Episode 2 – Understanding your spending
Episode transcript:
[musical intro]
Jenny
So Seth, you had said you wanted to do a podcast about …for DRS, for public employees.
Seth
Yeah, well.
Jenny
Tell me a little bit about that.
Seth
I think it’s something… we don’t talk about money a lot. And I don’t know if you saw, there’s an article I think was just this week, maybe it was last week about how younger people are much more comfortable about talking about money in the work environment. And the article was specifically talking about people’s salaries and that people were openly sharing their salaries or asking other people about their salaries and asking coworkers and sharing with their parents what they were making and how it was making older people feel very uncomfortable.
Jenny
Yeah.
Seth
And I think …what the folks who were being interviewed were really saying is this is how we know where we stand. This is how we can make sure that people are being treated equitably. This is how I can help advocate for my peers or I can advocate for myself. I can advocate for my boss. There was an example in the article about how someone was sharing with their boss what they made, and their boss didn’t even really know.
And they realized that like they both had sort of the same earning potential. And it doesn’t always necessarily translate to public employment. I think one of the things that’s really odd about our situations for most public employees, our salary information is just out in the universe like you can with a little bit of Googling. It doesn’t take too much work to find what people make.
Seth
But we still don’t have a lot of conversations about it. And our… raises are usually set. You know, you work a year, you work two years, you work five years. You get a another degree or more education. Those things are kind of prescribed for us, but there’s still a lot more to talk about than what you earn.
And so I was hoping in the first episode we could talk a little bit about spending. And I, I know I hate talking about budgets, thinking about budgets, and I think it feels like a diet and it feels like restrictive and it feels like judgment. And I know I personally run into this a lot, and my wife used to get very frustrated with me because I would pay WAY more attention to like really small things, like how much we were having coffee or like our donut habit and like things that in the grand scheme of things probably didn’t make any difference in our budget.
But I would just stress about them. And because it felt discretionary, you know, you talk about needs versus wants and sometimes it’s hard to tell where those differences are, but sometimes those ones are very obvious, like, I want to buy a new video game.
Jenny
Yeah. And so I really look forward to that kind of getting into that that discussion of spending and budgeting. And I’ve always been kind of more the person who was probably budgeting a little bit more like by the numbers than most of my friends were. But yeah, I kind of back to the whole salary discussion too, where … there’s all these tools that are available online for really anyone.
But I think it’s the younger generation that are going on there and saying, hey, I want to be able to look at to see if, you know, if I work in graphic design or as a nurse or wherever the field may be that I want to see what should I be making and should I be asking for a raise at this point?
And almost all of the time the answer would be yes. You know, it’s always a good idea to ask for a raise. I, I think. You know, the worst they can say is no, but yeah, that people are just having more of those conversations. And I think that’s what we want to spark with this podcast is just start having those conversations about money and things like budgeting and that it doesn’t have to be scary that there is this sort of all these things in everyone’s past that you have about money in your head, whether it’s good or bad, or that budgeting is easy or scary for you.
And I think we just want to kind of spark some of those ideas and conversations.
Seth
So for sure, I think it’s really hard to do these sorts of things on your own. And there are so many resources out there. We’re not we’re not experts by any means. We’re not going to be like the end all, be all resources of any of the subjects we talk about. But it’s to get people thinking about how they, these subjects apply to their own lives and then have conversations with their coworkers or their family or their friends about what’s working for them, what isn’t working for them as well.
I think that’s a big part of it as well. I don’t know if you ever have used the budgeting…what’s it called? The envelope method of budgeting? Have you heard of this? Where you give yourself like $200 for groceries and you put it in the envelope. Yes.
Jenny
Straight cash. Cash out and you put it in envelopes. So it’s a good starter system for people who are not familiar with budgeting because it really kind of forces you to say, okay, I only have $200 in this envelope for whatever that budget item is, whether it’s shopping or eating out or, you know, and once you’re done with the envelope of cash, then you’re done for the month.
Seth
I’ve heard stories about people stealing money from other envelopes, you know, because that’s the system. Like, well, I was… fortunately, I didn’t go out to eat as much. So I can grab some of that money and go to a movie or move it to my entertainment budget. But like, I don’t know when the last time used cash was, but, I happened to go to 7-Eleven today and get some candy, but had some cash.
And I was like, I think this might be the first time I’ve used cash in six months. Like, it just… So much of our spending is automated now and you just don’t see it and you don’t necessarily feel it unless you’re looking at your bank statement or you’re looking at your credit card statement. It’s really… I think it’s more difficult now to try to figure out like, what does a… not necessarily a budget look like, but even just – what am I spending?
In some ways it’s really easy. You can download your credit card statement, you can download your bank statement for the last year or two years, and … as you were saying, there’s all these tools that’ll just do all the analysis for you and say: “Seth, you spent $600 on donuts last year.” That’s kind of ridiculous.
But those sorts of categories help us understand, like, are we prioritizing our spending? One of the things I’ve done recently as I’ve been thinking more about personal finance, is go back and look at that spending and think about: “what are the things that actually have brought me joy since the spending?”
Jenny
Definitely. I think that’s a really key part that you touch on there. It’s like, what are the things that are bringing you joy? Because every person’s budget is different. And, you know, we’re not here to say you should spend money on this and not on that. I think it’s about looking back at your spending and not having regrets.
And not being like, “oh, shoot, why did I spend $100 at Target last week? I didn’t really need, X, Y, Z thing.” And so I think that’s why it’s so important. Like you said, nowadays, I don’t use cash very much either. I just put everything on a on a debit or credit card.
And I use an online tool to track all of my spending that way. But it’s good just to kind of… for people who are learning to budget or want to try to look at their expenses more and try to get over the scariness. One, I would say, yeah, start with some sort of online tracker. You can link your bank accounts and they’re very safe.
This is not a paid post or anything. My personal favorite is Mint.com. And then there’s also Personal Capital. But yeah, it’s just a really great way because they make it so easy and you can go in and say, okay, “this one was for shopping, this one was for my house, this one was for food.”
But yeah, I think it’s just kind of about going in, at least for the newbie to budgeting online, I would say like once a month to look at your expenses, maybe twice a month to sit down and be like, “Okay, where did my money go last week?” And then start to kind of get that bigger picture. Because I when I first graduated college, yeah, it was that sort of feeling of like, where did my paycheck go?
And so I was like, “I need to sit down and write out all of my expenses” because…I hated that feeling of not knowing where my paycheck went. I was like, I had $800. What did I spend it all on? So I think it’s just…important to know kind of where your money is going and it’s just about not having those regrets in life or with your budget, you know?
Seth
Yeah, I think it’s… almost simpler when you start out as an adult, if that’s a fair phrase. But your life is simpler, you have fewer things that you’re spending money on. And it’s like, I need to worry about rent and I need to worry about how I’m getting to and from my job. And I need to worry about food.
Jenny
And then probably maybe some school loans, right?
Seth
Right.
Jenny
That’s about it. You usually don’t have a pet. You usually don’t have kids. You usually don’t have, oh, what are other life things? But yeah, you’re right… it’s generally a simpler budget when you start out.
Seth
And it’s like the first time you pay for rent, you’re paying attention to that. You’re shopping for it. It isn’t a locked in expense initially. And I think similarly with a lot of things in your life, like once those habits get built, then it’s just “Well, this is what I pay for my car, this is what I pay for food and this is what I pay for insurance.”
Seth
And we don’t oftentimes step back and look and say, “Well, what if I made different choices there? What if I, decided to have a pet?” You know, I have never had a pet as an adult in my life. I have no idea how much that would cost me. I imagine it’s expensive.
Jenny
It is. I have two dogs and two cats and I mean, I’ll be honest, we spend about $200 to $300 a month on pets. But that’s also because we buy very expensive food for our pets and we don’t have any kids. So we can afford to spend a little bit more on our pets. But it’s mostly just on food and cat litter and the occasional vet bill.
Seth
And that’s…I mean, trying to piece all of those things together. Budget, once again, it sounds like it’s restrictive, but like, what does my life cost right now? What am I spending money on? And, like you said, I know I’m bringing in a certain amount of money. We’ll talk about that in a later episode.
I’m sure we will. But where is the money going? And for a lot of people, we have general senses of that. But for a lot of expenses, I mean, some of them are very regular. I’m going to have to pay my garbage bill every month or every two months. I’m going to have to pay my water bill.
And they’re relatively set expenses. But then there are things that come in life that are surprise expenses…or you should know they’re coming. My wife’s birthday is coming up and I’m like, “oh, yeah, that’s right.” That’s an expense that I don’t normally think about until May-ish, right? I think Christmas, the holidays sneak up on people.
Like, you know, they’re coming. Having a budget doesn’t necessarily mean that you set aside money every month for those sorts of expenses. But it’s helpful to know that you’ve got some reserve or some wiggle room to handle that sort of thing. And I’m sure we’ll talk more about the emergency spending, emergency savings.
Jenny
Having an extra savings account set up for those sort of extra expenses like holidays or vacations or emergency savings. But I think you kind of touched on a really important part there. And I kind of want to go back to it as these sort of standard budget items like car insurance and internet and your how much I pay each month for my cell phone.
And I think it’s easy to kind of just get into the standard, and because a lot of times it’s just automatic payments. So my car insurance, they just automatically take the payment out of my credit card every month. And it’s a good idea to kind of… again, it’s that reexamining your budget every once in a while and be like, “okay, maybe I should try to look to see if there are some cheaper car insurance companies out there or obviously online with internet and movies.”
And this has become a big thing now with all the streaming platforms between like five or six different platforms. And I’m going, “okay” Now we’re having the discussion of “do we want to cut the cord for cable TV and just go with the online streaming services? And how many streaming services do we want to have?” Right now I have like five or six subscriptions, you know, and I’m paying, you know, ten or 12 bucks a month for each of those.
And so it’s like, which one do I want to keep? So I think that’s the other side of budgeting, is it’s a constant re-evaluation thing. Again, making sure you don’t have, regrets about what you’re spending.
Seth
Yeah. So I have set up… every six months, like the 1st of January, and the 1st of July, I have a ongoing spreadsheet, a Google doc…nerdy. And my wife does not care at all about it. But, but it’s the reoccurring expenses. It’s the thing, the things I know every month or every six months or every year that are set, you know, the car insurance, the home insurance, like how much did I spend on that?
And so every six months I can look and see, “oh, my Internet bill went up $20 and I didn’t know it.” Because it was automatic. Like everything. And then maybe I get a bill, maybe I get an email, maybe I don’t pay that much attention to it. Like it’s on the credit card. Maybe I’m looking closely and maybe I’m probably not because I don’t remember what it was last time or, you know, especially things that only happen every three months or six months or every year.
It just allows. I found that it allows me to look back and say, is this still the value that I’m hoping to get out of it? And some of these things are there needs. I have to have the car insurance. I feel very strongly that I should probably have my home insurance. You know, there are things that you’re going to have anyway, but you’re exactly right.
I feel very strongly about trying to avoid reoccurring expenses. And so, like, as everything is moved to subscription services, I feel like it’s making me feel older and older. Like I know that’s just what you do. You pay $6 a month or $3 a month. My wife gets toothpaste in a subscription. So like the little bites, you know, like they show up every three months or whatever.
And I’m just like, well, that seems weird, but it’s like, well, we buy it at the grocery store or any way fairly regularly. And I haven’t done like that whole cost benefit analysis of it. I’m sure it in the grand scheme of things it doesn’t really matter.
Jenny
Most people don’t get too much detail. But yeah.
Seth
And if you’re paying for convenience on some level and that’s great. But like you’re right that those subscriptions can add up over time and it’s really easy to sign up. Oh, it’s a 30 day free trial, it’s a 90 day free trial, but then it’s going to get charged and I’m going to forget about it and I’m going to forget about it for the next three years.
Jenny
The ones that really get me are the annual subscriptions because there’s like some apps that I have on my phone or like my Amazon Prime account and it’s an annual subscription. And so I don’t have the Excel sheet, I just use the Notes app on my phone. It’s just I have one that’s titled Annual Subscriptions and I just kind of list out and what month to expect it because again it it’s those surprise expenses. Where all the sudden you’re like “oh my Amazon prime account renews in July.”
So I know that that’s coming up and all of these different ones that all of a sudden it’s this charge on the credit card company and you’re like, “Wait a minute, I wanted to cancel that!”
Seth
I just heard about a new app that helps you get rid of all those.
Jenny
And so there’s tons of those too, which is good. There’s, there’s, yeah, there’s so there’s lots of those out there now because of that. That’ll go through your transactions and your account and say, “hey, did you know that you are paying, you know, $12 a month towards X company?” Maybe you’re like, “oh, I totally forgot that I signed up for that.”
And I just haven’t been paying attention to, you know, whatever credit card statements. So it’s good. It’s just a good review process.
Seth
It’s something that you have to figure out how to intentionally do at some point. And everybody’s got their own tools and resources because I think a lot of us just ignore it. It’s just easy to ignore. It’s like all of that stuff is happening in the background and most of the time it’s fine. But like, like you said, sometimes those things pop up and it’s a surprise and it’s scary.
And like, where, where did that money go? And I would rather do something else with that money that is going to be more beneficial for me either in the short term or in the long term.
Jenny
And I think it’s it’s like being intentional about that. And lots of these financial experts talk about that. And it’s just either setting aside some time, whether it’s once a month or once, twice a month to, you know, maybe make yourself like your favorite cup of coffee or favorite tea and sit down on a comfy couch and check out your expenses for the last month.
Just say, “okay, I’m going to just going to take like 20 minutes to look at my expenses, see what happened in the last month and, you know, see if I want to do something differently.”
Seth
Back to the… ”what is actually sparking joy and what is actually causing regrets?” And are there things that I got some value out of this? I’m notorious for when I feel bored or anxious, like just start browsing online shopping. I need to buy new running shoes I need to like and it’s around my habits there are things like, “oh, I’ll eventually use that” and then I end up with a closet of like 12 pairs of running shoes that I haven’t worn yet because it was on sale.
It was a good deal. It’s like it was. But am I actually getting utility out of that, those funds that I spent?
Jenny
So yeah, exactly. And I think again, it’s just the first step of like becoming aware that you’re that you’re even doing it sometimes. Yeah. Online shopping is becoming a big thing because…we’re all on our phones all the time and they’ve got all these tricky ways of of advertising, you know, even on Instagram now. I have the earrings that I’m wearing today.
I bought on Instagram because I saw a flashy ad and I thought, “Those are cool! I’m going to get those.”
Seth
That’s what’s crazy to me. Sometimes when I think about spending is like, was that an intentional choice or was it because something was marketed to me in a way…? That, yeah, it was something that was like… last year my wife and I bought a bunch of camping gear because we’ve been, you know, cooped up for a long time in the house with the pandemic is like, we’re outdoorsy people.
We had never gone backpacking in our lives. But, for some reason I thought, “oh, this is a really good idea. We need to do this.” And then I after everything arrived, I started thinking like, “was this a decision I wanted to make? Or was this something that had slowly fed in through my Facebook and YouTube because I’m, you know, doing some hiking, I’m doing some running.”
And the algorithm has figured out …not that I’m a conspiracy person. But then…But then sometimes you get like the random stuff. Yeah. It’s like, I don’t really need a diesel truck. I’ve never I’ve never looked for one. I’ve never… I don’t, I have no interest in one, but for some reason that pops up as an advertisement and it’s like, well, they’re still working it out.
So we got a little bit off topic, but I think we’re still on the general spending idea.
Jenny
Yeah, and I think so I’ll throw this out there as a tip that I use a lot of stuff with because Amazon. That’s a big one for purchases, right? It’s the same sort of thing. I get ads on Instagram all the time for things to buy on Amazon and I’ve started utilizing the wishlist category as a fallback because I know maybe I really want to buy this thing right now, but I don’t really need it…I’m like, okay, I don’t want to make like an impulse decision, so I’ll add it to my wish list.
And so I’m like, “okay, if I come back like two weeks later and I still want this item, I’ll go ahead and buy it.” But I’m not going to buy it right now, but at least I can put it on my Amazon wishlist and save it for later. And that has helped me so much just in terms of curbing that ‘emotional spending’, if you will, or impulse spending of, “oh, I see this cool thing, I really want this.”
And I’m like, okay, I’m just going to like, I’m trying to like eat dinner, make dinner or whatever and I’ll just deal with this later. I don’t have to buy it right now.
Seth
I know a lot of people who use like their shopping carts as that sort of holding bin. And then maybe I’ll come back… and then you get an email reminding you that you have something in your shopping bag.
Jenny
That’s why it’s dangerous, because then they’ll actually send you an email saying “this item still waiting for you in your shopping cart.”
Seth
Yeah. “I saw you were looking at this.” I have done something even more extreme and I don’t know if I should even admit this because people…I’ve said this to a few people and they certainly…I wouldn’t say judge me, but, look at me strangely. I just stopped using Amazon. Which, is weird and it’s just added another barrier to try to “I need to go find it somewhere else.”
If I, if I’m looking to purchase something. And there’s plenty of places to purchase things, but it’s made it slightly less convenient. And it’s sort of like that “using cash in an envelope”, you know, scenario of “how can I make this just a little bit less convenient?”
Jenny
Do you want to talk a little bit about why you decided to give up Amazon?
Seth
I’m sure there was some late night ethical moral questions about large companies in general in my my, my sort of concern about society. But it was a lot of things I do spending wise. I realize I’m just a cheap person and I’m just I just cheap and frugal. And I think that’s a big part of it is I felt like it was just so easy and it was and it is so easy.
And in a lot of ways it’s good. Like Amazon, a lot of people feel like it’s the most trusted entity they interact with because they’re convenient and easy and like, whatever you say you’re going to give me, you give me quickly and you just meet all my needs. You can help you find whatever I need. So… it’s weird.
And I mean, I’ll admit I’ve made one or two Amazon purchases in the last few years because it’s like, that’s what I need and that’s the only place I can find it. And it just, it comes back down to the convenience of it. But yeah, trying to just be, I mean, as you said earlier, more conscious of spending and when it’s just a one click and I’ve actually come to this realization with PayPal as well that I might need to like… that’s how I pay for a lot of things through the app.
Like I don’t, I don’t have to enter my credit card information. And so it’s simpler and maybe I need to disable that as well. Like keep putting more barriers in front of myself.
Jenny
So very responsible of you Seth.
Seth
Yeah, it feels, a little bit of like I’m, you know…a person who’s still trying to live without electricity. You know, at some point you have to figure out how to balance those things as well, like find the convenience and what you’re looking for.
Jenny
I think it just kind of gets back to the whole thing that, you know, personal finance is very personal. And, you know, we’re certainly not saying that you have to give up Amazon or live off the grid or anything like that. But it’s yeah, it’s just about looking at finances and it’s good. It’s good to have a budget.
Seth
For sure. Knowing what you, spend and where you spend, is really the first step like, which almost sounds like… like, you have to admit you have a problem, but it’s not a problem.
Jenny
We all do it. You’re spending money anyway, so you might as well know where your money’s going.
Seth
Yes, you need to. And then, as we’ve said a number of times, making sure that you’re making intentional decisions and that you are getting value out of what you want. And… you’re also making sure you’re meeting your needs. I think that’s one of the things that can be tough with spending is like you feel like, “okay, I’m depriving myself.”
And it’s like, no, you, you actually need that. You need food or housing or transportation. You might be able to get those things in different ways and adjust your spending, but those are needs and…you shouldn’t feel bad about them.
[music outro]
Disclaimer
The Department of Retirement Systems provides this podcast as a public service, but it is neither a legal interpretation nor a statement of DRS policy. Reference to any specific product or entity does not constitute an endorsement or recommendation. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by DRS employees are those of the employees and do not necessarily reflect the views of DRS or any of its officials.
