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- Hi, I'm Melissa Bell publisher of Vox Media.
Welcome to Money Talks, Home Habits,
powered by Bank of America.
This is a virtual explainer event
centered around the new meaning of home
and how its purpose has suddenly shifted.
Today, we'll be focusing on saving when home
and how to manage and prioritize savings
during such an uncertain time.
People spending more time at home
means changing spending and saving habits,
but what's the proper way to save?
And what are we saving for?
For some, the transition to spending more time at home
comes with automatic savings.
The U.S. personal savings rate jumped to 33% in April,
the highest ever recorded.
Still in a June, 2020 survey,
23% of Americans reported that a lack of emergency savings
was their biggest financial regret.
So how can people put any new found savings
to good while still at home?
An emergency fund should be the foundation
of any savings plan.
Emergency funds should cover six to nine months
of regular household expenses.
Saving, however, may not come as easily
for those whose incomes have been impacted.
That's why it's even more important to set aside time
to go through your monthly expenses
and identify any that can be reduced,
whether you've found unexpected savings in recent months,
or have had to cut back,
take the time to prepare for the future
by reevaluating your savings priorities, today.
I'm joined by Tonya Rapley,
a financial educator and founder of My Fab Finance.
Tanya, it's great to have you here today.
- It's wonderful to be here.
- One question that is really top of mind for me,
is centered around the folks who have been impacted
in a disproportionate way because of the coronavirus.
What financial advice do you have for them?
- Yeah, Melissa thank you for asking that question
because as a financial educator and working in this field,
I have seen and I've worked with people
who even before Corona virus
were financially vulnerable and what we are finding
are people, particularly people of color
and people who might be deemed essential workers
who are working in, whether it is required fields,
or essential fields such as in the grocery store,
farming, et cetera, things that really help ensure
that our economy stays voting and our needs are met,
are vulnerable as well and they don't often
have those protections, but they haven't had them.
And that's one of the things that I'm hoping
that this kind of starts a conversation
of what it looks like to bring people up to,
equally before we even have something
like the Coronavirus start.
And so when working with clients
and helping people kind of navigate, okay, what do I do?
I'm already financially vulnerable.
What can I do to kind of alleviate some of this?
If anything, the first thing
is we gotta comb through those expenses.
What was helping you or what worked before coronavirus
might not work now.
So what you could afford then
you might be able to afford now
because maybe your hours have been cut back,
or maybe now you have additional health cost,
or maybe you're responsible for your childcare and so forth.
So you aren't able to go into your office
or you're not able to do things you used to do
to bring in income.
And so we need to cut back on those expenses
and we can do that by looking at our budget,
looking at what's going out
of our household every single month.
And then cutting back on the things that aren't necessary.
Like during this time we really want to be focusing
on those essential items.
The next thing is I would suggest that people take advantage
of help or assistance that's available to them.
I know that sometimes we might not want to or feel like,
I got this, but there's any time in history
where there's more help available.
It is right now.
So there are resources available.
I know here in Los Angeles where I live,
they have a rental assistance program.
They're rolling out when everything first started happening,
they were forgiving student loan payments
for a certain amount of time
and mortgage payments for a certain amount of time.
A lot of utility companies have been understanding
and are working with individuals
or working with their customers to look to see
what help is available on that side.
But then also, if you need any social services
or anything of that nature,
find out what you need to do to make sure
that you're getting groceries and so forth,
look into, grocery co-ops or food pantries nearby
and so forth so that you can kind of make up
some of that difference
in what you were spending in groceries
and maybe you can reallocate the money from your budget
to something else.
And then the last thing I really want people to do
is really think about stabilizing and what it looks like
to stabilize your financial foundation,
because that's important.
And I know that people might be in crisis mode.
It's like, I just can't figure out
how to get to XYZ point.
You're not alone.
There's a lot of people who are trying to figure out
how to get to XYZ point,
especially when the point has been changed as it has.
I don't think any of us expected for 2020
to look this way and to have this experience this year.
So alter your plans.
It's okay to alter your plans and change your expectations
of what was expected for you this year.
And just realize that you're not alone.
I think that, especially for people
who might feel like they are vulnerable
or feel even more vulnerable, you're not alone.
There are services there to help you
and we'll get through this.
- Thanks, Tanya.
I think that's a great point.
One thing that I think you mentioned at the very beginning
is how a lot of these issues predate coronavirus,
and this moment is perhaps exacerbating them,
but also revealing them.
Now I would love to bring on some guests
who are excited to ask you some questions.
- Craig, welcome to the today's discussion.
I'm looking forward to what you
and Tanya have to talk about.
- Hi Tanya, my question is like a lot of other people
I've been saving more money than usual
in the past few months.
I'm not going out shopping as much.
I'm not eating out as much and spending money socializing.
And I'm wondering if for those reasons it's a good time
to spend a little bit more money
than I might usually on large purchases,
despite the fact that I still have debt
that I'm working towards paying off.
And I'm wondering if there's a balance
of how much more money I can spend on myself
and so into paying off my debt.
- Oh, that's well,
that's good news that you are saving more money.
I think that as we've spoken to others
and when I'm talking to other clients I work with,
that's been a positive byproducts of this entire experience,
but what kind of large purchases are we thinking?
Like what do you have in mind?
- I think there's kind of two categories.
One is just splurging a little bit more on clothes.
For example, every other month
usually I'll make an online purchase and maybe
I'm more prone now to spend a hundred dollars
more than I would have before.
And then the other side is just for example,
I'm moving apartments next month.
And I have my eye on a few furniture pieces
that probably I wouldn't have considered before,
but now I'm like, okay,
well I haven't spent so much money the last few months.
Maybe it's okay to buy these now.
- Okay, all right.
So furniture and additional clothes.
Okay, furniture makes sense to me,
but clothes I'm like, where are you going?
Like, take me with you.
Where are you going?
'Cause I know I'm not going to any places,
but so just think about this,
so there's needs and there are wants, right?
So when it comes down to our needs,
that's shelter, that's food, that's clothing and so forth.
But then there's once and these things probably do fall
into the categories of wants.
You have an apartment, you're thinking about
how am I gonna furnish that apartment?
And we have clothes like, well maybe I want
a few different pieces of clothing.
So these are wants and there's nothing wrong with wants.
But when we're thinking about moving into priority,
making wants a priority,
then we have to look at how are we doing financially?
So dialing back to, okay, moving into this apartment,
do you have enough money set aside just in case
to cover that rent, because what we don't want to happen
is that you spend quite a bit of money
on furnishing this apartment.
We haven't put money aside and saving for this apartment.
And so something happens
and now we've got to sell the furniture.
We have to move out because we haven't been prioritizing
putting money aside to save for that.
So there's nothing wrong with spending money on your wants
and there's nothing wrong with making it a priority.
As long as you have already previously prioritize creating
that emergency fund and that savings cushion,
so that things were to happen,
you'd still be able to pay for those basic needs.
How are you doing on that?
Have you been able to save, to create that cushion?
- I would say I have that cushion, but like everyone else,
it doesn't hurt to always save more money.
I always want to see that number go up.
So I guess I'm looking for what
that balance could look like.
- Yeah, definitely.
And are you currently working?
- I am and I'm very lucky to have job security
for the near future at least I see my income
continue to come in throughout the coronavirus.
- Okay, well that is good news.
And so you're in a pretty good position.
The thing with furniture,
it doesn't mean that you're gonna have to buy
the most expensive furniture in the store, right.
It means that we're gonna shop around for a good deal
and make sure we're getting the best deal.
And so maybe there's still a way to save on that
and still put money aside in savings.
It doesn't mean we're gonna blow
everything out the water.
So keep that in mind,
as you're looking at your wants and so forth.
I think it is, there's this theory,
whereas in like certain major life experiences or purchases
lead to more expenses such as moving into apartment
and moving into a specific side of town,
now you feel like you have to have certain things
in that apartment or a certain lifestyle
or reflected lifestyle to participate in living
on that side of town or maybe it's certain clothes
and certain wardrobe.
So we just have to be mindful of that,
what we call lifestyle creep
and those additional expenses creeping in.
But I think that you sound
like you're pretty solid on that.
So as far as your other financial goals
before we think about splurging
and taking care of wants,
how are you on your other financial goals?
So do you mind sharing maybe one short term financial goal
and one longterm financial goal that you have?
- Sure, I guess, well, they all relate to bills
and loans and things of that nature and debt.
I do have a lot of debt and I also know that for example,
I can made it a bunch of medical debt this past year,
and I know I have a lot more work to get done in the future.
So short term, I guess just paying my credit card bill
and making sure I can get to paying it off monthly
or quicker than I have been in my history.
And then longer term is just to pay off my other medical.
I have three different loan servicers
for my educational loan.
So kind of chipping away at all of those.
- Okay, all right.
Yeah and it doesn't sound,
it sounds like quite a few people are dealing with.
And so when we think about splurging on our wants
and so forth, it is also how am I doing
on my financial goals?
And if we're meeting all of our markers
for our financial goals and I think that since you have
like a few debts, unrelated goals
to debt elimination related goals,
like let's create those different markers where we say,
okay, I want to pay this bill down by 25%
or I wanna pay it down to this amount,
then the next amount, then the next amount,
so that we know, okay, I'm hitting
my financial goal mile markers.
At least now I feel more comfortable spending on my wants.
But if you don't have, like,
if you don't break down your larger financial goals
into smaller goals and it kind of can feel like,
what am I even doing this for?
So I want you to think about what the smaller goals are
and those larger goals.
So maybe it is all right,
I have a medical bill for a thousand dollars.
I want to pay off $250 of that.
So I'm left with 750.
I want to pay off half of that.
Like that can be a micro goal within your larger goal.
And once we reach your micro goals, like, okay,
now I can treat myself a little,
but we wanna make sure that we're making progress
on our goals too, before really splurging on those wants.
So does that make sense?
Does that feel realistic and comfortable for you?
- It definitely does.
And I think I have a followup question then,
which is 'cause all of my loans,
I'm paying them all on time and in the increments
that they has given me making the minimum payments.
So would this be a good time to just throw money
into those consciously of course,
but conscientiously not too much,
but throw that money I would have spent on clothes,
the extra hundred bucks into loans.
Is that a good idea?
- Yeah, if you can amp it up,
I would say like now, like I said, now is the time to do it.
Most of us aren't going any places
or going anywhere so forth.
So now is the time that you could really amp it up
and put that money towards paying
more than the minimum as possible.
I understand that dealing with creditors and so forth,
it can seem a little daunting
or especially if you haven't done it before
or aren't used to it.
So one of the things I actually recommend
is go to bettermoneyhabits.com/heretohelp
and actually have a few resources there
that can help you prepare for these conversations
as well as helping sure that you're more comfortable
having them and get the outcome more likely
to get outcome that works in your favor.
So you don't have to go into this alone.
I think if we have money to spend on clothes
and we have money and the clothes that we don't need,
there are certain things it's like,
okay, I need to transition my wardrobe to a winter wardrobe,
or I need to do this for workplace attire
or safety project.
But if it's not something that you need,
then I would say, yeah,
you just use it to get ahead
when it comes to your debt elimination.
And then, here's the other thing to think about
when it comes to purchases.
I think a lot of times we look
at I'm spending XYZ amount of money on this.
So I'm spending a hundred dollars on clothes,
but it's like, how much of your life
did you put aside to earning that?
Like how much, how long does it take you
to make a a hundred dollars?
And is it worth like, do you want to use it
towards your financial goals?
Or do you want to use it towards clothes,
which is essentially fulfilling someone else's goal.
So think about like the money you spend that way too.
It's not this money you spent is hours of your life
that you put towards bringing in that money.
So you want that money to work best for you.
- Thank you, it seems so simple,
but it actually feels more impactful coming from you
with the full rounded perspective.
So I really appreciate that.
- You're welcome and I'm really excited.
You're thinking about things like this.
I'm really excited that you're getting your own place
and you're moving in and hopefully,
you find a few items in there
to help furnish it inexpensively.
So thank you for having such great questions
and I'm excited for you.
- Thank you.
- And next step right here with Jen from New York,
take it away, Jen.
- Hi Tanya, my name is Jen as introduced.
So I'm a baker and I laid off during the coronavirus
and because the restaurant industry
is so influx at this moment and it's really uncertain
on what kind of jobs are available.
I'm looking to kind of pivot into new direction,
whether that be something related to my field or not.
And my question is how can I plan to save money
enough to focus on looking towards a new career
while this is going on?
- Yeah, Jen, the restaurant industry
has been hit really hard,
but as a baker, I'm curious,
what's your favorite thing to bake?
- I love baking cookies
and I'm really into decorating cakes.
Like I kind of would love to pivot into that in the future,
but I have a tiny apartment
and I really can't put it all in one go in that fridge.
- I understand, I mean, you need commercial kitchens
and all these other things like that too,
but I love cookies.
So if I lived in New York,
I would definitely be one of your,
I would buy cookies from you right now
because I'm not the best baker.
But I think that you're wise to think about
your different options.
Like if you really love baking,
I think that there are certain ways that you can continue
to grow in that career path.
But thinking about saving,
like I always say savings is essential
regardless of what you have going on.
So unless you just like inherited a large amount of money
or unless you've been saving
and so you're financially comfortable,
but if you're not in any of those positions,
which most people aren't,
I would definitely recommend that we focus on.
Okay, so what are different ways
that we can leverage the skillset right now
to add to our savings so that we have
that three to six month cushion
that makes us feel comfortable.
Outside of coronavirus, I recommend that someone
has three to six months and savings.
Now, it's kind of like if you had the ability
then six to 12 months of savings,
because one of the things about economic downturns
is we don't necessarily know how long they could last.
So this could be something
that's over at the end of this year.
This could be something that is ongoing until,
the next three to four years.
And so we want to be as financially prepared as possible.
- In the beginning when I was laid off,
I applied for unemployment.
So I've been receiving my weekly
and then the additional payment on top of that.
And again, I've been reaching out to certain friends
who want any pastries and offering them
on a friend to friend basis
or a lower rate than I would probably charge
for something normally.
And so it's been a slow climb in finances,
but I make ends meet with the unemployment
and just kind of supplementing myself a little bit,
but I don't have anything like part time going on.
I'm not doing any side gigs that like require me
to be around a lot of people.
So it's just more on the need basis.
- So we need to think about other ways that we can bring in
that revenue so that you can begin to pivot and transition.
And so we're thinking about it.
It's like, okay, what are different things that I can do?
Maybe it is, I think that now is the opportunity
maybe for you to start growing your online community,
because there are people who might not live near you,
who are willing to pay for access
to some of the knowledge you have
or show up for, they have time they're at home.
They're like, Hey, I'm going to bake a cake with Jen today.
And so they, you could say,
I'm gonna show up at this time
and I'll be baking a cake on Instagram, live,
get your ingredients and you can do it along with me.
Or you can start to maybe deliver some of these ingredients
to people or help them decide.
This is exactly what I need.
So I think one of the appeals
to a lot of those delivery food boxes
is that they premeasured the contents for you.
But I haven't seen the dessert one
and so maybe that's small curated thing
that you could offer,
just so that when you bring in that money,
you can put it into your savings account.
So it is important to think about,
I'm bringing in this extra money,
I'm putting it directly into my savings account
instead of using it on something that's not essential
or not important because that's gonna
to help you create that transition fund.
How do you feel about that?
- Yeah, so focus more on saving in longterm
than just taking the money that I've earned right away
and spending it right back.
- Yeah, yeah.
Especially if we're thinking about a transition
and I'm curious, what kind of transition are you looking at?
Is it, I know that you said maybe in your industry,
but what other options are you looking at?
- Well, I like the ins and outs of publishing.
Like if I've ever been able to put a cookbook together.
- It can seem arduous,
especially given that finances might already be constrained.
There are so many resources online.
One of my favorites is Canva
where you could publish your own PDFs and so forth.
And they have all these nice images
and you don't have to be a design expert
in order to create your own book
or create your own whatever it cookbook
or whatever you may want to create.
And then you can upload that.
And the great thing about creating something
is that you'll have passive income.
And so I don't think enough people also talk about
passive income when it comes to your saving strategy
and your longterm goals,
but it is looking for ways that are active.
So baking a cake is active income,
and it requires you to go out and get the ingredients,
bake it, sell it to someone,
arrange the delivery of it or whatever it may be.
Whereas in passive income, it's like, okay,
maybe you can put your recipes together.
Maybe there's this awesome cookie recipe
that you developed and you want to sell it
in a few others that you wanna sell.
You can upload those online
and you could still be selling those
five years down the line.
Even after everything has settled,
you can still bring in that passive revenue from it.
You can make it so that your passive revenue
goes automatically into your savings account.
So it's already, it's deemed being deposited
into that savings account.
So you're still automatically
building your savings, but passively.
So think about that there are different ways
that you can build it.
It doesn't necessarily have to just be active,
but I'm looking forward to what you come up with.
And I wished that I could taste you some of your cookies
'cause I am a cookie monster.
- Okay, well, we'll stay in touch.
Anytime you want something.
- Tanya, thank you so much for this great discussion.
You had some fantastic advice.
I really appreciate it.
And a big thanks to our guests who shared
so much about their personal situations.
- Thank you again to everyone
for watching Money Talks, Home Habits,
powered by Bank of America.
We hope this event was able to provide some guidance
and help you prepare for a better financial future.
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