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Your Money: How Making A Budget Can Help You Save

April 23, 2018 1:40 p.m.

Your Money: How Making A Budget Can Help You Save

GUEST:

Brian Keliher, associate professor, Grossmont College

Related Story: Your Money: How Making A Budget Can Help You Save

Transcript:

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

>>> April is not only tax deadline month, it is also national financial literacy month, and for good reason. There is nothing like the annual review of income and expense to highlight the need for a good personal financial plan. Today we start a weeklong series with your money. How to track your spending and save. It seems nearly impossible in a region as pricey as San Diego, but experts say it can be done. Joining me is Brian, he is associate professor at Rosemont college, he teaches a personal finance course. Welcome. We are told one of the best ways to get a handle on your personal finance is to make a budget, and that usually sounds as exciting as going on a diet, so what can using a diet do for you?
>> It can allow you to reach your financial goals which is key. In fact surveys and studies have shown that recently the financial state of many people is really in bad shape. Budgets can help. For example, two thirds of those surveyed say they struggle to bring home $1000 in emergency consensus. Many could not do that. 52% pay the minimum balance on the credit card meeting it will take you five years to pay that off if you never use it again. Budgeting will not cure all of these challenges. It will make it so you can get a better grasp on your financial circumstances and maybe take care of some of the problems.
>> I have a statistic for you, 40% of Americans use a budget, why do you think that is?
>> Budgets are not fun. I am not having fun talking with you about it here. It takes discipline. It could take you a whole afternoon if you use one of the budget apps to set it up with one of the accounts required. You can get pushback to the email saying we are sorry the account is not connecting. Most importantly you must follow-up each week some say, at least month -- at least once a month. Some of the challenges people face is the discipline of doing it. Setting up is one thing, continuing to use it is a -- another.
>> In the case of couples should you agree on what your financial goals are before you start budgeting?
>> I encourage my students to run a credit score if you going to run it more than a week. That is more than a couple challenges that financial couples face. Ideally you, you handle it, it is crucial you get on the same page of what you can or cannot spend. If one is lucky they get a lot of money and they are naturally frugal. Which is good. Most of us had income expense which is too close together. That is where budget becomes truly important.
>> Let's have the standard advice for allocating money, using only a third of your income for housing is pretty useless in San Diego. How do you adjust a budget for the reality of your situation?
>> That is the key to budgeting. It allows you to adjust accordingly and decide what you can do with and without. You have your income of course which, for many, in this economy, it is a very challenging step. Today I read that experts are saying that by 2020, not far away, 50% of those in the workforce will be in this, -- will be in the economy. If you are a goober driver, had a great month last month, congratulations, this month your car was in the shop for a week and a half. Not only did you lose the income but you have a limit on your car. Allocating expenses, it is a crucial piece.
>> How do you do that? Do you average out your income from the previous year? And then think what you might be doing on a monthly basis, if indeed your income goes up and down?
>> This is where aspects of a budget including the emergency fund come into play. Some say a couple months, whatever you can put aside. There is no perfect answer. If you are making, as a independent contractor, $5000 a month and a drops to 1000, there is no way to do it other than to make sure that your fixed expenses are manageable. That your variable expenses can be adjusted accordingly. This is going to be a true dilemma as more more workers move into this economy.
>> As you mentioned Brian you do not have sitdown with a pen and paper to begin a budget, tell us about the online tools available.
>> There are dozens, one of the most popular is mint.com, which is what I use. What is nice about it is that it is free. There are promotions and ads that they push credit cards and such, what it does do which is positive is it integrates your accounts including your banking and checking your savings and retirement account and credit card accounts. It integrates that into your budget. It gives you something much more to work with, making it easier to follow through when incrementing your budget. It is free which is key, there are others like every dollar Dave Ramsey is a advisor who puts it together. If it works for you that is terrific. It is my understanding, to integrate your accounts with that, it costs 99 a month. Which is a cost. You need a budget is another popular plan. Again, I believe it has a few more bells and whistles. It costs 699 a month. Which is key, virtually every single -- every single one has a free trial. Find the budget that works for you.
>> Can you make adjustments to your budget as the month progresses or is that just too dangerous?
>> Is actually necessary for many of us. Depending on which program you use, I have a friend who still uses XL. It works for him. Which is terrific. And other friend uses a pad of paper and pencil. These new apps allow you to adjust accordingly each month for what is going up and going down. In some cases, if you budget $400 or $200 for close. If you do not use the full amount, some can carry over to the next month. So, budgets require attention. They require you actually work hard and monitor and adjust accordingly. That is a big piece of that process.
>> This takes commitment and stick to witness., You will have to monitor it and it will take time. What kind of budgeting success stories have you seen? Have you known people to be able to turn financial lives around X
>> absolutely, I work with students primarily, they have a whole different set of needs. Some 18-year-olds still live at home, some 45-year-olds come back to school, the bottom line, anytime anybody takes a close look at the finances, which is every program, no matter how you do it, you almost for sure be more successful with your financial circumstances.
>> I have this Boake -- I have spoke with with a professor at University who speaks finance.

>>> Your money continues series continues with some ideas on how to whittle food costs down.