How to Budget When Your Paycheck Changes
Budgets. So simple and yet so difficult. This week we’re refreshing our first episode, where you’ll learn about the importance of a budget as a tool to help you stop living paycheck to paycheck. Whether you’re trying to manage your personal checking account, save up for a down payment on a new home, or just manage your monthly bills, having a good budget can help take the stress out of payday… but how do you get started with budgeting? In this episode you’ll learn about the importance of a budget as a tool to help you stop living paycheck to paycheck. With a personal touch and easy to understand information, Money, I’m Home is bringing your money back to you!
Lynne Jarman-Johnson (LJJ): Money, I’m home. From finance to fitness. Hi everybody, welcome in. This is Lynne Jarman-Johnson with Consumers Credit Union. And I’ll tell you what, we’ve got a great podcast for you, today, because we’re going to introduce you to a person who was out in our community, and he is doing something that is probably one of the most important missions that we have, and that is financial education. Thanks so much, Scott Dobson for joining us.
Scott Dobson (SD): Thank you for having me.
LJJ: You’re the manager of consumers at work. Tell us a little bit about what consumers at work is all about.
SD: Well, to put it kind of simply we go out to businesses and we talk to employees, and our main goal is to improve the financial lives of those employees.
LJJ: How do you… How do you do that?
SD: It’s tough right, you think you just go out and give a little seminar and how to budget and how to handle your money and everything will be fine but it’s difficult. We find the best way to really help people manage their money is to be hands-on, to provide solutions that are very direct. And this happens with your pay check and this is what you should do with it. So, we’ve talked before with people about a theories of saving money and budgeting and that’s tough when you’re just getting a paycheck every week, it gets difficult to do that. So, you have to… You kind of have to have a theory, but then you have to have an actionable plan. So, we try to help people get an action plan, so they can think about their finances in a positive way and then do something about it.
LJJ: You know what is interesting, a brand-new study just came out from the Federal Reserve that shows that we as Americans have more debt now than ever before. Now we’re good in some parts, our credit scores are seem to be doing pretty well if we want to get a house, that sort of thing, but yet the debt is so looming.
LJJ: Bigger than 2008, they’re saying what you know what happened then, what is it that you have found when you’re talking to people every day, that really makes a huge difference? Is there ever a light bulb that goes off that you see over and over again Scott when you’re meeting with people?
SD: Yeah, I do. I think the light bulb a lot of people do not feel like they have any control over their money at all. Their paycheck comes in, when it comes in, their bills are due when they’re due. Christmas comes when it comes, and they are just trying to react to it.
SD: What we try to do is go and say “Hey look, it’s your paycheck, there your bills. Let’s take action, let’s do something and put you in control so that you feel like you’re in control of your money, instead of your money being in control of you. It’s more of a thought process and what you’re going to do then you’re instantly going to make a million dollars. But if we can help people think of it, it’s your money, and you’re going to control it, instead of your employer just gives you a check and it is what it is. We can really change people’s minds and really money is it’s mental is what you think about it, how you decide to use it that really makes a difference from feeling comfortable with your money, or feeling like you’re always behind, or always in debt.
LJJ: You know that’s a really good point about really what this whole podcast series is all about. It’s all about how do we become financially fit? And stress we know is the highest level when you’re not financially fit.
LJJ: I… Because you’re constantly worrying about it.
LJJ: So, what are some of the very first things that you try to help us with?
SD: Financial fitness is the very first thing that I recommend people do is take control of something, decide that you’re going to be in control of your money and your money is not going to be in control of you. And that’s really tough, because a lot of people, they think, “Okay I need to be in control in one I should make a budget and set a budget. Well, a budget, can be everything from…
I have a mortgage payment due next month to… I have kids that are going to go to college in 12 years, and I need to pay for my retirement, and it can be very overwhelming and very daunting.
So, what we try to do is to get people to pick one thing and just let’s just knock out one thing and then build on that. If you can get started with budgeting something and feel comfortable with it and get a process that works for your head and also feels good in your gut, cause you know finances, they make you sick if they’re not going well, so we got to get rid of that. If you can make one of those one change and take one step and say, “Oh I got that step, and then build on it eventually you can get control of your whole financial life, little pieces at a time.
LJJ: I have read, tell me if you found this to be true that it makes no difference what the salary is, that if you haven’t learned that art of saying I’m going to budget for my life, for my lifestyle, for the needs that are upcoming, it makes no difference how many zeros you have at the end of your check.
SD: I tell the story, I talked to thousands of people every year I’d say, and I always tell the story of back when I was doing lending. I did a loan in the morning for a couple, and they each made at the time minimum wage, maybe $8 an hour and they were struggling. That afternoon, I did another loan for the same amount for $2500, for a couple that made and brought home 10-000 a week, but they spent 11-000 a week, and they were just as broke as the people that made 8 an hour. So, you’re 100%, right. It’s not how much you make, it’s the difference being how much you make and how you spend and really how you take care of your money.
LJJ: So, I remember clearly, I can see it when I was growing up, my parents would sit down at the kitchen table and they had their register, and the book register, I don’t even know if my kids know what a checkbook is. What’s the difference in how are we learning that step of budgeting, if there’s no paper and pen anymore?
SD: Yeah, I used to be the old paper and pen, sit down, get your bank statement, spend two hours on a Saturday reconciling. And we live in a society now where no one’s taking two hours, with a pen of paper to sit down and do anything. We live in a world of instant it should be work for me now, I should be a look at my phone, and it tells me all those things, and those things are absolutely out there.
But just like your parents took the time with the pen and paper, probably lots of other parents didn’t. And nowadays, some people take the time to use the technology that’s available, and a lot of people don’t know what’s out there or haven’t used it yet and just aren’t familiar with it, and don’t understand how much easier using technology could make their financial lives if they invested just a little bit of time to understand what’s available to them.
LJJ: So, I have seen you in action and I’ve seen you actually show some of the things that can be done with technology. You though, at one point in your life, this wasn’t just a piece of cake.
SD: Absolutely not, And I came from the best possible circumstance. My dad was a certified financial planner. He talked about finances all the time. I could not have gotten a more perfect role model to how to handle personal finances.
I grew up and worked in the financial field, and I literally my life until let’s say 10 years ago, I knew what I should do, I knew the theory, I didn’t practice it. I got my first paycheck when I got a job and I did what I had to do with it. I had bills that were due and I paid those and I figure out what to do with the rest, and that turned into my financial plan so even though I had the best up-Bringing, the best possibilities, It still took me a while to figure out what was going to work for me and really what works for me is not the same as what worked for my dad. So, everyone kind of has to find their own their own theory that works for them both in their head in and in their gut, for their finances to work for them.
LJJ: When was it that you said, “Whoa, whoa, whoa, whoa”, I’m doing it, but I’m not?
SD: I can’t tell you exactly the day, it was probably 12 years ago when I got my paycheck and I did what I always did was I got my paycheck, now what I’m going to do with it and I’m like, “I’m not getting anywhere, I’m figuring out what to do with my paycheck, and my goal is to make it to my next paycheck, and I’m not thinking about next month, next year, when I retire, I’m really just focusing on how to get my paycheck to get me to my next paycheck.
Which one I sat back and thought about it was really, I’m trying to figure out how to be just over broke two weeks from now, which is a terrible strategy, but if you don’t have a strategy you fall into something.
LJJ: That’s exactly what I did. I didn’t, Emergency happens in your what?
SD: Absolutely, that’s the same thing if you have a budget. Alright, I’ve got lock solid, I’ve accounted for every penny. And then something that you didn’t account for happens, your entire budget falls apart and you’re back to square one. So, it makes it very difficult. And it’s really how I decided for me personally. Let’s break it apart, let’s start one piece at a time and build on it so that I can understand what I’m budgeting, why I’m budgeting, what good it’s doing me, and I can see why I might want a budget something else to make my financial life easier for me.
LJJ: Did you, at that time, think to yourself, Okay I want something large, in my life later? Maybe it would have been a home, maybe it would have been a car, at that juncture is that when you started to say, Look, at, I need to actually look at how much that might cost and how I can save to get there?
SD: Yes, you look at purchasing a house and you read something online at says you 20% down to buy a home, and your stomach goes into knots when you think of how much house you want to buy and how much that cost. Then you realize there’s lots of great options out there, so you don’t have to have 20% down, but you do have to have money down and you got to save it and you have to figure out how to save it. And so, I’m like, Alright, if I want to save X amount of dollars next year to buy a house, how am I going to do it? I can’t just write a budget down on a piece of paper and have it magically happen, it doesn’t. You have to write it down and then you have to take action. So, I really had to figure out, alright, what action am I going to take for myself so that my do budget works for me and I hit my own goals.
LJJ: And really, that’s what it’s all about, when you’re talking about the person-to-person education and helping someone figure that out.
SD: Absolutely, our job really is to say to our new members and our current members, what do you want to accomplish? What makes you uncomfortable, what makes you comfortable, and let’s manage your money that way. Some people, it’s like I have to be saving for my retirement is the most important thing to me.
Other people might say, If I have to make my mortgage payment on time every single month, it’s where I live, is where my family lives that’s most important to me, I need to take care of that first.
So, we listen to you, and then we can devise a budget program that makes sense to your mind, feels good to your stomach and helps you get to where you want to go.
LJJ: Have you been surprised at how people just, they’re scared to talk about money?
SD: Yes, it’s well like me. It would be a little bit embarrassing before I had my finances under control, to be a grown-up working in the financial services industry, and say, Yeah, I don’t really have a budget plan right now, so you’d rather just say nothing and nod your head, that everything’s going fine than to say, Hey, you know what, I don’t think I have a perfect system that feels good to me and it’s helping me get to where I want to go, help me out. But nobody is a professional and everything, and there’s hardly any way to become a financial professional unless you work in the industry for 10 years.
So that’s exactly what we’re here for, is to say, “Hey you’re an expert teacher, doctor, or whatever it is that you do, be an expert that come to us will be the expert in your finances will help you figure out how to make a plan that works for you and feels good to you.
LJJ: One of the things that you mentioned that we’re going to deep dive into in another podcast is the fact that you can use technology to help you reach those goals.
LJJ: And what do you think is the favorite thing that you do that helps you and make you smile?
SD: The favorite thing that I do is getting someone who has never budgeted anything, that did the paycheck roulette as I call it, they got their paycheck and they looked at all the things that they had to pay and they pick from the roulette wheel which ones they were going to pay, and to say, pick one thing and let’s budget it, let’s have a plan for it.
Like for 2019, I was with someone this afternoon and they would say, my mortgage is the most important thing that it’s paid on time every month. I don’t want to stress about it every month.
And for us to use technology, direct deposit, automatic payments, different sub-accounts with Consumers Credit Union to make that happen for them.
It really is like an epiphany. It’s like a light bulb goes off in their head.
I can set this process right now, and I don’t have to worry about my mortgage payment next year. It’s going to come in from my paycheck like it’s supposed to, it’s going to get paid exactly on time. I don’t have to think about the due date or whether I should pay this or the mortgage, it’s set, I can set it and I can forget it. Once you do that once and you’re like, “I like that, that feels good, that’s comfortable. It’s very easy to take that theory and then just start adding other things that you’re going to budget and slowly build your budget to work for you.
LJJ: Do you think that of the individuals that you meet, What’s the percentage that really work on a budget?
SD: Five, if I have a class, I say if I’m in a group of people in a business and I say, how many of you balance your checkbook? It’s probably 1%. How many you have a budget that you use, probably 10% raised their hand and then 5%, half of those people kind of slowly back down, like I don’t really have a budget, but I figure out what too with my paycheck.
Very few people say, I know my next paychecks come in, I know exactly where the money is going to and it’s all set up for me, hardly anyone has that, and it’s super simple to do and for my own personal life, reduces my stress level significantly on payday. I used to get my paycheck, and it would stress me out cause I had all these bills that I had to pay, I got my paycheck, it was a bad day for me. I’m like, that’s exact opposite of how it should. Actually now, I don’t know what my pay day is because all of my bills are set up to go in to my account and be paid automatically, and my bills account just takes care of it for me, so my stress level is super low right now, and I couldn’t be happier about it.
LJJ: So, the goal is to never know when your payday is.
SD: Your stress level on your finances is so low, you don’t know when your pay day is if you get there, you’re doing things right.
LJJ: Alright, well, we’re going to make that happen for all of you listening. Money, I’m home from finance to fitness, I’m Lynne Jarman-Johnson, Scott thank you so much!
SD: My pleasure.