These days many consumers are worried about inflation and their finances. Everyone would want to save more, spend less, and enjoy financial freedom. How do you achieve that?
... to save money, you don't have to make huge sacrifices.
PissedConsumer.com has interviewed a money-saving expert, Andrea Woroch. Andrea is a well-known writer, speaker, and regular TV contributor who helps consumers take control of their finances.
Watch this video interview to uncover money-saving tips that work on a day-to-day basis and find your way to financial freedom.
- What is financial freedom?
- How to plan stress-free budgeting?
- When to teach your children about money?
- Who can help with budgeting?
- Online tools for budgeting
- How much money to save?
- Inflation and savings
- How to achieve financial freedom?
Andrea Woroch: I'm a money-saving and budgeting expert. You can read more about me andreaworoch.com. I went through my own journey of discovering financial freedom. I struggled with debt. I was living beyond my means. I realized though, I had a moment in time when I was living in New York City and couldn't afford to pay rent and all this stuff. And I realized that the path I was leading down was not going to really create the life that I wanted.
And so I started to change my lifestyle and my habits. I moved out of New York City. I got a new job. I changed a lot of things. And while I was on this journey towards paying down my debt, I had the opportunity to work with a company that was in the financial space.
And because my background was in media relations, I also was able to then share the story of the company and my story with the media, and it was at a time during the 2008 market crash that people were really hungry for financial information. And so it was just kind of like the perfect opportunity and the perfect time for me to really help get my message out there and help other people manage their money better.
What Is Financial Freedom?
Michael: Thank you Andrea for your introduction. We're very happy to have you on the show. How do you define financial freedom?
Andrea: I definitely believe that financial freedom is a personal goal.
...the way that you define your own financial freedom will really be based on what you want out of life.
So for me, financial freedom is not having to worry or stress about money, and it's also not having to worry or stress about how you're going to afford to pay for something. How are you going to afford to take care of your kids or what your future retirement is going to look like? Or if your kids in your future are going to have to pay for you.
It also means that you're not saddled with debt, that you feel comfortable in your everyday life. And just again, just removing the stress from the financial aspect of your life, which, unfortunately, is something that a lot of people lose sleep over.
How to Plan Stress-Free Budgeting?
Michael: Is budgeting stressful? Budgeting may limit your expenses, and that could be stressful. How do you deal with budgeting while limiting stress?
Andrea: Yes. I think for a lot of people, budgeting can be overwhelming. Consumers often think that if I budget, that means I have to cut back. I have to make sacrifices. I can't live the life that I want to live. But they fail to realize that a budget is actually a tool that can help you create the life you want because oftentimes, you don't realize how much money you're wasting on things you really don't need or on things and services and just other costs that don't bring you happiness.
Consumers often think that if I budget, that means I have to cut back… they fail to realize that a budget is actually a tool that can help you create the life you want...
If you're not tracking what you're spending, which ultimately a budget does, if you're not tracking it, you can't see where your money goes. Not every dollar at least.
There are so many people out there who at the end of the month say, "Oh my gosh, I don't know where my money went. I don't know how I'm down to zero. I don't know how I can't afford to pay off my credit card."
And a budget will help you figure out where your money should go to create that life you want to. And it really doesn't have to be complicated. I always recommend taking small steps when it comes to budgeting. And instead of trying to cut all those discretionary expenses at once, make small changes, which are easier to adapt to rather than an entire overhaul of your whole life.
Start basic budgeting
Andrea: So when it comes to your budgeting, the best way to approach it is to really just start basic. First, look over the last three months of your expenses. And this will give you a baseline for how much you spend across different categories. And during this exercise, you may realize, "Wow, I didn't even know I spent that much on entertainment. I didn't realize I was spending that much on children's clothing or groceries or takeout."
Sometimes even just that initial item that you do to get your budget set up will be enough to make you want to take action to improve your finances. And then once you do have your budget in place, once you know your budget baseline, you know how much you spend on all these different categories. Now you can start figuring out where you want to make those improvements.
Improve your spendings by limiting stress
Andrea: And as I mentioned before, you really do want to start small. So let's say you realize you're spending more than maybe a couple of hundred dollars on takeout every month. Well, instead of saying you're going to go cold turkey and cut it all out, you might feel deprived. You might get frustrated.
So instead you say, "You know what, I'm just going to cut out take out just one time a week and that will free up X amount of dollars." And that would become a habit over time and you'll realize you didn't even really miss it.
It's really the best way to approach your budget and to create financial improvements and will eliminate or at least reduce a lot of that overwhelm or frustration or stress.
When Should You Teach Your Children About Money?
Michael: What would you advise parents? When shall parents start teaching their kids about finance?
Andrea: Yeah. I think that this is such an important topic. First of all, we know that financial education is lacking in school. Maybe they get a little bit of introduction in high school, maybe a little bit in college, but it should start from elementary school. I mean, money is ...
We like to say that money isn't everything, but really you need money for everything.
So it should be part of basic education. And so, unfortunately, if it's not happening at schools, it should be happening at home. And remember the number one thing, your child learns from your behavior.
The number one way to teach your child how to manage money is to manage the money yourself really well.
And to talk about money openly and in a positive light. If all you do is complain that you don't have money, but then don't do anything to change it or that you always complain that you're in debt, but don't take actions to cut back on spending and to pay off that debt, your child is never going to learn how to overcome that issue either in the future.
So simple things as don't give in to every one of your child's requests. Also, have them participate in chores and maybe give them an allowance and salary, teach them about saving. Maybe you can match their savings.
...help them work toward a savings goal and then match that savings goal. So maybe they want to save up for a big toy, show them how to do that.
Take them shopping with you, take them bargain-hunting with you. I've taught my child that we only buy clothing that's on sale. So she always looks for the items with the red tag. And that's actually gotten me in trouble a few times because sometimes I do want to buy the things that are not on sale and I will get in trouble with my child.
But there are so many different things that you can do from a young age. You can show them how to use coupons, to their preteens and teenagers. Maybe they want those name-brand clothing to fit in with kids at school. And I get that. That's kind of a strained situation for parents to deal with because they don't want to give in, but they don't want their child to stick out.
Instead, show your child how to shop at thrift stores or online. There are so many used options, so they can really stretch their budget, get those name brands, but not spend a lot of money.
So again, it just starts at home and it doesn't have to be complicated. It can be fun, open conversations, teach them about budgeting, especially if your child asks for something. Instead of saying, "No, we don't have the money for that," explain why. Explain where the money is going instead, and then show them how you can do things without spending a lot.
Who Can Help You with Budgeting?
Michael: A financial advisor is someone who helps you invest money, right? But are there equally specialized people that can help you with budgeting, and where to find them?
Andrea: Yes. I mean, there are different experts out there. Financial counselors, there are, like you said, financial planners who help with investments. And perhaps, they take a percentage of the money that they earn you for managing your money.
But there are also fee-based financial planners. So you just pay them an hourly fee and then they can kind of run through all your finances and tell you where maybe you should focus on and how to create a debt repayment plan. So there are those options out there.
Your bank may offer some options. So that's a good place to start. Maybe your credit union. You could go online and just like finding different experts, even just like myself. I have a free budget worksheet on my website.
Just read more about budgeting and getting out of debt. There are so many great articles. There are so many great books. Your local library would be a great resource to find an audio or ebook. I would just say, educate yourself as much as possible.
You don't have to spend money to help yourself get out of debt.
But if you do feel like you want that accountability, then certainly maybe seeking out one of those fee-based financial planners could help create a plan for you. And this way you feel like you have that expert guidance.
What Online Tools Can Help You Do Budgeting?
Michael: If someone wants to start to do family budgeting. You just mentioned on your website there was a worksheet that can be downloaded. Are there online tools or apps for smartphones that can help do budgeting? Do you have any favorites that you would recommend to people?
Andrea: So there's a couple of different ways to approach creating your budget. So a lot of people want to go the old school route by actually writing down their budgets. And there's something I have to say about writing everything out. You feel so connected to the numbers that you're writing, to the tracking. It kind of gets really ingrained in your mind and you can stay focused on it.
So I do like using a spreadsheet. And of course, you could use a spreadsheet on your computer, so you don't have to actually write it out with a pencil or pen. You can just type it in. So you can use like I mentioned, the budget worksheet on my website's downloadable, and it has all the basic living categories where you can write your expenses, your income, your debts, and track it that way.
But you could use Google Sheets to find other budget templates. Otherwise, go online and go to a site like Mint. There are different apps like Mint does has an app or PocketGuard, or You Need a Budget is another great app. These apps help you to input all your financial information and they link to all your financial accounts.
So whether it's your savings and checking, your credit card, or your retirement accounts. Mint will do a really good job with this. They'll link everything and import it all into one place so you can get a quick snapshot and overview of your finances, and then you can also track your bills. It will also track your purchases in real-time. It'll alert you when a new purchase posts. And I feel like that holds you really accountable for every dollar you spend. And that's just a really great way to stay on top of your finances.
And another cool app to check out is called Honeyfi. And this one was created specifically for couples. And what it does is it helps two people manage their budgets together. So especially for today's couples who maybe keep separate bank accounts, because they're both working and just manage their finances separately. This would be a great app so you can still hold each other accountable for where your money goes and how you spend it.
How Much Money Should You Have in Your Savings Account?
Michael: Most of the people work day-to-day, earn their paychecks, salaries. How much should a person have in their savings account? How many paychecks are in their savings account, to feel good that they are financially protected?
Andrea: There are a lot of different numbers out there if you Google how much you should have in your savings. So it could be a little confusing and then you feel bad about yourself if you don't have enough.
The typical rule of thumb when it comes to having money in savings would be to have six to nine months of living expenses.
Now, these should be your essentials, because maybe Netflix could be canceled if you are going through a tough time. So just calculate how much it costs you to live comfortably and make sure that your family needs are met every month, and then multiply that for about six months, by six, to figure out how much you would need in your savings account. And this savings target would be how much you want to put away.
Now, I know that six months of living expenses can seem overwhelming for a lot of families out there and a lot of individuals who maybe don't have that much in their savings and then they get frustrated and then it just seems like a goal that they can't achieve, so they don't even want to start.
So that's why I usually say, you know what, start with one month. If you can get one month of living expenses saved, then you can move on from there.
...once you make saving a regular habit, it becomes easier to keep saving.
So maybe it's cutting back a little bit here and there. And remember to save money, you don't have to make huge sacrifices.
Begin by looking at your regular monthly bills. Are there services you're paying for that you're not using, or you don't need? Are you paying more for car insurance because you haven't compared it in the last three to five years? Chances are you're missing out on a better rate out there. And you could just run a quick comparison online.
So there are so many small tweaks you can make to your budget to save and then put that money towards your savings account. So again, it is going to depend on your own personal financial situation, but figure out how much you need to live on for each month, and just try to grow it as best as you can every bit, every month.
How to Save Money During Inflation?
Michael: Inflation. I mean, we are about to get into the inflationary market and what to do about the savings if we are in inflation. Do you have any recommendations?
Andrea: I mean, really when it comes to inflation, we're already seeing prices across the board going up on consumer products. Our savings rates are going to be affected. Real estate, all of these things. And the thing you have to think about is to really reassess your spending. And it goes back to what I was saying previously.
Don't spend on things that you don't need, to save money because the inflated cost is going to just be an additional waste to your budget.
And then when it comes to saving your money, think beyond just your traditional bank. There are so many great opportunities out there to make more on your savings. So could it be even just putting your money in an online high yield savings account? Look at investments. Is there a company that you feel really strongly about? Start investing a little bit into that company. Buy a few stocks here and there.
Unfortunately right now, if we are going into inflation, there's not much you can do other than just prepare yourself and get rid of the wasteful spending so that you are in the best position to manage your money.
How to Achieve Financial Freedom?
Michael: How can consumers achieve financial freedom?
Andrea: You know the most important thing when it comes to your money is to realize that it doesn't have to be a source of stress…
...you really should use your money in a way that can bring you so much happiness and joy. I mean, cut back on the things that are just cluttering your life.
We get so consumed with having a nice big house, a nice luxury car, fancy clothes, giving your kids toys, and extravagant birthday parties. But at the end of the day, those are things that you won't remember. Those aren't things that are adding value to your life, and the things that maybe matter more, like maybe going on that vacation and having those memorable, meaningful moments with your family.
Those are the things that you want to spend your money on and create security so you're not wondering how you're going to pay for yourself in retirement. I mean, these are things that we really should prioritize and focus on and cut out the rest.
And remember that you shouldn't compare yourself to others, especially with so much social media focus these days. You're only seeing the best highlights of people on social media, on Instagram, and on Facebook. And to compare yourself to those highlights is a disservice to yourself and your finances and your family.
So just unfollow the people who make you feel less than your best and just spend time with your family and focus your money there.
Michael: Andrea, thank you very much. Really appreciate you jumping in and sharing your ideas with our viewers. Appreciate having you on the show. Thank you.
The best way to take control of your finances is to start budgeting and cut unnecessary spending. As a money-saving expert says, money “doesn’t have to be the source of stress”. Practice the tips above to improve your financial situation, and you’ll quickly find yourself on the path to financial freedom.
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