How to Start a Budget and Save Money
Scott Dobson joins Lynne to discuss the moment he knew he needed a budget… and how he built it! Learn to take the budgeting process one step at a time using savings accounts and credit cards. Discover how to build a toolbox to afford a mortgage for your new home. Most importantly, find freedom from the stress of finance with today’s “Money, I’m Home!”
00:06 Lynne Jarman-Johnson: Money, I’m Home. Welcome on in, I’m Lynne Jarman-Johnson with Consumers Credit Union. And we have your topics from finance to fitness. Today’s guest, Scott Dobson, with our @Work program. He is our, the face of the Credit Union. You’re on TV a lot, Scott. But you also really do present some phenomenal financial education workshops in series.
00:29 Scott Dobson: Yep.
00:29 LJJ: Today we’re going to focus on one that is probably the biggest that people talk about and it’s also I think ever changing because of technology.
00:38 SD: For sure yeah and tough… Easy to talk about and tough to implement. I think it’s one of those, theoretically it all makes sense, but in reality, gets a little tougher.
00:47 LJJ: So, you might be wondering what is it, what is it that we’re talking about? It is budgeting. And it’s something that I love to listen to you, Scott, talk about budgeting, because you talk about it in a different way. My thought was, “Okay, you get your piece of paper, you write down everything you spend,” but you really have a unique way of talking to individuals because it’s different for every person.
01:10 SD: Yeah, I think it is different for everybody, and myself included. I’ve been in the financial services industry for 20 years, and it took me forever to figure out how to have my own successful budget. It sounds easy, get a piece of paper, write everything down, this is what I’m going to spend money on. And I think I designed our program something on my real life of me trying to set my own budget or saying really feeling not in control of my money. And I’m like, “Well, I should be more in control of where my money goes, I’m going to do it.” And so, my first real attempt at a budget, maybe more than 10 years ago, started with a piece of paper. I printed it off online. Here they do a budget, here’s all the categories, fill it in, start with your income. I got that, it’s easy. Your W-2, there it is. And then start what’s your housing, what’s your… I got down to like a…
02:03 LJJ: Card?
02:03 SD: Yeah, yeah, credit card payments, student loan payments, how much do you spend on groceries, gas, gardening. I got to gardening, I wrote down, I think, I wrote down $300, kept going and I got to the end of my budget and it was just a whole bunch of made up numbers. I didn’t really know if I was going to spend $300 on gardening or $800 on gardening and I didn’t know how to manage it if I went to the store and bought this and that. How is it going to turn into understanding how much I spent on gardening and how much I spend on candy bars?
02:32 SD: So, I really try to look for a process that was theoretically what a budget is. It’s you being in control of your money. And for me, it’s a mental and emotional thing. What makes you feel good? What do you like or what you don’t like to do? For some people that like to budget and manage their money, they’ve got it set, they have a complex budget, they got money going everywhere. They like to look at it and like to see, it gives them pleasure to have everything budgeted, but I think for most of the rest of us, it’s avoiding pain, it’s, “Oh I have these bills coming in at the end of the month, I have this stack. Do I have enough money in my paycheck to get through these bills? How am I going to get through the next birthday or holiday?”
03:15 SD: And that’s kind of how it was for me. And so, for me, a budget was getting rid of stress so I didn’t feel bad every single time I got paid. It’s no fun to get your paycheck, and have it be a negative experience that you just have these bills stacked up, and no real plan for them. So, I started with a new, erased everything, I said, “But how do you take action? How do you have a budget? But really…
03:37 LJJ: Make it make sense?
03:39 SD: Make it, yeah, and how do you leave a seminar and be like, “Alright, this is exactly what I’m going to do.” So, I really broke it down. So, what am I going to do? I’m like, “Let’s start a budget with by my paycheck because…
03:52 LJJ: So, starting with one paycheck you’re talking about?
03:53 SD: Starting with one paycheck, yep.
03:54 LJJ: So, if you get paid twice a month, you’re talking about just the first one?
03:57 SD: Yep, I take that first paycheck. Okay I make X amount of dollars from that paycheck. How do I budget that? And I wasn’t smart enough to budget the whole thing, so I set it I’m just going to budget one thing. I’m going to pick the most important thing in my world that I have to pay for, and I’m going to not be stressed about that. And that was my house payment. So, for an example, let’s just assume my house payment was $500 and I’m starting my budget on November 1st. So, in October, I get paid twice. My first paycheck, I’m going to take $250 and move it from my main paycheck account where I get paid into a little bills account that I set up at Consumers Credit Union. So, my paycheck came in there first time and immediately I had $250 transferred to my bills account.
04:50 LJJ: That you had set up yourself?
04:51 SD: Yeah, I went into Consumers Credit Union, I was employed, made a little easier for me, but I set it up and I said, I want an account this has bills on it, and then I want automatic transfer on my pay day of $250, so my paycheck came in in the morning and in the afternoon the $250 was transferred to that account and it just sat there, I didn’t do anything with it. When I looked at my debit card how much money I had, I didn’t see that $250, it was already…
05:14 LJJ: It’s already taken out.
05:15 SD: Yeah, it’s out there in the sides. I don’t see it, it’s not in my mental process or I even have that money to spend on my debit card. Two weeks later I got paid again and the exact same thing happened $250 went over and now I have $500 sitting in that account and a couple of days there was the first of the month, so the next step was to have an automatic payment from that bill account to my mortgage company, so on the 15th, $250 went in automatically. On the 30th, $250 went in automatically and then on the first of the month, a check was automatically written and sent to my mortgage company for my payment. And then the next month I did the exact same thing and I set it, I forgot, I didn’t have to think about it again. And the most, the biggest stress of my life making sure that a place to live for myself and my family was taken care of, and that made me feel better. I didn’t, I’m not a pro-budget person, really, I just don’t want to be stressed out about money. So, having that happen felt good. So, I said, “Let’s do that again.” So, then I did it with my car payment.
06:21 SD: Added that into that… Did the exact same thing. It was maybe $125 in each check. And each time I did that, I’d feel more comfortable. I added another bill to it until I had all the bills that stressed me out were coming out of my paycheck automatically and being paid exactly on time automatically. And I did not have to think about it on my paycheck. When I got my paycheck by the time I had all my bills that I wanted to pay over here, the amount that ended up in my checking account was my money that I could do with what I wanted. So when I got through all my bills, I had a list of everything that I had to pay, everything that I wanted to pay, and of course, how much I really had left over on my debit card, which was sickening because I had so much money going out into all this stuff that I had decided that I needed to pay. But it gave me… But then I had a road map. I could see that I wanted to have more money in my checking account. And I could see where all my money was going and all the bills that I was paying every month. And I could start targeting those and say, “Alright, which one of those or I going to pay off because once I do I get all that money back into my checking account.” Which also made me feel good to get my money back and have less over there in the bills pile and more in my pile.
07:34 LJJ: When you’re in seminars and you’re talking with individuals, is it surprising to you that sometimes people really… They’re just don’t know where all the money is going. And then how is it once you start to be disciplined about what bills need to be paid… And you mentioned it. Oh my gosh, the leftover was paltry. Is that where the discipline comes into about saying, “Look at… You can make this work, but you have to think about where those extra dollars are going.”
08:08 SD: Yeah, it’s good to… I think a lot of people don’t have a plan. I used to be surprised. Of course, I didn’t have my own plan until I decided to come up with my own plan. And everyone else is kind of the same way. So, I’m not surprised that people don’t have a plan because that’s the most common if you’re out there thinking, “I do not have any plan. I get my paycheck on Friday. I look at my stack of bills. I decide which ones I’m going to pay, and then I cross my fingers for two weeks.” That’s common. That’s normal. Don’t feel like you’re out of the loop. But then it just goes for me is what will take away your stress? What do you want to do? And putting a budget together really is just lets you see where the money is going and pick out where the stress is versus the whole thing is stressing me out. So, I think a lot of people say, “I’m not going to manage my money. It’s just I don’t have enough. I don’t make enough. I have too many bills.” But if you could take that time and say, “You know, I’m going to what? I’m going to write it all down. I’m going to see which order my bills should be paid in.” You see where my money is going and how much I have left.
09:12 SD: It helps you have a next step. Because unless you put that together, you’re like, “I want to make a change. This is not comfortable for me.” But you don’t know what to do. So, starting with one step and saying, “Alright, that made me feel a little bit better.” Just keep moving down that trail.
09:27 LJJ: You’re talking quite a bit about the everyday things of life that you’re paying for. So, what about the emergency savings that people talk about? What if there’s no money left over for the emergency savings? How do you start to build that up and not have the stress that kind of eats away at you, just in case something happens?
09:49 SD: I did it the exact same way. Really, a little bit of math here. If you get paid every two weeks, if you set aside half of a month’s worth of bill, at the end of the year you set aside a little extra. You get paid two more times, essentially than there are our months in the year. So, you get two extra paychecks when you set money aside. So, once I had my plan where all my bills were set up to be paid, I still did not have enough money for emergency fund. And I just had to deal with that. But we all do anyway. You’re not going to solve everything in one day. But because I had 26 payments go in and only 24 go out, by the end of the first year, I had a whole month’s emergency fund sitting in my bills pile over there. So that I knew that if something happened and my paycheck stopped, all my bills were set up to be paid automatically at 30 days before I had to worry about anything. So, I had set up my 30-day emergency fund, and it was sitting where I needed it to be to pay all those bills that were important to me.
10:54 SD: But once you get that set up and you see where the money goes, you say, “Okay, I do need an emergency fund.” And just like your Bills Account, you set up one more and say, “Alright. I’m going to put 10 bucks a paycheck into my emergency fund or whatever it is.” You look at yourself and say, “Yep, I need to build it. I want to have it there.”
11:09 LJJ: This sounds a little bit to me like what some people call the envelope method, but it’s more technology-based. How did you teach yourself? If you have online banking as an example and your phone or you do banking traditionally where you just go walking into our wonderful offices, how is it that you can learn that, Scott? Is it easy? Is it something that we actually at Consumers will help you with?
11:37 SD: Absolutely. We want to help you with that. All of our employees and… Well, let me be honest. When you say, I’m the face of the Credit Union, I go talk to a lot of people. I do. But I do not know how our systems work at the Credit Union very well. So, I needed to help myself. I said, “This is what I want to accomplish.” But if you walk into any of our office, they’ll be like, “Absolutely. I’ll make it simple for you.” And they can set up your account so that when you look online, it makes sense to your brain. Like I want this account labeled Bills Account, or nope, I want one account…
12:05 LJJ: Wedding account.
12:06 SD: Yep, I want a Savings Account and I want a Mortgage Account and I want Credit Card… Whatever works for you, plop down in front of a one of our smiling faces at any of our offices and they’ll walk you right through it. They understand our technology perfectly, even if you don’t. And you’ll walk out understanding how to look at it using our technology. And I’m not a disciplined person really. So, having it set up and getting…
12:32 LJJ: Well, you forced yourself.
12:34 SD: Yeah, I did. And that’s how it worked. I set it, and then I literally forgot it, which is what I want to do. I do not want to think about my bills really. So I just let it sit over there. Because I didn’t like to look at my bills, I sometimes pay them late. And now I don’t because I never look at them. They’re all… And my credit score is spectacular because I’ve got a system in place that automatically raises my credit score for me because it’s making my payments for me on time every single month.
13:04 LJJ: And you just don’t even think about it.
13:06 SD: I don’t. I’ve set it. I forget it. The only time I think about it is if I get some money at Christmas, I’m going to knock off another one of those bills. And I get to move that money back over into my Fun Account or my Spending Account and get to do what I want with it, which I like.
13:18 LJJ: Tell us about a story of somebody that perhaps was at a seminar or you ran into and you helped. And it just made you feel good because you know darn well this works.
13:30 SD: I had a great one. I love it that people walk around, assuming everyone else has everything figured out, always. And especially, I work with a lot of companies. They have a vast array of employees from someone that just started their job to the HR Manager, who’s sharp and has been there a long time. And I did this paycheck budgeting seminar for a group. They had the HR manager in the back observing the class making sure everyone was in… And we got done and she goes, “Oh my goodness. I cannot believe I have never had any budget, nothing. I had no clue. And this is exactly what I should be doing.” And I’m like, “Yes.” And so, I helped her get her’s set up, and that was probably two years ago. And she gives me a high five when I go back in there ’cause she’s like, “I got it all figured out. And I’m not stressed out about my paycheck.” And she was the HR manager of a company with hundreds of people. But just like everyone else, she was a stone-cold expert at what she did. Personal finance wasn’t her thing. It doesn’t mean you’re not smart, or you can’t do it. You just haven’t yet, or it hasn’t been your thing.
14:42 LJJ: And it doesn’t matter how many zeros are at that paycheck, does it?
14:45 SD: Absolutely. It has nothing to do at all with your personal financial such, how much money you make? So yeah, you cannot judge a book by its cover. You can’t tell how much people have saved or how much people earn or how good people are with their money, based on what you think they earn. That’s for sure.
15:03 LJJ: Well, what a wonderful conversation. And again, the neat part about it is truly what we’re saying is, “Hey step on in. Pick up the phone, whatever you need to get yourself rocking and rolling on your own personal budget that makes it yours.
15:16 SD: Make yourself feel better. Do it for yourself.
15:17 LJJ: Make yourself feel better. Scott, thanks so much for making us feel better today.
15:22 SD: Sure thing.
15:22 LJJ: Hey, money I’m home. From finance to fitness. We’d like to thank Jake Esselink, our producer. And listen in again next week because we will have a topic for you that will help succeed and smile throughout your week.