We’ve all made mistakes when it comes to creating and sticking to a budget. But it there are things you can do to help set yourself up for success.
With this webinar, save yourself a little time and money by learning from others’ budgeting missteps.
View video transcript
Common budget mistakes (and how to avoid them)
Now I'll turn it over to today's presenters. Take it away, Jill.
Hey. Good morning, everyone. We are going to have a webinar today on common budgeting mistakes and how to avoid them, and share some experience that I have with you and see how we can help you.
We're starting today with a poll question. Simple things, it works for me budgeting. I'm here for bonus tips, all the way down to, ugh, I can't stand this. We're going to get in to the poll later on today. We'll get those results out there at the end.
I am a goals coach here at U.S. Bank. And a little background. I am a navy veteran and a former HR director and project manager. And I'm super excited to be able to present to you guys today. Meg?
Excellent. Hi, everyone. My name is Meg McCall. I am here with EverFi, who is the technology partner powering financial education for U.S. Bank.
Good morning, everybody. I'm so excited to be here. My name is Kory Agan. I am a branch manager with U.S. Bank, and I work primarily at the University of Washington Hub location.
A little bit about me. I am a mom in Seattle. And I am looking to move right now, so budgeting is really important for my family. And I'm excited to share some of our tips.
Excellent. So today, let's start with what is a budget. A budget is our estimate of itemized expenses and income for the future. This is our plan of operations. This is how we allot our funds and our time.
And this sounds like something most of us do, right? We know how much we make. We know when we get paid.
We know we have responsibilities like rent or mortgage, car payments, student loans, that sort of thing. So budgets are a really excellent tool for just helping us allocate those financial resources that we-- from paycheck to paycheck. Next slide, please.
But why is budgeting so hard? Budgeting for some people is just really complicated. Our brains have two systems of function. We have the rational system, which is our system to-- this is what helps us think logically. It helps us create our budgets, do the things we're supposed to be doing. Our system one, our fun function, as I like to call it, is for everything else.
So for those people who don't have a hard time budgeting, budgeting is kind of like that warm, fuzzy blanket. It makes them happy. Makes them feel secure. They feel very comforted knowing where all their money is going and how and when.
For others, budgeting is kind of like a four letter word. Unless you're somebody like me, in which case it makes you say lots of four letter words. Either way, why is budgeting so polarizing? Unfortunately, I am not a licensed therapist so I can't really give you a clinical answer, but I'll tell you what I've learned over the years.
The one thing that has just come up over and over again, people would much rather spend their money enjoying life than paying bills. And it is that simple. Unfortunately, our banks, our car dealerships, our other lenders they don't really care what we'd rather do, and they expect us to pay our bills before we have any fun.
That said, however, budgeting really isn't that hard once you create one that's easy to follow and fits your lifestyle. Meg, I think you have some examples for us.
Yeah, absolutely. As Jill shared and as you can see on this slide, 95% of our brain is hardwired to act impulsively, automatically, and without conscious effort, which is why it can be so hard for us to budget. Especially when a lot of effort and logical planning is required. So personally when I go shopping for clothes, for example, it's spur of the moment and something that I do because I see something that looks cute.
It's hard to know how often I'm going to see an outfit that I want to buy, or even harder to know how expensive some of those items might be. But by creating a budget ahead of time, I give myself some rules on how much I should spend when I'm shopping and when I should close out the online browser tab.
Meg, I'm with you on that one. It's all about the shoes for me.
So today, let's talk about the five most common budgeting mistakes. We have overgeneralizing, unrealistic targets, budget creep, tunnel vision, and hindsight. In my job, I work with people at all stages of their lives, all stages of income levels, and these are the same common mistakes that come up over and over and over again. So I'm going to walk you through some of these today, and hopefully you can learn from some of the missteps-- my own, my clients, other people-- and take something away from this that will help you.
Our first mistake that we see so often is overgeneralizing. People create one category for their budget, and they usually define it as bills. And so we said-- we put in there utilities, like water, sewer, power, trash, cable, streaming services, whatever it is that we're paying every month. And while some of these are static-- I mean, you know what your trash bill is going to be. You know what your cable bill is going to be.
Other bills are fluid. The other ones like your power bill, your water bill, those are going to be fluid. And so by not actually looking at those and allocating enough money to them, we end up falling short in that category. So it's-- overgeneralizing is a common problem.
So the best way to avoid this mistake is to put meaningful categories into your budget that means something to you. If you pay for education. You need meals and entertainment. You need utilities. Maybe you have kids, something like that. You want to put those categories in so that you don't miss anything. You're very specific with your money so you know where it's going.
Maybe you're a person who doesn't have kids or pets. Maybe you have a hobby. So hobby would be one of your categories so that you know where your money's going and how to allocate it to your budget.
This way even the most automatic part of your brain gets to understand what you're doing, and you just automatically put your expenses there. If you need help finding a budget worksheet like this, USBank.com/financialiq, we have budget insights. We have this template this way.
You can also go on to the mobile app, the USbank.com mobile app and create a budget. For me personally, I put in there-- I don't have kids or pets at home right now, so I put in categories for utilities and education and coffee and Sephora, because apparently I can't live without either one of those.
Bear in mind, however, with the COVID crisis, a lot of people's budgets have changed in the past few months. The pandemic has caused us-- some people have more savings because you're not going out as much. Other people have less savings because you're finally able to binge watch all the TV you've been putting off, so you're adding streaming services. Whatever that is, just make sure you're adding it back to your budget. Kory, I know you have some examples specific to that.
Yeah, absolutely. So one way in my household that we've taken our budget and customized it, specifically for right now during COVID, is we've added in a section for debt pay off. One of our goals as a family is to buy a house, and so we take into account when we're making our budget that goal.
And that usually means savings. That usually means we're putting money into savings to get to that goal. But right now while we have a little bit of additional income, what we've done is we've actually added a category separate from savings that's specific for debt payoff.
And so we can put money still into savings like we normally would. We haven't modified that portion of our budget, but we also have additional income that we can now put into that debt category. And it can be very specific. That money can go to paying off things to help us achieve our goal a little bit quicker.
Oh, excellent. Meg, I know you had one, too. I wanted to hear about yours.
Yeah, absolutely. I am not a student right now or a parent, so some of the budget categories here don't apply. But I have an additional category of wellness. And I budget for the things that I want to spend on fitness classes or instructors each month during a non-pandemic time, maybe services like massage or some other items that might help me meet my wellness goals.
Sounds like-- I hadn't even thought about that one. That's a great category.
So moving on, the next mistake that I see all the time is unrealistic targets. People just-- they need the categories to be flexible but essential. We need to budget for the things that we actually buy.
So, for example, I always say you can't feed a family of five on $100 per month, unless you're really into buttered noodles and Cornflakes. The reason I say that is because I have a client who told me he feeds his family of five on $100 a month, because, A, he only buys off brand items, which I think is brilliant.
I mean, being frugal is amazing. It's a great plan. But he supplements by picking up meats fruits, vegetables from a local dumpster.
This is not a great plan. It's not safe. It's not healthy. Being frugal is one thing, but that goes a little overboard. So in this case, the client has a really comfortable income, but he just doesn't feel that because his family has grown that he has to make any other kind of budget for that, and it's unrealistic.
Another thing I hear people say all the time is that they don't have to budget for clothes. They say, I don't buy clothes. I'm going to go ahead and say I've never coached a naked customer.
So the clothes are coming from somewhere, which means the money for those clothes is coming from somewhere. So even if you're not a big shopper, maybe you don't subscribe to the online like Meg and I do, you still need to set aside some money for clothes.
And then think about the unexpected but essential items, if you want a car. Maybe your car is a little bit older. You can't expect to never have a problem with that car. It's unrealistic. So you're going to want to put some sort of car repair into your budget so that you can plan for those things as well.
So to avoid this mistake, we tell people, look into your past. You can go to your bank, get your old bank statements. If you're like me, you can print them out. I want them in my hands so I can physically see them.
But review them. See what your spending habits have been to help you figure out what your spending habits need to be now. Fill out your budget worksheet like the one we talked about at USbank.com/financialiq. Sort your purchases into your categories.
This is going to be time consuming. It's going to be hard work. But once you get this done, that's going to be the easy-- then it's just going to be the easy part. Then it's just plug and play from there.
Something to keep in mind, too, is that your budget has probably changed. So if you go back and you look two or three months back, you're looking at what happened pre-pandemic. Your budget has probably changed-- or, excuse me-- during pandemic. Your budget has probably changed since that time.
So maybe in this case go back six months to get a really good, solid overview of what you're doing. One of the biggest changes that I found in my budget when I did a look back was I have a lot more money in my bank because I don't go to the movies. My husband and I are big movie people.
We love to go to the movies. But now we're just watching Netflix or Amazon. So that's a big, huge change for us. Kory, I think you had an example for this as well.
Absolutely. Yeah, I mean, we've noticed that there's been a few big changes with our budget. And we try and look at our budget and understand that we can be a little bit flexible and it can be fluid. Some of those categories can be fluid.
So what we've done is we've seen that things like coffee and take out, delivery food, delivery services, have gone up in the past few months. Those are kind of our guilty pleasures in our house. We like to do family walks in the morning to go get coffee, things like that.
And then things like gym membership and gas, those expenses have gone down. I'm not driving to work as often. We're not paying for a gym membership right now.
And so what we've been able to do instead of restructuring our entire budget is we've been able to just move the money over. So the money that we weren't spending on gas and groceries, we're able to take portions of that and move it over into those expenses, those categories that have gone up a little bit and so that we're still maintaining our budget.
We're not throwing a wrench into the whole thing and trying to change it all up, which can be a lot of work. But we're just making adjustments, and we're kind of going with the flow. Because we know right now things are a little bit unique, so.
Absolutely. Meg, I know that you have some stuff-- some thoughts here, too.
Yeah. To your earlier point, Jill, I was recently-- I pulled a transactions report for my credit card and was looking at my spend for the first half of 2020 so that I could plan for the rest of the year. And I realized over the last few months, travel and dining out, in particular, are the categories were really low, of course, because of the pandemic.
So leveraging how I've been spending in those two categories for the next few pandemic-related months is going to be really important. But once these circumstances change, which will hopefully be sooner than later, I'm going to want to look at my spending from 2019 or perhaps the early part of 2020 for future planning.
Absolutely. Yeah. Those are great examples, guys.
The next thing I want to talk about is budget creep. Budget creep is something that just happens so gradually. And as your life changes your budget should change, but a lot of people don't think about that.
So one of the examples that I have is, did you guys consider all of the streaming services that you already had when Disney+ came out? Or were you like me and said, $6.99 a month to watch The Mandalorian? Heck yes. I'm on board.
Rather than considering that I already have Netflix, and I already have Amazon. And I know other people have Hulu and Spotify and whatever other streaming services you need to get. Because winter is coming, and we have to have that, right? We have to see it.
But $6.99 starts to creep up in your budget. Especially when you start looking at $6.99 here, $6.99 there, $12.99 over there. They're not big totals until you start adding them all together.
So budget creep, how do you change it? Budget creep is all about behavior. It happens very gradually. We don't even notice it.
Maybe since the pandemic started, you're one of those people who started virtual happy hours. And so you had to purchase an extra one or maybe three bottles of wine each week so that you can participate in your happy hour. Maybe you're like Kory. Maybe you go out and you have coffee because it's a family walk thing.
You're working from home. You need to get out of the house. Now you go to Starbucks every day.
One example that I have of budget creep that has stuck with me since really since starting this program is that I had a client who came in and said she's got a bunch of money going out. And she just doesn't know where it's going, and can I help her find It? And ultimately we figured out that her treat to herself was Starbucks.
And she ended up spending-- she was spending $200 a month just going to Starbucks. And at $7 a day, you don't realize that daily until you look at it by the months. So how do we avoid this?
We avoid the mistakes by doing budget tune-ups. We recommend you do it every two to three months. Are you going over budget? Are you going under budget?
In this time of COVID, so many people have lost their jobs. They've relied on savings. They're relying on unemployment.
Other people have the opposite problem. They aren't going out as much, but they kept their jobs so they have more money. In this particular case, we say go back two to three months.
I would say because you're in a-- we're in this kind of weird COVID pandemic period that you want to go back six months or so to really get a good guide of what you're doing, and then watch your new habits that are forming as we're going through this. Are you one of those people that are working from home now so you are going out every day and having coffee versus making it at home and taking with you? Take a look at what your habits were versus what they are now so you can get a really good idea of how to tune up that budget.
Mistake number four, tunnel vision. This is a big one. This one actually recently caught me. Forgetting major expenses, forgetting expenses that are attached to major purchases.
Did you remember to consider things like maintenance, insurance, when you're buying a new car? It hit me hard pretty recently, because I decided I was going to go out and replace my 11-year-old Hyundai Elantra with a Mercedes GLA 250. I was finally going to get my Mercedes.
The price of my vehicle was going to be $38,900 plus tax, title, license. Hopefully you guys noticed that I said, would have been. Like most people, I got tunnel vision.
I got super excited about my new vehicle. I was really excited about everything, like it color matched my eyes. It was going to be great.
However, as I started to get my financing in order for my purchase, I started to-- my vision started to expand a little bit. And I started to realize, hey, wait a minute. One of these days, my beloved new vehicle is going to need new tires, going to be new brakes. We're going to need oil changes and whatever other maintenance comes with keeping a car for 10 years, because I do that.
And the other thing was the insurance. They say you can't put a price on safety. My insurance company did. They absolutely did. So needless to say, I still have my Elantra.
However, on the opposite of that, we don't purchase new cars daily or weekly. So one of the more common-- one of those more common tunnel visions that I've seen lately is coming from people who decided to adopt pets during the pandemic, right? Everybody wants a pet at home. Everybody wants their new puppy, which is great.
You get the puppy. It's cute. It's furry. Everything's awesome. But did you think about the vet checkups that come with that puppy?
Did you think about the accessories you wanted for the dog, the toys? If you're a person who dresses up your dog, you're going to buy it little clothes and sweaters. If you live in Vegas, you don't want your dog walking on the pavement so you need puppy shoes. And then, of course, that added line of emergency vet visits, because your dog will eat something inevitably that it's not supposed to.
And I know I'm-- so avoiding this, obviously, comes with researching the costs. And Meg, you had an excellent example for us. Will you share, please?
Yeah. I'm happy to. And unlike you, Jill, I didn't change my purchase decision or my spending decision until after the fact unfortunately. But you'll hear that I have a lesson that I will now adopt moving forward.
So a few years ago, I got this great idea to start planning one big week long trip each year. My first one was going to be to go to Paris, and it was very much a treat yourself mindset. So making a lot of purchases one off.
Like, oh there is a reasonable flight. I can afford that. Or this Airbnb looks great. It's in a nice neighborhood. I can afford that.
And I knew that the spend going into the trip was all well within budget. But what I hadn't thought about or planned for were some of the expenses, like going out to eat and drink while I'm there, getting a museum pass to make sure that I left cultured, all the cups of espresso that I was going to be drinking in these Parisian cafes. So I was really surprised when I got home and looked at my credit card bill at how much I had managed to spend outside of just those major purchases.
Something that I did after that trip was actually go through and categorize and track some of that spend. So now as I'm planning future travel, I have a sense of what I might spend regularly on dining and some of those activities.
I love that example, because I do the exact same thing when I travel. Who doesn't love food, so you just eat. You don't think about it.
Kory, I know that you had some excellent advice for this particular group. Will you please share?
Yeah, absolutely. And real quick, Meg. That's a great share. I went to Italy a couple of years ago and was shocked at the credit card bill when we came back with how much was spent on just food and coffee and wine, and yeah. So definitely a great example there.
So we wanted to talk a little bit-- we've got some really great examples of big life moments up on the slide there. But we wanted to talk a little bit about an example that might be a little more applicable to the group today. So the big life moment of graduating college and entering the workforce, looking for that big job that comes after college. And when we look at the big life moments, there's often a big price tag attached, but that's not always a bad thing.
So when we're looking at graduating college, there are some sources or some services that we might see that would have a really hefty price tag associated with them. Things like resume writing services, things like headshots, professional branding services. Our wonderful moderator today, Jill, did a little research and shared some facts with me on some of these numbers. Professional resume writing services can run you $200 or $300, so those can upfront deter a lot of people with that big price tag.
I mean, so what we want to look at when we're thinking about these additional costs and researching them and factoring them in is the concept of ROI, that Return On Investment. So when we look at these big services, we want to take a step back and look at the big picture. Will that purchase, will that one time $200 or $300 to get that great resume that looks fantastic that's going to set you apart from the competition, will that pay for itself in the end by helping you get that job, by giving you that leg up?
So I think it's really important before we deter or before we move away from those big life expenses to look at our budget and see, if I really do believe that this will benefit me in the long run and I will get my return on investment, it will worth it for me? To sit down and take a look at that budget and make sacrifices places. See where you can play with the money.
See where you can cut back. Can I cut back on eating out? Can I cut back on my coffee expenses for a few months?
And make those sacrifices to where you can fit that purchase in, where you can pay for that service that's really going to set you apart from the competition. And it still doesn't end up derailing your whole budget.
That's excellent. I love how we all keep coming back to coffee. I know who my coffee friends are.
Keeps us alive.
So mistake number five, hindsight. Get ahead of your money, don't just look backward. That is that is really important. Looking at your budget only after your spending decisions are made, rather than before is a big problem for a lot of people.
Recently I worked with a client who purchased a new TV. Went to his buddies house. Saw-- went to a hockey playoff game.
His friend had a new TV. It was bigger. It was better than the one he had. Didn't want his friend to think he couldn't afford a better TV.
His current TV was only a year old but apparently it wasn't as good. And he was still making credit card payments on that initial TV purchase. So he went home. He purchased this new TV just like his friend had.
And then we had our meeting, and I said, hey. How can you afford this? I kept asking him, do you not see the payments that you're making?
And he kept telling me, Jill, stop fussing. It's not too much. It's not a big deal.
It took me a really long time to get him to understand that his credit card payment, because he added this very expensive new TV to it at 24% interest rate, his credit card payment minimum was $700 a month now. He didn't even think about that in his budget. And unfortunately for him, having to go back through his budget now to accommodate this new credit card payment being so high, it forced him to reassess the whole budget, forced him to have to make some changes in a couple of places.
And it meant that the vacation that he and his wife were planning was out of the question. And that-- for me personally, that was the hardest part, because I know how much they were looking forward to that trip. But they just could not afford it anymore. It was that simple. So making those decisions in hindsight is really, really not a good decision.
And there are some expenses that come up unexpectedly. That's why we have an emergency line in our budgets. But to avoid the hindsight issue, look ahead at things that come all the time.
We have gift giving seasons, birthdays, holidays. You have-- every year if you own a vehicle, you know that the DMV expects you to pay a certain amount of money to keep your vehicle on the road. That's something that doesn't have to be a hindsight decision because you know it's coming.
You know what the total is. It's about the same every year. So take that total divided by 12. Put the money in your budget. You're in great shape.
Then you're not stuck with the, oh, no. What do I do? Now I've got this $200, $300, $400, $500 DMV bill.
But budgeting isn't just about bills, and life isn't just about car repairs and utilities. So one thing I do as a goals coach is I get to work with people on their life goals and what they really want for the future. And those big ambitious goals cost money, but they're worth saving for, like Kory talked about earlier.
Maybe you need those headshots. Maybe you need personal branding. Maybe you just need a vacation after you get out of college. Everybody needs a vacation after school, everybody.
But it keeps you motivated. It will keep you sticking to your budget and what you're working toward. And I know, Kory, you had something you were going to share with us here, too.
Yeah, absolutely. I just wanted to share a little bit of my personal experience, because I think it's something that-- I think especially this mistake is something we have all experienced. You go out. You make that big purchase.
And even if it's something small, you go out with friends and you spend way too much money. And then the next day, you don't-- all of a sudden, you've spent all this money.
So my personal example that I really wanted to share with everybody was that a few years ago, my husband and I-- back to the car example like what Jill was talking about-- but we didn't stop. We actually bought the cars.
We knew we needed new ones. And we were both driving two-door vehicles at the time, and we had a little one on the way. And if you know anything about car seats, they don't fit in a two door vehicle.
And so we knew that we needed to go ahead and get those new vehicles. But what happened is as we found cars we really liked, we got tunnel visioned onto them. And instead of looking at our life goal, which was to eventually in the few years following that to purchase a home, we went ahead and we just bought the cars we wanted at the time, not thinking about how that would impact the long run, the big picture.
We were able to fit the car payments and everything else into the budget at the time, not thinking about that long term goal. Not looking at the three and the five year plan of, here's what we want to do.
And so for me, I'm able to kind of take that experience and sit with it and realize that I don't want to be in that situation again. I don't want to be having to push life goals or-- or like with Jill's example. Nobody wants to have to you know go tell their significant other or somebody they care about that you have to push a vacation or something important.
So this experience allowed us to kind of sit back and say, OK. We don't want to do that in the future. We don't want to be in that situation again.
And so that we can really-- before we make those big decisions, it's a conversation that happens, It's a sit down and look at the budget, but also look at the life goals. Look at the big plans in the next few years that are going to cost money and so that we don't find ourselves making this mistake again.
Yeah. Oh, my gosh. Car seats in a two-door car. I did that when my son was a baby. What a stupid thing for me to do.
I got home. I'm like, where is my head? What was I doing? But you know the car was red, so it was important, right?
So we have some additional resources with EverFi. And I'm going to turn the time over to Meg, cause she's got some great stuff to share with us.
Excellent. Thank you, Jill. As I mentioned, I'm here with EverFi, who's the education technology partner with U.S. Bank. And a common method that we rely on figuring out how to budget is by using the 50-30-20 budgeting rule, which you see on this slide.
At the very top of the slide, you'll see a bit.ly link, bit.ly/budget-fi. That's going to take you to a free EverFi module from U.S. Bank that walks you through some tools to create a budget, made available to you guys at no cost. And so go ahead and check that out. You can type that now into your phone browser or on your computer.
The 50-30 budget rule recommends that you spend 50% of your income on needs. You can see that on there red little pie slice here, 30% on wants, and 20% on either saving or paying down debt, or some combination of the two. Now this is one of those equations that's really easy to remember and can come in handy if you don't know where to start with your budgeting.
Needs, of course, are things like rent, groceries, health and transportation. Wants are all of the fun things that we've been talking about like clothes shopping and traveling. And then 20% in savings or debt reduction is really important. So if you make that a habit now, you'll be able to save more as your income goes up without feeling like it's a stretch.
Excellent. And you'll notice that when you visit the EverFi site, you see on this screen that our content is organized into playlists. That's going to group learning together for you to better find topics they were interested in, like financial foundations for developing healthy habits. So you can navigate at your own pace and check out some of the lessons to learn and get answers to your most pressing, financial questions.
And you'll see on the next slide that this learning actually helps you to qualify for entry for a scholarship from U.S. Bank. U.S. Bank is offering a chance to win up to $20,000 in scholarships by completing those online lessons powered by EverFi. You're eligible to win either $5,000, $10,000, or $20,000 in scholarships.
The more you learn, the more you could win, as you can see on the dial there. So you can either scan the QR code that's on this slide with your phone camera, or visit usbank.com/scholarships to get started.
I love that. Where was that when I was in college?
All right. So let's get back to the poll question. We asked how confident you are in your ability to follow a budget, everything from I've got this, to thanks, but still ugh. It looks like we are pretty mixed across the board.
Looks like there's a little bit more going on with your ability and confidence. So I'm glad you guys are happy to-- you feel good about your budgets and here to learn more. I love it.
For those of you that are still in the ugh category, don't worry about it. You can ask for help. Please, talk to a coach. Talk to somebody, maybe like Meg or Kory. You can get help anywhere, especially on the resources list that Meg shared for you.
So I'm going to move to the next slide, and I'm going to end my presentation-- now you've got this. Because you guys are going to do this you're going to be great. I want to end this presentation on my part by thanking you for taking the time to prioritize this call in your life and prioritizing your financial well-being.
I'd also like to share with you one of my favorite money quotes that I really think sums up budgeting greatly. Our great Zig Zigler once said, expect the best, prepare for the worst, capitalize on what comes. And I think that kind of-- for me, that just sums it all up. Meg, how about you?
Yeah. I really love that. For me, I think budgeting can feel like a lot of work upfront, but I know that getting out of debt is a lot more work and can be a lot harder. So in my mind, doing the work to budget is definitely a trade off that's worth it.
Kory, how about you?
Absolutely. I think, Meg, that's such a good point there that getting out of debt is even more work. So you took the first step. You attended the call today.
Take that momentum, go out, use one of those budget templates. There are so many available out there. We've provided resources for one. There are even some just preloaded in Excel already for you.
There's so many resources. Take that momentum you've got going from attending the call and just go for it. You've got this.
Courtney, I'll turn it back over to you from here. Thank you.
Wonderful. Thank you to our panelists for today. We received some really fantastic questions during the registration process, and we're going to answer a few of those here today.
So our first question comes from Judy. Jill, can you help us answer, how do I best work on a shoestring budget to comfortably meet needs of family, education, and career if I am the sole provider?
Absolutely. Judy, thank you. I want to say before I answer that my answer is based on my experiences, and it may not be the same as yours, Judy. But I hope it will help you.
For me, I got divorced when my son was a year old. So I was the sole provider in my household. And the single most important piece of advice that I could possibly give you is to define comfortably. What does comfortably mean to you, and how do you think you need to-- how do you think you can achieve that?
For me, personally, comfortably meant figuring out what I needed versus what I wanted. It meant spending less than I made, so no credit cards. Planning ahead for necessary items like my education and that ridiculous car I bought.
And fun things like vacation. And eventually, a new TV. I had to buy one of those, too.
It meant for me being frugal. It meant bargain shopping. I went from Prada to Payless. It went being a-- it meant being a minimalist where I could.
For me, at the time, internet was very necessary but cable TV was not. So that was something that I left out of my budget. I did pick up a streaming service, but I refused to allow myself to go more than one or two.
I'm learning to cook. That was a big deal, so I wasn't going out. That was, by far, the worst thing for me, because I am a terrible cook still to this day. My poor son ate pot roast all the time, that poor kid, but I had to do it.
And I also found all the free services I could. So we wanted movies. We wanted magazines. We wanted books. They're all free at the library, so going to the library was a big deal.
The next thing I had to do was I focused on my long-term career plans. I found mentors at work that were willing to help me grow. I knew for me I had to further my education. and so the top choice for me, I just bit the bullet and I had to take out some student loans.
Did homework when my son went to bed and then had to plan in my long term budgeting strategy for those loan payments. But for me, that was the only way that I could move forward. And that was something-- it was a debt I was willing to take on for that reason. The return has been amazing.
Finally, the last thing I could say to you, Judy, is be patient. Be methodical. Expect things to take time.
You can't have it all right now, so don't expect it all right now. Give yourself some time to gain some traction and those results will come. Thank you.
That's great. Thanks, Jill. Appreciate your feedback there, and being patient is always really hard.
Our next question comes from Deborah. Meg, can you help us answer how should we budget in uncertain times?
Yeah, absolutely. At EverFi, we always emphasize the importance of building emergency savings for uncertain times, like I believe Deborah is describing here. And as you've heard from Jill and Kory and myself, all of our budget categories have changed significantly over the past few months during this pandemic.
So it's really important when you can to actively begin planning and building your emergency savings for these uncertain times. Especially if you have additional budget spend right now because of the pandemic. I've added another bit.ly link at the top of this slide, so it's bit.ly/savings-5. This will take you to another part of our EverFi learning on the U.S. Bank site.
And you'll see there that EverFi recommends aiming to save the equivalent of one month of living expenses if you're just starting your career, and then growing that amount to three or even six months of living expenses over time. So if you do have that in savings, it helps to provide a bit of a cushion during these uncertain times. This number would, of course, change if you have additional members in your household who might depend on your income, or if your income is not always predictable.
Now I realize that for some of us thinking the same question, you might not have previously built emergency savings. You might find yourself in a financial emergency right now where you are having to re-evaluate your spend, and so that's obviously a different story.
If your income changes drastically and you don't have emergency savings to fall back on, we recommend leveraging the 50-30-20 rule to adjust your categories accordingly. So if monthly income is typically $4,000, I would aim to spend about $2,000 on need per month. So if that income drops unexpectedly to $3,000, I can either pull back on some of my want categories that I was previously budgeting for when my income was higher, and I can still afford what I know to be my needs for that month.
That's great advice, and I know I plan to continue saving and building my emergency fund. Thanks, Meg.
Our last question for the Day comes from Julia. How do we know how much to spend on entertainment, food, et cetera as we enter the real world? Kory?
Yeah. Thank you so much for the question, Julia. I think this is a really great one. I have three pieces, I think, that are going to be really helpful.
So one, being flexible. When you go into this, just know that this is new and so you might have to reassess over the next month or two. Just like we talked about throughout the seminar, fine tuning, being flexible, going back and looking at it.
And then I think the second piece is start with what you know. So put in categories that you already know. Your phone bill, groceries, things like that that don't have to change pre and post-graduation. So your phone plan doesn't need to change. The amount you're grocery shopping, the amount you eat doesn't need to change pre and post-graduation.
So start with those controllable items. Get a budget built with them. And then as you-- as the first few months go by and you're starting to see what things like utilities and stuff costs, then from there you can start adding in those additional and really build out that really customized budget.
And then I think the third piece that is really important that I think a lot of people forget about is that you can just ask. So you can ask friends, family, co-workers, things like that, that live in the area that you live in what those things cost.
Recently, I had a conversation with one of my team members here at work, who was asking me what my utilities on average cost. He's living at home right now as he's been paying off some student loans, and he's looking to potentially be moving out soon. And he wanted to kind of get an idea of what utilities cost so he knows what to expect when he moves out. So that water bill, that garbage bill, all that kind of stuff, so I was able to share that with him.
I'm personally moving from an apartment into a house here in the next couple of days. and so I've asked my parents, what is a typical electric bill for living in a whole house? what does that cost, since we live in similar areas.
So use the people around you, use the resources that you have to ask and get at least a general idea. And you can build your budget with those, and then from there you can modify it as the next few months go by.
That's fantastic. Thank you, Kory. Thank you to everybody for joining today's presentation. Jill and Meg will be back on July 21st for "Train your brain for smart financial habits." Please use your phone's camera and scan the QR code to register.
As a reminder, we'll post the recording from today to usbank.com/financialiq. In the next week. This concludes our webinar. Have a wonderful afternoon, everyone.
Bye. Thank you.
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