#07 - Zero Based Budgeting for Life

This week Nvidia & Tesla made some big forecast announcements, household affordability continues to rise, and why you should consider zero based budgeting.

Big 3 Market/News Topics

• The Federal Reserve Board issued their Economic Well-Being of U.S. Households in 2023 report (see report here)

  • The report analyzes topics including financial well-being, income, employment, expenses, banking and credit, housing, higher education and student loans, and retirement and investments.

  • It shows financial well-being was nearly unchanged from 2022 as higher prices remained a challenge for most households and workers continued to benefit from a strong labor market.

  • Ideally households want to stay under 28% of their income going toward housing but as you can see below since 2020 this has continued to rise.

• Nvidia Announced 10-1 Stock Split & Q1 Earnings Beat

  • $NVDA revenue rose to $26 billion for Q1 2024. Net profit was $14.88 billion, up from $2 billion a year before.

  • Nvidia plans to launch a new generation of AI chips late this year and shipments could be seen in 2024 revenue by year end. The adoption & advancement of AI is fully into swing with their new AI chip on the Blackwell Platform.

  • Shareholders of record as of June 6, 2024, will receive nine additional shares of stock for each share they own after the market close on Friday, June 7. The stock is expected to begin trading on a split-adjusted basis on June 10.

• Tesla Changes Delivery Goal by 2030

  • Tesla dropped their 20 million units shipped goal by 2030 recently as they dropped future expectations for individual EV growth and shift focus towards Robotaxis.

  • Tesla will need to continue to push for the lower $25k entry level EV if they want people to begin to adopt EVs. Most major car brands prices have been inflated nearly 20-50% in the past 5 years making the barrier to new car ownership even more expensive and placing a squeeze on the used car market.

  • Hybrid vehicle adoption seems to be happening more rapidly than EV adoption. Heavily favoring the Toyota, Honda, and US legacy automakers.

The Freedom Fund Update

• 5/24/24 - Friday Freedom Fund Purchase:

  • 2 shares of $SCHB - Schwab US Broad Market ETF

    • I will be buying $SCHB weekly now to mix in some all market indexes with my single stocks.

    • Since its inception $SCHB has returned ~13% per year. Keep in mind these returns aren’t guaranteed and will lower with more market changes over time.

    • But if I invest $120 on average per week into $SCHB with similar returns in 20 years that will result in a ~$500k total holding in $SCHB. Feels like a no brainer to me to have about 60% of my purchases go into $SCHB weekly.

    

  • 4 shares of $PLTR - Palantir Technologies

    • To me these buying zones in the low $20s are still a great entry point.

    • If you have 15 minutes to watch this current status breakdown by Jeremy w/ Financial Education he goes deep into the fundamentals of the companies earnings over the past 3 years and makes some great predictions based on current growth rates and factors not priced into the stock yet.

Freedom Fund Background: I created the Freedom Fund as a public brokerage account back in October of 2022 to share that anyone with a social security # and a bank account can begin their investing journey by investing a couple hundred dollars a week. Every week and month I post on X (@GrahamInvesting) public updates about the purchases, exits, dividends, and growth of the fund if you want to follow in real time. The biggest obstacle people have to investing is just getting started so I decided to start a new account at $0 to start from nothing with you.

Zero Based Budgeting (ZBB)

I have had a lot of conversations about budgeting and personal finance with co-workers, friends, and family recently. Working as a Project Manager in the construction industry for some time I noticed that I really enjoyed the way we budget our $ for each individual project by assigning dollars to “phase codes” that are set for a specific work task, material, equipment, etc. I now implement zero based budgeting into my own personal life on a monthly basis and don’t think I will ever go back. (Side Note - I am also working on an Excel template for my very own ZBB).

Zero-based budgeting (ZBB) is a method where every dollar of your income is assigned a purpose, resulting in a budget that totals zero. Instead of simply tracking expenses, you plan each dollar you earn to ensure that every cent is utilized effectively. This proactive approach forces you to scrutinize your spending and make intentional choices about how you use your money.

How to Implement Zero-Based Budgeting

1. Calculate Your Income: Start by determining your total monthly income, including all sources such as salary, freelance work, and side hustles.

2. List All Expenses: Create a comprehensive list of all monthly expenses, including fixed costs (rent, utilities, loan payments) and variable costs (groceries, entertainment, dining out).

3. Assign Every Dollar: Allocate your income to cover all expenses. Ensure that every dollar is assigned a purpose, whether it’s for bills, savings, investments, or discretionary spending.

4. Adjust as Necessary: Throughout the month, track your spending and adjust your budget as needed. If you overspend in one category, reallocate funds from another category to cover it.

5. Review and Refine: At the end of each month, review your budget. Analyze what worked, what didn’t, and refine your approach for the next month. This continuous improvement will help you stay on track and achieve your financial goals.

6. Tools: Ramsey Solution has a great simple ZBB Calculator here: How to Make a Zero Based Budget

Zero-based budgeting is more than just a financial tool; it’s a mindset that empowers you to take control of your money and your life. By giving every dollar a job, you can achieve financial clarity, reduce stress, and work toward your goals with confidence. Whether you're looking to get out of debt, save for a major purchase, or build a secure future, zero-based budgeting can provide the structure and discipline you need to build a foundation for building wealth.

The purpose of Graham’s Gazette and my social account @GrahamInvesting is to help others get started and stay consistent on their own personal, professional, and financial journey. I appreciate the time you take in reading & interacting with me and look forward to growing together.

Thanks for investing your time reading this.

-Graham (@GrahamInvesting)

Disclaimer: Graham’s Gazette provides information and resources related to investing, financial topics, and personal growth for educational and entertainment purposes only. The content presented is not intended to be construed as financial advice. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial decisions. Graham’s Gazette and its creators do not assume any responsibility for the accuracy or completeness of the information provided nor do they guarantee any specific results from such use of information.