just the letter J then money then .biz. Oh, and I’m on Twitter at Budgets Are Sexy if you want to chat there. But yeah, feel free to reach out. I love talking about this stuff and yeah, it’s good that you guys listening actually care. A, it’s awesome you’re on the show because you care, you’re paying attention and spending the time, but really think about that dream lifestyle of yours and work backwards and start getting the money and it’ll eventually get you there.

Eric Rosenberg:

Awesome. Well, thank you so much. And as we always like to finish off with one last question, if you were talking to the managers out there, the people out there trying to help their employees thrive and succeed with their money, what advice would you give to those leaders?

J. Money:

So I’m going to give a specific one. And so for me, something that was really big was having a 401k, which is basically your company. They match money that you take out and invest in your own money from your paycheck. So if invest 3%, really good employers will match that 3% or even give more. So, if your company doesn’t have a 401k plan, that is a really huge thing you could do for your employees to help them invest faster and easily without much even notice, because it all takes out of your paycheck. You don’t pay taxes on it in that beginning part. And if you do have a 401k plan, but you’re not matching, if there’s a way you could match that is even more motivation for people. And if you do have a 401k plan and you do match, then the third best thing is what funds you’re giving your employees access to, because a lot of funds in 401k plans have really huge fees just for having money in there that eats away a lot of your compounding.

So just having someone review it and making sure that there’s some good options for people to invest in. You hear those surveys all the time that if you have people automatically opt in, when they start working for you, where they have to manually unlock in or… Well, that’s the word, the deroll or something, whatever that-.

Eric Rosenberg:

Yeah. Yeah. Unenroll.

J. Money:

… unenroll, most people don’t take the time, which is actually more beneficial for them because they’re going to be investing. So, any of those things around 401k is my number one thing for employers, because it’s something that you could do and massively helps employees for the long term.

Eric Rosenberg:

Well, that is great advice and something I agree with completely. So thank you again so much. And again, listeners, head to budgetsaresexy.com. You can find everything about J. Money and see his beautiful face and mohawk, you can’t see that right now on the-.

J. Money:

And my shirt on there, I’m wearing a budgeting shirt, but you can’t see it because you’re audio. It says, what does it say? I like big budgets and I cannot lie.

Eric Rosenberg:

And I do like big budgets that I can not lie. That’s a great way to end it up. Thank you so much, J. Money. Thank you to all the listeners for sticking with us. And we will talk to you next time.

J. Money:

See you all later.

Eric Rosenberg:

And as we always like to say at the end of our shows, go on out there and live the life you’ve earned. Thank you so much for being with us today. Have a great rest of your week. Bye-bye.

to focus on areas to cut. While budgeting is an integral part of managing your income, there’s only so much you can save. Your income can grow forever. Over your lifetime, it could add up to tens of thousands, or even hundreds of thousands.

That’s something anyone can get excited about.