Budgeting and Accounts Pt 1

Scott: [00:00:00] Dollars and Cents with Hapo Community Credit Union helps empower our listeners to achieve financial success while living for today and planning for tomorrow. This podcast focuses on financial education, community support, fraud prevention, real life stories of financial transformation, and much more.

Hapo Community Credit Union serves Washington and Oregon with over 18 locations. Bank on more when you bank with us. This episode of Dollars and Cents will cover topics on Budgeting account structures and account types. We've split this episode into two parts. The following is part one. Hello everybody and welcome back to another episode of dollars and cents.

Hapo Community Credit Union's financial literacy podcast. Today in the studio we are going back to our core pillar, which is base financial education. And we're going to talk about building a budget, how you can use those budgets, [00:01:00] and how more specifically personality wise you can make those work for you.

Uh, in the studio today, we've got a couple of experts on these topics, Sabrina, who is a financial education coordinator here at Hapo Community Credit Union and Stephanie, who is an assistant branch manager, but was also previously an FSS. What tell us about your positions and why that makes you guys the experts for our topic today?

Stephanie: Okay. So this is Stephanie. You know, what makes us experts is that we get to see these things first hand, day to day, we get to see real life people, real life situations. Um, everybody has their different struggles, you know, different stories. Some people are saving for a house, some people are saving for a car.

Uh, so we really get to sit in and listen to everybody's stories and see. Or I guess really cater to their needs. 

Scott: Find out those individual stories, what makes each of the budgeting aspects of things [00:02:00] unique to each person. Because while it is a big topic and it's a very broad and basic topic, it is also very personalized, right?

Sabrina: Yeah, definitely. Everybody's budget is going to look a little bit different. Because everybody's needs and wants are a little bit different. You know, everybody's life looks different. So what's a need for me may not be a need for you. So it really is customized. Um, I Just like Stephanie, I come from inside of a branch several years.

I worked in our contact center, so really seeing firsthand those, that desperate need for just some sort of organization, some sort of clue of what am I doing wrong? I don't know how to do this. Nobody taught me how to do this. 

Scott: Now, you said, what am I doing wrong? Does it typically come from a position of concern that somebody starts budgeting?

Or is this kind of a topic that some people will hit kind of proactively or is this individually again a unique situation to whoever it's coming from? 

Sabrina: All of those things. So, some people have no, no understanding of finances. They were just never [00:03:00] taught that in the home. Maybe their parents paid all of the bills, but they never sat down and taught them what that looks like.

Um, how to, how to actually say, this is what I want, this is what I need, this is what has to be taken care of first, this is how you save. Um, versus some people just are organized, and they go at it proactively from the beginning, and then some people just don't even know where they're missing it. 

Scott: Now, the proactive aspect with the people that you see doing that, you see it coming from kind of a, a controlled, I don't want to say an OCD standing standpoint.

Is it a matter of just wanting to have things organized? Is, are the people that go that route or do they see a need in their life for having a plan? Uh, is there a certain attitude or stereotype that, that comes along with each of those, those aspects? 

Sabrina: So, you're asking these really, these questions that the answer, again, is yes.

All of those things. So everybody's background is different. Everybody's culture is different. Everybody's upbringing is different and what gets you to that point where I need a budget is, [00:04:00] is different for so many people. For me, it was because everything was out of control. I couldn't get ahead. I didn't know what I was doing wrong.

I needed a plan. Um, I have people in my life that are like from the time they were 18, they were on it. They, you know, by 25 they bought a house. They had two kids, they had, you know, 50, 000 in savings, and it blows me away. So, but, but again, those are the people who are organized, who, that's naturally their bent, is, I like to, I like organization, I like to know what's where, this is, you know, I like everything in its own little box.

So there's nothing wrong with that, and it's actually working really great in their favor. Not everybody's 

Scott: like that. I know me personally, I'm more fly by the seat of my pants. I, uh, have a general idea of what's going on in my life and what things are costing and rough numbers are here or there. So I definitely don't work with a, a strict or, uh, structured budget, but I don't know if I would say that that means that I don't work with a budget.

You [00:05:00] mentioned needs and wants earlier, and I don't know why, but for whatever reason, that's not where my mind first goes when thinking of budgeting. I think about income versus expenses. Can you talk a little bit about the difference between those? Is this a mentality approach to this, or is this a structurally different approach to creating a budget?

Sabrina: So, this is what works for me, is envisioning, and so that's why I kind of lean towards that. I feel like if you don't have a picture of the end goal, then it's a lot harder to make the plan to get to the end goal. So, the first thing that I have people do is spend some time writing out, what do you want?

And that doesn't mean a reliable car, that means what kind of reliable car, because a reliable car often goes in a need. What do you want? What do you want in that car? Picture it. Do you want, you know, do you want, what color do you want it? Does it have leather interior? Really be specific and what do you want?

Spend some time dreaming and kind of remove that, that thing in your mind that says, I can't [00:06:00] afford that. That's not what this part of this is about. Because if you do this the right way, eventually you will be able to afford that. So we want to get that end goal picture. If it's a vacation, if it's a lifestyle of travel, if it's...

Working abroad, if it's, you can tell my heart is abroad. But whatever that dream is for you, maybe it's putting your kids through college without student loans. Maybe that is a dream and a desire in your heart that you want to do. Write those things down that you can't afford today. Um, and really spend some time, it took me weeks to do this.

Um, to really kind of refine and, and tell myself it was okay to dream about these things. That it wasn't just great things for other people that I felt like I could never live up to. And once you get your mind out of that box, um, it just kind of opens the door for you to really start moving forward. Now, 

Scott: you said you spent weeks on this.

This obviously is going to be a list of like 50 to 100 different wants that you had come up with, right? You 

Sabrina: would be surprised. I [00:07:00] came up with less than 20 in those weeks. Less than 

Scott: 20? Yep. Interesting. 

Sabrina: And they were things like, again, for me, it was a reliable car and I had to move beyond that. It was, um, being able to get my daughter a great graduation gift.

It was, you know, really small things. And as I went along, they began to get a little bit bigger and a little bit bigger as I gave myself permission to dream a little bit bigger and a little bit bigger. And you might think this doesn't have anything to do with budgeting, but really for me, that's the first step.

This is where I really started my journey and to get my life together. 

Scott: And you said that you want this vision of what you're driving towards. So basically the, uh, the pot at the end of the rainbow. So as to speak in order to give all of the structure, you're about to create a purpose. 

Sabrina: Yeah. So from the dream to the practical, absolutely.

So. Back to the dream. Get a picture of it. Like, get a vision board. I mean, that sounds cliche, but really get a picture of it. Print a picture, put it somewhere you can [00:08:00] see it, put something on your screen, on your phone, something like that, where you can actually see it, so that you're reminded of it consistently.

Because that's what's going to help carry you through to the goal. Um, so, when you actually get down and gritty in it, the first thing you want to do is track your expenses. Look over the last couple of months and really track your expenses. There are some great apps out there. Um, your financial institution probably has something that will categorize that your expenses that you can go in and actually adjust to, you know, to make it more specific.

You can see how much you spend on housing. You can see how much you spend on DoorDash. You can see how much you spend on fuel. Um, you can see where the places are that you overspend. Um, how much do you spend on groceries? That one is one of the, one of the top things that people spend way more on than they realize is food.

Scott: Okay. So you mentioned overspending now overspending, uh, I assume at this point it's kind of a gut feel because we haven't built a budget, but the budget is going to give us the rigidity and the structure [00:09:00] of what we believe that we should be able to stay within, at which point looking at it after the fact, we'd be able to say for certain I'm, I'm spending outside of my budget.


Sabrina: Yeah. And by overspend, I meant simply that place where I didn't realize I spent that much. So it's not necessarily an overspend at that point. And I do want to call out, you use the word rigid and we're not going to use that word. That's a no, that we're not allowed to use that word when we budget because it's not supposed to be restrictive.

It's supposed to empower you to move toward the things that you really, really want to accomplish in your life. It's not supposed to restrict you. So 

Scott: it's not supposed to be looking at it and being like, well, I've only got 20 left in my Uber eats budget. So that means that this is going to be 22. Nope.

Can't do it. Need to find something cheaper. We're supposed to be able to look at it and say, that's only 2 over, over this part of my budget. Am I okay with that? 

Sabrina: And where can I pull that from? Does that mean that my clothing budget has to cut back a little bit? Does that mean that something, where, where do I cut that from?

Because [00:10:00] that 2, it's only 2, but it's not going to come out of nowhere unless you've got it in your couch, right? So if you are a line by line, um, and you do like, so Dave Ramsey talks about budgeting every single dollar, every single penny. Well, if you've done that, then you don't have 22, you have 20. So maybe you need to re look at your order.

Okay. I kind 

Stephanie: of wanted to add to that. Yeah. So I know that you said using those apps, seeing where your money goes. I think for me it was just reviewing my statement and I was like, I eat out a lot and I buy a lot of coffee. So, um, you know, one of the things I've, I've kind of adjusted recently is making coffee at home, you know?

And maybe I don't have to, maybe only on Fridays I go out and buy my coffee. But, you know, realistically nowadays coffee is like 7. And I think that's where I was kind of like highlighting and I'm like. Yep, I'm a foodie and I'm and I'm a caffeine addict. So 

Scott: do you have a a dream or a vision? [00:11:00] Like we talked about that you are cutting that extra coffee expense out in order to drive 

Stephanie: towards and you know Again, everybody has their own You know, you, you have your daughter as your priority, and currently I'm in the process of buying a house, so every penny, I have been pinching pennies, but I'm, I'm such a visual person, and I'm such a checklist person, so I have, with this check, I need to at least buy these items, and then, you know, well, payments, and then I'm going to buy these Whatever's left, maybe some money in savings and maybe some spending money.

Scott: So does that mean that you're building your budget based off of your basic expenses before you're looking at say your income? Yeah, 

Stephanie: definitely. And I think everybody's different, you know, everybody has their own journey. Um, everybody's in a different place in life, you know, maybe you're 18 and you're just getting started, you're living at home and you really don't care to like budget.

And I think we've all been there at one point. 

Scott: You mentioned 18. Uh, [00:12:00] new, new to this whole thing. We still talked about the dreaming aspect. Dreams can change over time, obviously. And we should probably be rechecking with those as we move forward. It's not, I'm budgeting until I buy a PS5. Uh, and then budget goes out the window.

We want this to be a regular occurrence, a regular event in, in somebody's financial life so that they're constantly on top of it and aware of what's going on. Um, what are the type of reasons that people should be budgeting for outside of planning? Like, what are some issues that people run into if they're not implementing these type of strategies?

Sabrina: Really, the biggest one that we see is just a mismanagement of funds. It's overspending. And again, I use that word loosely, but spending more in areas where you don't realize how much you're spending on coffee. You don't realize how much you're spending eating out every day instead of bringing your lunch to work.

Um, and those things add up and maybe it's causing you to be short on your power bill. Maybe it's causing you to to stress [00:13:00] out consistently or thinking that you need another job and maybe you do need another job. Maybe it is an income issue. Maybe if you adjust things a little bit, you won't have that stress because you'll know that the rent is fully funded.

You'll know that the power bill is fully funded. Um, and then that coffee that you buy is a treat rather than a stress point of, I don't know if I can afford this, but I really, really need it because I'm stressed out. It's a, Oh, Hey, I get to treat myself because everything is paid because I was more responsible on a 

Scott: previous podcast.

We did have an entire discussion about financial stress and how those type of things, not knowing if you can make rent, not knowing if you can pay the bills. can lead to, uh, major issues. This was, uh, during mental health awareness month that we talked about this. And that is one of the major factors that can cause people to have, uh, issues in their life as far as those things are concerned.

So having your budget and your finances under control is going to lead to better mental health in the longterm as [00:14:00] well. Uh, one of the things that. I would see in here is an interesting hitch and you mentioned it previously is, um, fixed versus variable costs. So we know that say our rent is going to be X number of dollars every month, but usually your utility bill is going to flex between the months and the seasons, depending on how much, say you're running your air conditioning or you're watering your lawn middle of winter, you're probably going to have a pretty low water bill, but maybe a higher heating bill.

How should people be planning and what are some different strategies they can use to kind of smooth out that rollercoaster of variable 

Sabrina: costs? So there's, there's some different ways that you can do it. For me, if I have a variable, I always budget for the high end. And then if it's lower, I either have that, I can add it to, you know, I can add it to my savings.

I can add it to my fund money that month, or I can set it aside and leave it there for when it does get higher. You know, when we have that [00:15:00] streak of eight degree weather in the wintertime and it's there, you know, so so there's ways that you can do that. One thing I want to point out is that when you do your budget, don't look at your checking account to see if you have enough money for that extra because you're not living off of your checking account balance any longer.

You're living out of the budget that you've created for yourself. And so that's where that extra if I decide to just leave it in my account to to worry about December's Power bill or July's power bill, you know, when it's 110 degrees outside, um, it's still there and I'm not looking at my account saying, Oh, I have this 40 bucks extra in there.

It's not extra because it's already allocated. So I'm looking at my budget saying, What do I actually have available in my plan? So in 

Scott: this particular case, we're looking at the allocations in our budget and not the balance sheet of our accounts, which actually drives me to another interesting question.

Okay. Uh, is there a particular way that we can [00:16:00] utilize our account structures to help enforce or reinforce our budgeting? 

Sabrina: Yeah, absolutely. So you may, you may want to set up a separate savings account. You may want to have just a bills account. Um, for me personally, I have, I'm going to be really transparent.

I have two separate savings accounts at two separate financial institutions besides my main one. So one of them is my vacation fund. And the other one is my don't touch it fund. And that one is an online account that I cannot access without. Um, electronic. So it's five business days before I can access those funds.

So I can't make a spontaneous decision and just pull money out of that savings account. It's inconvenient for me. So that helps me when I'm budgeting for those bigger things, those visions, those dreams, those, you know, that, that Audi that I really, really want, you know, that, that thing that, that trip to Europe, those are, that's where I put those because it's not easy to override with my emotions what I want right now.[00:17:00] 

But it's not a genuine emergency, not a wardrobe emergency, then yes, then yes, I can still access it and I can access it in a convenient amount of time, but it's inconvenient enough that I have time to write out the emotion of the purchase.

Scott: Okay, so let's talk a little bit more about the types of accounts that are out there and how we can use those to kind of implement this idea one different ways that we can keep ourselves from just grabbing money and going and buying things. Obviously, 20 bill in my pocket, I can go spend that on coffee if I want to.

It's right there. There's no thought process to it. Uh, as opposed to if it's sitting in a different account, I've got I've got to do something different to access that. So what do we have out there that we can utilize? Uh, to our advantage in this type of a [00:18:00] scenario. 

Stephanie: So there's, I mean, you know, like Sabrina said, I'm the, I'm the same type.

I have to have, you know, out of sight, out of mind, my savings account, my emergency savings account. I don't want to see it. I almost don't want to know how much money is there because I think once you have that amount, maybe, you know, that Audi. Is sounding a little more appealing. I have this money, this emer, this emergency money that I can use towards that.

I can afford that. Yeah. definitely. But I'm definitely the same. Um, I have that savings. I don't touch it unless it's an extreme emergency. Um, but we even have sub savings. So if you have, and I remember I used to do it this way, which I, I've kind of again shifted my mm-hmm. , my ways of, um, Managing my accounts, but you know, you can have your emergency savings where it's I don't touch it And then there's a sub savings where this is my rent money and then maybe it's another sub savings where this is my vacation money I really want to go to Europe and this is where I'm gonna put my money away If you feel like you've [00:19:00] had money sitting and it's just sitting it's not doing much there's different options out there You know just depending on What your vision is for yourself.

So, um, there's certificate of deposits, which, you know, pretty much you. Lock in certain funds for a certain time frame, whether that be six months, 12 months, up to five years. If you withdraw, there is a penalty. But if you feel like, I always tell people, you know, lock in an amount that you know for a fact you're not going to need.

And again, if you, if an emergency arises, you can always withdraw 

Scott: that. And so that type of an account is a, is going to... Do what with your money other than make it cost you a little bit to get access. What is that actually doing? Yeah. So 

Stephanie: we actually pay interest on those. Um, it's going to be a higher paying interest account versus just a regular savings or just a regular checking.

And again, it is. Locked in. There's certain certificates where you can even continue to add in there. 

Sabrina: So 

Scott: that money is going to be [00:20:00] Working for you while it's sitting there waiting versus it just 

Stephanie: sitting in a savings account 

Scott: Yeah, so it's gonna it's gonna be working a little bit harder because you know You're not going to try and access it And of course, like you said six months out to five years.

It sounds like you can pick Kind of a time frame, whatever you can plan a little bit further 

Stephanie: ahead. And a lot of the times, I mean, in my experience, if I see somebody like it's their first CD, I'm like, Hey, let's start you off with like a six month or a 12 month and really see how that goes. See if you want to continue to contribute, or maybe if you.

Just locked in that money you, you, after a year or six months, you saw, I didn't touch this. And maybe we can roll it over at the time of maturity to a longer period. But when it's somebody who's just getting started and they're like, Oh, I heard about CDs. I'm like, let's lock it in for a shorter time. That way we kind of play with it.

We see how this goes 

Scott: for you. Yeah. You don't, you don't want your first rodeo to be five years. Yeah. Like how many people would you guesstimate, uh, actually utilize, uh, certificate deposit accounts. [00:21:00] 

Sabrina: You 

Stephanie: know, I don't see many. 

Sabrina: I won't lie. Yeah, I was going to say it seems to be the older generation that uses them more, but also they're in a different phase of their life.

Their kids are out of the house. They're not paying for college anymore. They're homeowners. They, you know, they've built up retirement, so they've got more to spend. Disposable income that they don't necessarily need access to right now. So, so they're, they are in a different phase of their life. And I think that is a big contributor to it.

Scott: Is there also a potential factor here of having had enough time to learn about them? Or the opportunities to learn about them. Obviously, one of the reasons that we do this podcast is to get people the financial literacy and the information that they probably don't know that they don't know, like how many people come into a branch and don't realize that a CD is a thing that just they can go 

Stephanie: get.

Mm hmm. Definitely. And I think kind of touching back on the whole budgeting and how did you, how did that come to be? This is almost the same. I think. There's certain [00:22:00] people who, maybe your parents taught you, I think it starts when you're young, you know, so maybe your parents taught you how to, how to budget, how, different types of accounts, or maybe you learned that in school, but there's certain people who maybe never learned that, and it's almost just like trial and error, like, this person had to get into so much debt and then live check to check to really kind of bounce back and be like, I really need to reevaluate my, 

Scott: I have to go sit down and learn the things that I didn't know that helped put me in helped that put me into this position.

Uh, as well as I can imagine a number of people that just didn't know that those existed, they weren't in any sort of dire straits and they just have. A bunch of money sitting in a savings account and don't realize they're not touching it because they, they have the self control, but they don't realize that if they just took, uh, a bunch of money out of there and put it into this other situation that it is actually going to benefit them.

Yeah. Uh, what other type of accounts do we have? I know that like, uh, certificate of deposit accounts are, are [00:23:00] one, uh, what about money market accounts? 

Stephanie: So, I mean, money market accounts. They're, compared to a C, you know, it's going to be easily accessible. It's like a higher paying savings account as well.

You can order checks on it. Um, you get up to six, six unsigned transfers per month. Um, some people like that. Um, I've seen, I see some people use those. 

Scott: Okay, so that, that six transactions, uh, per month on that one is going to be a little bit of a limiting factor. 

Stephanie: Yeah, and there's also a minimum balance on those 

Scott: as well.

Okay, so you need to have a certain amount of money in there. You don't have as many transactions that you can get to it. Uh, you mentioned checks on that, uh, is that a debit card type of a 

Stephanie: situation? Oh yeah, no. It, so again, it's almost, it's like another type of savings almost, um, but you can order checks on there.

You can. 

Scott: But you can't just swipe your, your card at the coffee stand and be like, I'm going to pay for this out of my money market account. 

Sabrina: Yeah. At that 

Stephanie: point you would have to. [00:24:00] You know, transfer money into the checking account. Yeah, 

Scott: but that is going to be another one of those, uh, slight barriers of access, such as like having it only in an online situation, a five day waiting period type of a thing as a place that you can earn a little bit more, uh, of an interest on this account, um, and possibly a good place to store, say, an emergency fund.


Sabrina: Definitely. Yeah. And so I like the money market and I found it's kind of the in between a savings account and uh, A CD, because it still puts a slight restriction on there, but it doesn't actually lock it up. So you can still, you're still earning a little bit more interest than a basic savings account.

Um, not as much as a CD, but it gives you a little more freedom if you're not comfortable locking it up. 

Scott: Yeah, and I, I think that that's kind of those tools that we can utilize in structuring our accounts, putting money in certain locations to help enforce and maybe, maybe give us a little bit more willpower [00:25:00] so that we're not just seeing, Hey, I do have this money sitting in this savings account or even a sub account, uh, that then.

Okay, I know that my emergency savings over here. I do have access to it. If I need it in an emergency, I can get to that, but it's not going to be a, you know, three week waiting period for me to liquidate this, uh, like mutual funds or stocks or, uh, whatever other method people might be utilizing to, to, uh, store their money.

This concludes part one of our Dollars and Cents podcast episode covering budgeting and account types. Please tune in again for part two.