On today's edition of The Village, Willie P invites Reggie Pittman who is a financial literacy teacher and Kevin Smith; banker, Highschool economics teacher, and currently serving as a financial literacy educator with the Massachusetts Council of Economic Education. Pittman and Smith explore different types of budgeting and emphasize the importance of aligning your budgets with future goals. They encourage listeners to maintain a strong financial-foundation and take control of their finances.
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(upbeat music) - Hey, Boston, you are in the village with Willie P. We are WBCA, L.P. 102.9 FM Boston Community Radio. And it's about money, money, money. Money, we talk about money today. You know how we roll in the village. We all about giving information out. So I have my two guests. I'm gonna have them introduce themselves by telling you who they are. So my first guest, introduce yourself. Kevin. - Kevin and Willie, thank you for having me. My name is Reggie Pittman. I am a financial literacy teacher at a high school on the North Shore. I am originally from Boston, and I'm just happy to be here. Thank you for having us. - Cool. The next one, my next guest. - And I'm Kevin Smith. When I first came out of college, I worked in a bank in Connecticut. So I was a loan officer. And I've also been a high school teacher teaching economics, and I currently serve as a financial literacy educator with the Massachusetts Council of Economic Education. - Thank you. Thank you guys for coming on. We're gonna talk about financial literacy. We're gonna talk about budgets, the type of budgets. What do you do when you're out of control? You know, 'cause we're gonna give you a lot of information to help you be able to live a financial successful life. I don't say rich. We say financial success. That means you can pay all your bills. You know how to budget your money and save for the things that you want in life. And it don't have, you don't have to be rich to do that. You just have to be smart. And we're gonna talk about budgeting. So Reggie, start us off with, what is a budget? - What is a budget? First of all, before I get into the formal definition, let me tell you about financial literacy in general. Whatever type of financial plan you're on, budgeting, there's a few things that you have to keep in mind. It's sort of like building a house. You have to have a strong foundation. And there's two important things you have to remember in building this strong foundation. First thing, pay yourself first. It doesn't matter how much you pay yourself first. Years ago, I worked at a high school here in Boston and it was this older teacher. She said, it doesn't matter how much you pay, even if it's $5 out of every paycheck, you must pay yourself first. The second thing, build an emergency fund. When I teach little kids, we call it a rainy day fund, but as we get older, and when I talk to older people, I tell them it's an emergency fund. And what is that? It's approximately three to six months of living expenses. And actually, prior to the pandemic, every financial expert was saying, save three to six months, emergency fund, three to six months, three to seven. Now that we've gone through this pandemic, all the financial literacy people are saying six to nine months, nine to 12 months, because we've actually gone through an emergency, the pandemic. So I'm on board with saving anywhere from six to nine months, nine to 12, and I even heard one financial literacy person saying 15 to 22 months. So if the more the merrier, the more months you can save up the better, but budgeting is all about saving. - Yes, yes, yes, definitely. I can remember when I started out trying to save, I always, 'cause people always want to have money, but they don't know how to save for money. And a quick one is savings account, a Christmas savings account, that's what I had started. And I would take half the money and I would save it. And when Christmas come, I would spend half, put the other half away just like I didn't have it. So that's kind of part of that budget in you talking about, right? - Let me just jump in because when I worked in banking, they did have the vacation funds and the Christmas clubs that you could be a part of. And Willie, you said you chose to do that. - Yes. - Because I didn't know how to save. I didn't know what to do. And when you don't know what to do, you think you're gonna have that money the next year. That just does not happen. - So you felt it gave you a sort of a structure and you put that structure there and you had to give what you gave every week or every month. - Yeah. Every week, right out of my check, if I got a raise, I would add that to it because I haven't gotten used to having that extra money. So live without it. You can. - Okay, I don't even know, do they even still have those? - Yes, they do. - Okay, okay, cool. Okay. And then, Red, you mentioned something about pay yourself first, which I think it becomes a nice catchy term these days. But, you know, when I go back over 40 years ago and I came out of college, I never heard that term before. But, as I look at what pay yourself first includes, I'm saying, okay, I guess that's what I've always practiced because when I got my first job, I'm working at a bank and they actually came around and paid you in cash on payday. But I also had an account at that bank and I said, okay, I want to get a car, a brand new car, not just a car. Okay, I want to get a brand new car. So I started putting, so each pay we got paid every two weeks. The pay master came around and she, or pay mistress, she came around every two weeks and she gave you an envelope, had your statement and all that. And the rest, it was cash. But I chose to say, well, you know, if I want to get a new car, you know, maybe I need to put an X amount of dollars away every pay period so that I never ever see it. It went directly into the bank first. Okay, so I never saw that. Okay, and then in about six months, I was able to buy the car, but I was already on that kind of structure of putting the money into the account so that I never saw it. So I didn't have to make any adjustment. Okay, now I got the car and now I don't need to save anymore. Well, yeah, I do, I just kept on with it so that pay yourself first. No, I mean, I guess that's a nice catchy phrase, pay yourself first, sounds nice. But I'm putting the money into a saves account. I don't see it. I don't get it. I'm not missing it. Okay, because I don't get used to having received it from the beginning, from the get go. So, Reggie, what is budgeting? Okay, let me formally define it and then I'm gonna break it down. The formal definition, the one we look up in the book, it says it's an estimation of the revenue and expenses over a specific future time, which that means you're watching your income versus your outgo. So when you're doing budgeting, it has a two vote, income and outgo. So all it is is knowing every single dollar that's coming into your household versus knowing every dollar that is leaving your household and hopefully at the end of the month, into the two months, whatever, there's some money left over for your savings. So that's the informal definition and I gave you the formal definition. So that's what a budget is. Okay. Because let me just jump in here on that because yeah, you don't wanna end up in a situation where you have, you know, let's just say, take a number, you've got $5,000 coming in every month. - Well, that would be nice. - But you got $8,000 going out every month. You cannot sustain that. That's the negative situation, okay? So you wanna make certain you got more coming in than what you got going out. - That's why they always at their mother's house borrow money, right? Those people. - Okay, yeah, their mother, their sister, their brother, you know, their auntie, you know, Godfather, they just appoint them. We use my Godfather now, you know, something like that, even though they're not. Okay, whoever they can give, get the money from. - Yes, not a good situation, right, Reggie? - Yeah, absolutely, absolutely. And a friend of mine just asked me recently, why do we need budgets? Why do we need, you know, I heard that several times in the last few months, why do we need? But there's a bunch of reasons why, you know, I always say the first one, if you have specific goals and minds, you wanna align your budgeting with your goals. You could have a, like Kevin just said, he was, at one point, he was saving for a cost, so that's a goal. Budgeting will help you towards your goal. Maybe you have a child that's off the college in a few years. Budget, that'll help you get there. Maybe you wanna buy a house someday. Budget, that'll help you get there. So, budgeting aligns your spending with your goals. - Yeah, and I mean, other than this, you know, one of the things that throws us off of these budgets, unfortunately, is, you know, okay, let me go shopping. Oh, they got a cell over here, maybe they don't even have a cell, and you're in the store. Well, I think I want that, you know, impulse buying. And so, well, let me just grab, oh, they got a big house. 60 NTV, let me get that TV and look good. It would look good in my room up on my wall. Okay, that's gonna maybe throw your whole bucket off. So, okay, go on, sorry. - And the problem that comes in with that is a lot of times they, it's immediate gratification. And a lot of times you wanna do time payment, which drives in the interest, you pay extra. So, we might wanna talk about that, Reggie, as part of the types of budgeting you wanna do. But yeah, you're right, absolutely right. - Yeah, do you wanna get into the types of budgeting now, or? - Yeah, we can talk. - There's several types, several types. And as I talk to my class every day, we talk about some of the more well-known budgeting. I mentioned at the top of the hour, pay yourself for us. That's a type of budgeting, pay yourself for us. Then something called a 50/30/20 budget. There's the envelope budget, zero-based budget, and some of my relatives have something to call a no budget. No budget budget. But let me get into just one of them. One that I recommend all the time. The 50/30, actually, there's two that I recommend. So, I'm gonna talk about two. The first one is 50/30/20 budget. So, every paycheck, every money that's coming to the house, you're gonna divide it 50%, 30%, and 20%. The 50% goes to all your needs. The 30%, that's you wants. You want to go out to eat. You want to do this. You want to do that. You want to go to the movies. So, that's 30%. The 20%, that's where your savings and investment comes in. You should always have budget for savings. You should have some money going into your savings account and investing in, of course, retirement as well. So, that can be, and that can shift too. It can be 19%. It can be 21%. So, you're juggling right around that 20%. But you want to kind of stay with the 50/30/20 budget. - And I think that's become more popular. - Absolutely. - Within the last maybe 10, 15, 20 years, you hear that being spoken of more often. But one of the things you said, Rich, was that you make those periodic adjustments. So, it's not a one and done. Oh, I sat down and I did my budget. It's the first of the month, and this is what's going to hold me for the next year, for the next two years. No, you re-examine. You re-evaluate. You reassess your budget. A budget is not static. - It's not a one and done. - Yeah. - Yeah. It constantly adjusts things, month after month. And it might take six months, seven months, until you can really get a good one. So, and matter of fact, you don't even have to mention one of the, or go with one of these five types of, you can create your own type of budgeting. But the point we're trying to say is, it's important to budget. - Yes, yes, definitely. - And another type of budgeting that I want to stress, Kevin talked about years ago, they paid them in cash. So, there's a budgeting system called the envelope budgeting, where you have the cash in your hand, and you distribute the cash of all your expenses. For example, you could have one envelope called transportation, one envelope called housing, one envelope called utilities and so on and so on. You could have six or seven envelopes. So, you take the cash, and you distribute the cash in each envelope. The trick is to try not to commingle the money. If you have X amount of dollars for transportation, don't take that out of housing to pay for transportation. Don't take the money out of transportation to pay for housing. Try to do your best to stick with the money that you put in that envelope, and that'll try, that will keep you on the budget. - Rob traded to pay Paul. - Yeah, there you go, there you go. - Except, 'cause you think you've got all those envelopes, and you put the money into each of those envelopes, you think you've got way more Peters, or way more Pauls, or whatever, it does not work like that, you know. Or, you know, well, you know, I think I want dinner. - Now, I feel like going out. And so, what are these services now that people have where you can call them, and then they go get the food for you and bring it to you now? - The delivery service, yeah. - It's so easy, isn't it? - It's so easy. - They're not delivering it to you for free. Okay, and Peter, it's real comfortable. So, we have made it so, our society has made it so easy for you to run up debt, and that can become a major issue if you're trying to live within a budget. - Major issue. - And depending on what your budget is, you always want to budget for debt payment. So, whatever budgeting system you want, you only want to carve out some money to pay down your debt. You never want to live with debt. Debt is an enemy. That is one of the worst full letter words out there. Never mind any full letter word you hear on the street. Debt is the worst full letter word. - Whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa. I'm gonna say it a little bit different there. I mean, 'cause there can't be good debt. No, you don't agree there's a-- - We'll talk about that. We'll talk about good debt. - There's good debt. - If there is such a thing. - And bad debt. - That's an oxymoron. - Good debt. - To me, that's a jumbo shrimp. - Okay, but what about if you're buying a home? And most of us are getting a mortgage. Most people would say that's good debt. I mean, the typical American does not pay for his or her home cash, so to go into debt. Now, as long as you're buying a home within your meat, you're not buying a home, you're not getting a mortgage that's way above where you ought to be. And now that's going to sort of create some kind of situation that constrains you and can bring you down. And you know, before you know it, you won't be in that home. I mean, so that's not too nice either. You know, had your house warming and everything like that. Everybody over for the cookout and the summer, the barbecue. And now, next summer, you don't have the home. We don't want you to be in that situation. - But the bad, the good debt, and when we were talking about homes really, I just want to say this, the good debt, you have to be there for the long haul to get that benefit. So don't think that unless you're in a situation where you're flipping houses or some situation like that, thinking that you're going to get a house and all of a sudden it's going to pay itself. That's a long haul investment. - Absolutely. - And it is an investment, which is different than kind of budgeting. - So about the debt, the good debt and the bad debt. - Well, I'm still sticking to, no such word is good debt. I will go halfway and say purchasing a house. You will be in debt, of course, for a number of years. Hopefully, 15 year mortgage, not a 30 year mortgage. - But that's a good point you're mentioning that because most people are not aware of the 15 year mortgage. - Right, I wish. - I had gotten a 15 year mortgage to my place. - When I first purchased my house in Texas, I wish I had a 15 year note versus a 30 year note. So I'm recommending everyone who's with an earshot, try to budget for a 15 year note versus a 30 year note and go through the budget and make sure that you're able to afford it. Of course, it's going to be a little bit more than a 30 year note, but budget. So you're prepared to do a 30 year note versus a 15 year note versus a 30 year note. - Okay, all right. What, you were talking about what types of budget, let's get back to that we talk about all the budgets that you wanted to share with them. - The two main ones that I did stress, the 50, 30, 20 and the envelope. Those are the two main ones. But if you wanted to talk about the other ones, the zero base budget or the new budget, we can if you want to, but certainly those are the two that I recommend. - I think talking about those two, giving them some type of idea of where to start, you know, where to start. We're gonna take a pause right here and we'll come back and talk more about. - The proceeding commentary does not reflect the views of the staff and management of WBCA or the Boston neighborhood network. If you would like to express another opinion, you can address your comments to the Boston neighborhood network at 3025 Washington Street Boston Mass zero two one one nine, attention WBCA LP 102.9 FM. If you would like to arrange a time for your own commentary, call WBCA at 617 708 3241 or email us at radio@bnntv.org. We are WBCA LP 102.9 FM Boston community radio and you're in the village with Willy P and we are talking to Kevin and Reggie about budgeting. It's so important, this information that they are giving us, it's so important to keep you on track, to keep you from having to borrow money from your cousins, your nephew, your nieces, you know, they don't even want to see you coming 'cause they know your hand is out because you are overextended yourself. You bought those hundred dollar glasses instead of paying yourself that money and now you're in debt in Christmas. Don't talk about Christmas, you know, spending. So Reggie, what you mentioned goals as being a part of the reasoning that we, that gives us an incentive to have a budget. So is there anything else you wanna add to budget in today? We got about 20, we got about five more minutes into the program that we can talk about. Anything that you wanna talk about or share you and Kevin about budgeting to kind of instill some information into them, you wanna share anything else? - Sure, I'll just get into some more reasons why we need a budget. - Okay. - I mentioned that it aligns your goals. It also improves your debt repayment strategy because we all have debt whether it's student loan or whatever type of debt that we have. Budgeting helps you pay down your debt and it helps you achieve your savings goals. Say if you have a goal by time you're 30, by time you're 50, by time you're 60, you want X amount of dollars in a bank. When you budget, that'll help you to your savings goal. But there's some other things, other reasons why we budget. You wanna save a retirement. Of course you wanna build up a good emergency fund. You also wanna take control of your finances. That's another reason why. For any reason other than this one, you wanna make sure that you're, you wanna control your finances. - And Reg was mentioning earlier on about the emergency fund and how much money you should have put aside for savings in that fund. And you gave a number of different numbers. And I know when I first came out of college just working at the bank they were saying had at least six to 12 months. It's what they were saying back then. So I went to a conference maybe about eight years ago financial literacy and they were saying three to six. And these were so-called experts, three to six. And I'm like, okay, that's. So, well, what we're telling students now is three to six so that they start out with the three to six. And I said, well, I don't know. I disagree vehemently with that in the workshop. Okay, that's why I'm telling the people looking at me. But I'm saying, no, it's gotta be at least six to 12 months. And then beyond that, because what if you get into a recession and you lose your job, that unemployment is, it's not gonna- - Man-a-mom, everything, you know. That's not a whole lot of people I know getting big fat and happy for unemployment compensation. Okay, even though some people out there tell you that thing. Well, we need to stop it because they're getting too rich. I don't know anybody getting rich off unemployment conversation. So having that emergency fund available always, I cannot stress that more than what we're saying right now. Make certain you have one. Now, in the three to six months, I know they're telling students that today, I'm not quite on board with that. Get that at least six months. But I'm like, Reg, I want you to have at least a year. - Yes. - At least a year to two years. I mean, that's that you in a better position when you get that. Yeah, we know you got a sort of sacrifice and it can't be that instant gratification. Okay, well, I want to go to that restaurant or I want that TV or I want to go on. This place for this vacation, well, maybe you can't do that. That's part of your plan. You budget for that and make certain that you can afford it. If you can't go this year, maybe you're going, no, four years from now. I know there's a weight from when you get to four years from now. And don't be afraid to wait. - Yeah, there you go. - You know, don't be afraid to wait one. You're young, you're young, you have the time. I'm old, I don't have the time. But, but, but these young kids have the time to save and just putting away a minimum amounts, try it. It's $5, $10, something you're never going to miss. Put it away and never touch it. And let me throw a quick story in there talking about never missing. I used to work with a teacher years ago. This was even before I started teaching financial literacy. She used to come in every day with a Dunkin Donuts T with the extra T bag. So they charge you with extra T bag. Every day, the large T, double T bags. She was always complaining about money. And then I said, how much is that? How much is that Dunkin Donuts T that you get every day? And she told me, and I just scribbled on a piece of paper, how much it is per week, then I said per month. And then I held it up to a, how much it is per month. And then she stopped talking for about five seconds. And then she, from then on, she made her T at home. And then she said she has extra money every month because of that one thing. Sometimes it's the little things, the little things. And she had extra money because she made her T at home every day. - But what about the ones, you mentioned the brand name of where she was getting her strum. But what if those, and I worked with some of those who, that particular name that you mentioned, is just not good enough for them to go get their T. They wanna go to the place where the T is. - The high end, yeah. - Oh yeah. - Yeah, because that T is so much better. - It's gonna cost them twice or twice. - This is nice more. - Well, you know, that's the golden T. - Okay. - But you know, you can buy that golden T in boxes. - There you go, there you go, and make it at home. - And make it at home. (laughing) - But I think for people who have not saved, they think, they say in their minds, like I said, next year I'm gonna do better. Next year I'm gonna do better. If you don't start, it will not be a next year. You have to start somewhere. Take the advice and try it. Try taking $10 a week and put it in a way. Try for a year and see what happens. - But wasn't there some study here a couple of years ago that said something like little less than half of all Americans did not even have $400 for an emergency? Like, absolutely. - And I think about that, that just would make me go crazy. I think if I didn't have it, I mean, that's just so, we're talking just for $100. - Yes. - And really half of the Americans. I'm like, wow. So I am blessed, but I'm just like, okay, how do we get them out of the hole that, you know, that they're in, you know. - I know. This is closing. We're coming to a close. You know, you've been in the village with Willie P and she's been talking to Reggie Pittman and Kevin Smith. We've been giving you some educational information about financial literacy. We hope you were able to take some of that information away with you. And, you know what, we gotta go. I hate to say that, but thank you guys for coming. Thank you for coming. And we're gonna wrap it up and we're gonna say to you, thank you for being in the village. You are WBCALP102.9 FM Boston Community Radio. And maybe they'll be back next time in the village. And this is "Take Me Away", Aaron Chase. ♪ I wish she grips her chairs like her body screaming out ♪ ♪ And I don't know her name but as she looks my way ♪ ♪ I hear her say could you please ♪ ♪ Take me away, away you ♪ ♪ Take me away, away you ♪ (gentle music) [BLANK_AUDIO]