Fast fact, Americans spend approximately $1,000 on Christmas each year, with 71% of holiday budgets assigned to gift buying. I'm Drew Thomas, and you're listening to Bank Chats.
All right, today we're going to be talking, budgeting on the podcast. Very excited to talk about this, because this is something that affects so many people, it affects every single person really out there that has a house or rents a place or has a car or is basically just living life, right. So, the average household right now earns about $94,000, in 2022, before taxes, and spent $72,967, according to a survey by the most recent Consumer Expenditure Survey. That seems like a high number, and we're going to talk a little bit about where those numbers come from, and how you can budget and all that happy stuff. It's going to be a really good conversation and with me to have this conversation, because I can't have it alone is Kerri Mueller. She is the Senior Vice President of Retail Banking at AmeriServ, and I want to introduce her and, hi, how are you doing today?
Great, Drew. Thank you. Absolutely.
So, tell me a little bit about yourself and where you, where you come from and what your background is. Sure.
So, I've been in banking, probably for a little bit over 30 years now. And I received my bachelor's degree from the University of Pittsburgh at Johnstown. And a few years later, in about 2011, I went back and got my masters, and I've been in banking since then. And I pretty much have been in every position of banking, so that has definitely helped me be well rounded as far as being a branch manager of a branch and working with customers regarding this very subject to, you know, to being able to manage now 17 branches altogether.
So yeah, so managing 17 branches, I'm sure you talk to a lot of customers. I mean, you know whether personally or through your branch network, I'm sure you've heard stories and things like that about people. What are kind of, what are some, well, let's start with what budgeting is. Because I think a lot of people think that budgeting has to be a very complicated process. Is that true? Is that not true? Like let's, let's talk a little about the basics of what it means to have a budget.
Absolutely. So, a budget is something that most people need it in any terms. So, it's a way of seeing where your money is going each month, and it can help you feel more in control of your finances, make it easier to save money for goals. The trick really is to figure out what works for you. And that's what I found, I think most rewarding whenever I work with customers, as far as, you know, whether they come to me and you know they're in debt, or they want to start a budget because they don't want to go in debt. There's always a way to figure out or a tool to figure out and how to be able to help them. And it honestly does not matter what age you are, whether you're just starting out or whether your retirement budget is everything at any stage of the game.
Yeah, I would imagine that. I think a lot of people don't, don't think about that. And that maybe I didn't really think about that either. But as you, as you get to your retirement age, you're not going to have that consistent income, right. So, maybe budgeting actually becomes even more important at that point.
And you're exactly right. One of the relationships that I established whenever I was a branch manager, and I'll never forget this, was a couple that was in their 70s. And they came to me because obviously, you know, they had both retired, they were working on a limited income. But in the past few years, they had ran up their credit card debt, and they still had a mortgage and so forth. And they just couldn't make it. So, we sat down, and we talked, and we looked at different ways on how we could maybe consolidate a little bit of their debt to be able to increase their cash flow so that they could have more disposable income. And I was able to do a home equity loan for them and consolidate all of that debt. And they were so thankful, you know, the next day that I got flowers from them, because they were just, they were just elated. They could relax and they could live their lives now.
I think that's great. I mean, and I don't think that people sometimes recognize just how much of a relief it can be to sort of know where your money is where it's going, no matter how much your budget is. You know, just because you're making, you know, if you're making $94,000, which $94,000 sounds like, was it $94,000 or $96,000? $94,000 a year is the average in the United States. That has to be artificially raised by some of these people like Elon Musk or something. I agree, billions of dollars. I don't imagine that that's a pretty common thing and in a lot of towns, but regardless of how much money you have to work with, at the end of the day, knowing where it's going and how much you have allocated, every bin has got to be a relief.
And, and I think that's true. I think, you know, one of the fears that we have, even myself, is your right, no matter how much money you're making, it, if you don't know where that money is going and at the end of the month, you know, you're living paycheck to paycheck, it is very, very difficult, you know, to try and pay all of your bills, and then still have money left over.
Yeah. So, let's talk about some common misconceptions about, about budgeting. Right, because I think sometimes, I don't know, I think sometimes whenever people say like, well, you need to have a budget, it almost comes across as an accusation, right? You’re right. Like you're not managing your money properly, you need to have a budget. But what I mean, budgeting really is as simple as what you were just saying, it's really just a matter of sort of writing down or taking note somehow of how much you've coming in, and how much you have going out, right? I mean...
And that's exactly right. And we'll get into that a little bit later, but it really is. It's about figuring out, you know, how much you bring in on a monthly basis and tracking your expenses. And then what you have leftover, and if you find yourself in the negative at the end of the, end of completing your budget, you're going to need to make some changes. Yeah. And, you know, if you find yourself that you have some income left, then you need to decide on how you want to, you know, split that up. Whether you want to, you know, put that towards some short term or long-term goals. But I think the biggest thing is, is having a budget decreases your, I guess, opportunity to overspend and, and really just make purchases that you really don't need. Yeah.
So, if I was, so let's talk about starting a budget. So, assuming that I'm a person that has never had a budget before, and I think we've all been there at one point, I know, I was whenever I was younger, I sort of just flew with whatever I got in my paycheck. And you know, at one point I was working commissioned, so my paycheck could have been very different from, from pay period to pay period, right? What are some of the like, do you have to use, I mean, obviously, there's a lot of budgeting tools out there, like you can use online tools, you can use online banking tools, you can use software, what's the best way to get started?
To be honest with you, you're exactly right. I mean, if you Google any type of budget tools or calculators, there are tons of things out there that can help you. And some are, some are very easy, some are free, but it can also get very complicated. But my recommendation would be that if you're starting out for the first time and creating a budget, like, and I'll be honest with you, whenever I first started a budget, I started with an Excel spreadsheet and by hand, and I still use that by hand. And I have a binder and I put all my bills in there on a monthly basis. And I pay my bills twice a month whenever I get paid. And it's as simple as having a piece of paper and writing down exactly where your money's going and knowing where and what bills need to be paid when.
So, I mean, that's, that's comforting in a way that you know, despite what you might see online or in the media, you don't have to get some big, complicated program. I mean, it literally can be a matter of writing down two columns on a piece of paper and how much you have coming in and writing down what you have going out.
You're exactly right. I mean, we have you know, Dave Ramsey and Suze Orman, Suze Orman, she is always on TV. And you know, they're always giving financial advice, which is great, and you can listen to that. But for some of us, it could be over our heads, and we might not be able to, you know, comprehend. And so sometimes I think that the simplest way is the best way.
So, obviously just writing down a list of what you have coming in and what you have going out isn't, that's a good starting point, but you kind of have to have a goal, right? I mean, so your, what is your goal of a budget? Is it literally to just make sure that you're coming out even on both sides every month? Is it, is your goal to have a little money left over, like what should your goals be, ideally, when you're starting out building a budget?
Well, I do think that, you know, you need to come out at the end equal. I mean, obviously, if you're in the negative, then you need to start looking at your expenses. But, you know, the biggest part is, I mean, the best solution would be if you came out with some extra money that you had, and you could decide what to do with that, whether you wanted to save that or whether you were going to use that for a special purchase. But I think you know, the first step in calculating your budget is to make sure that you're using your net income and really the foundation of that is that's your take home pay.
Okay, yeah, I was gonna say let's, let's, let's, let's define net income, right? So, Right.
So, when you look at all the deductions that come out of your pay, it's just the opposite of like, when you apply for a loan, they take actually your entire income.
They take gross income. Yeah, exactly. We've had, we had, we had an episode about loans, and we talked about gross income, right.
But technically, that is not what you bring home. So, that can be a little bit of a conundrum. Because when you consider your take home, pay it's your total wages of salary, minus the deductions for your taxes, and anything else that you might be putting towards retirement or health insurance. So, focusing on your total salary instead of net income, could lead to overspending because you think you have more available money than what you really do?
So, just so, so, just using as an example, let's pretend I make $50,000 a year, right? So, I make $50,000 a year. But that's, that's what the, that's what my employer tells me that I make. That's exactly right. But, and that's what I would tell a loan officer or something, if I were looking to do a mortgage, or looking to take out a loan, that my gross income is $50,000 a year, but my net is $50,000, minus all of those pre-tax deductions plus my taxes, right? So, like my taxes come out, things like that. So, what you get on your paycheck, is really what you want to be looking at when you're starting your budget. Absolutely. Okay. Absolutely. So, and some people now, now here's the other thing, like you said, you get paid twice a month, correct. So, some people get paid twice a month, some people get paid bi-weekly, some people get paid once a month. So, that also I think, has to factor into your budgeting, right? Because if you're the type of person that only gets paid maybe once a month, you got to make that stretch for four weeks.
That's exactly right. And that can have a big effect on, on your bills. I mean, whether they come due, you know, in mid-month, or whether they come due at the end of the month, you need to plan, so you actually need to plan a month ahead of time. Right? In order to have the money to pay your bills for the next month.
Yeah, because you're not paying your electric bill for last month. You're paying it for next. Exactly, yeah. So, and I can speak from some experience in that, you know, I said before I worked, commissioned sales for a while. And you know, especially around this time of year, we're recording this in December, right? So, the holiday season and stuff, man, I had more, I thought I had more money than I ever knew what I was going to do with and that was great. But I had to also think about the fact that in February and March, I was going to be making a lot less, and I still had to pay my bills. So, you have this sort of like rich man syndrome, where you get paid, and you're like, oh, I've got all I got more money than I know what to do with. And then, you know, three weeks later, you're like, oh, geez, I can't pay my car insurance, right? So, so I think, especially in those situations, having a budget where you literally know, like, I'm putting this amount of money into this bin, this money into this bin, you can sort of tell yourself how much money you can spend every week, while still being able to pay all your bills.
And I can't agree more, I think a lot of us have, have an idea that we have all the money, disposable income is really what it's called what's leftover. And, you know, we'll go shopping, and we'll buy that sweater, or we'll buy, you know, an extra purchase, you know, could be anything, a TV. But what happens is, you're exactly right, those bills come due, and you've already spent that money. And so, I think that's why it's so important to really take a look at your budget. And once you know how much money you have coming in, the next step is to really find out, okay, what are my expenses now? Where is it going?
So, what are some good, are there any good tips or methods for sort of doing that, for sort of setting that money aside ahead of time? You know, there are some methods that maybe people can use that would be maybe more tangible than just writing it down on a piece of paper and trying to be disciplined enough to not spend the money?
Sure. I mean, to explain, to first to explain your expenses. I mean, there's two kinds of expenses, there's fixed expenses, which are basically, you know, those expenses that you have every month that includes your mortgage, your utilities, you know, even groceries, I mean, these are the things that you know, fixed expenses that you need to have in order to live, right?
Food is important. Absolutely, absolutely. If anybody has seen my picture, they know that food is important.
So, the other part of the equation is variable expenses. And variable expenses are something that can change, and they change from month to month. They could be entertainment, they could be gas for your car, I mean, anything like that. So, I think this is an area where we possibly could, in the end, find opportunities to cut back on. I think one of the most important things and I think I heard in one of the podcasts before is that the, probably the most important expense, fixed expense that you want to pay first is your mortgage, right? Because you need a place to live. And normally your mortgage and your car payment are going to be your two most important expenses that you want to pay. And then you can look at all the other areas that you may want to cut back.
That's a good point because like you said, you need a roof over your head, whether you're, whether you're paying a mortgage, or you're just renting whatever it is, you need to have a roof over your head, and then transportation, you know, people tend to think like car like, oh, well, I can, I can hold off on the car. But if you don't have a car, now, how do you get into work? Right, you either have to take a bus, you have to take a train here to public transportation, that costs money. So, having that, you know, working vehicle and being able to be you know, get yourself from point A to point B, that's, that's an important thing.
Yeah, that's exactly right.
So, let's talk a little bit about, I’ve heard about something called the envelope method, what is the envelope method?
So, as you mentioned before, there are so many different tools and apps out there that can help you budgeting and the envelope method is basically where you title an envelope for, you know, your different expenses. And so, each month, and a lot of the older generation, whenever they receive Social Security, tend to come into the bank, and they pull out their money, and they use that envelope method. So, they put money in there in order to pay their rent, and or mortgage in one envelope. They put money in there, in another envelopes who pay for utilities, they put money in another envelope to pay for groceries, and they the, the final envelope would be for any type of entertainment or anything else that might come up. So, once that money is gone, right, you know that you cannot spend any more.
I mean, that's, that's a, it seems like a very effective way to do it, because you can also kind of see when your money is getting a little low. And maybe you, you know, when you go grocery shopping, maybe okay, maybe I don't buy two bags of chips, or that extra thing is soda or something, maybe I buy just like the staples, because I can see that my money is getting a little lower.
That's exactly right. I mean, you have a fixed amount of money for your groceries, and you need to stick to that.
So, that was, that's a really good method for people that still like to use cash. Correct, right. But let's be honest, not all of us use cash. Right. So, what other kinds of things can we look at for people that maybe are more like, debit card credit card type, you know, folks?
So, there's an, there's, there's a lot of other methods. And one of the other methods including myself that I use, I have a house account. So, again, you know, if you have a bank, and right now, I mean, direct deposit is probably most popular in how people are receiving their pay at this point. But to open up, maybe one or two more different accounts and name those accounts, whether it be a house account, or whether it be a savings account. And when your paycheck comes in, you can either automatically have that money be transferred to those different accounts, or you can do it manually. But those accounts, then how's that money for those particular expenses. And so rather than pay cash, you can write a check, you can use your debit card to pay those types of bills as well.
So, speaking is a person who's worked in a bank for such a long time, right? So, as far as having those, like, do you have to, you can usually find some sort of a free version of an account, right? Or like a, like a free checking or something like that, savings accounts, things like that? Because you don't want to end up you know, feeding yourself into, you know, an additional cost. But most of the time there's a, there's an account at your bank, you know that you can have multiple versions. That's exactly right. Okay. So, let's also talk a little bit about something called the 50/30/20 rule, which you mentioned, I don't know if you mentioned it on the mic, but you mentioned it before, what is the 50/30/20 rule?
So, the 50/30/20 rule is a budgeting technique that actually divides your take home income into three categories. And it's a simple way to track your spending. So, basically, what the 50/30/20 rule states is that 50% of your income goes to your needs. And those needs might be obviously your rent or your mortgage, your car payment, utilities, groceries. 30% is going to go towards your wants. And that's going to be, whether it be shopping, vacations, streaming services, and then the other 20% is going to be dictated by savings or your debt. So, it's going to be either like an emergency fund, or it's going to go towards retirement, your child's education, different things like that.
Okay. So, you said it's, it's what is it, its needs, wants, needs, wants, and then sort of emergency. Okay, so that makes sense. I mean, because that, that's another thing that I think a lot of people tend to forget about is paying themselves if they can. That's exactly right. And it's not always easy to do, especially because you're the first person to let yourself off the hook whenever you say, well, I know I can live, future me can deal with, with that problem. I want my, you know, Starbucks coffee, now. You know? But ultimately, it's a little bit about being disciplined and saying, no, I have to treat myself like a bill. You know, and, and I have to pay myself a certain amount of money, even if it's $5. Because that savings could really come in handy down the road someday. Absolutely.
Absolutely. I mean, the rule of thumb is, is that, you know, any type of savings account, they tell you that you should have twice your salary, you know, in a savings account, and you know, that can build fairly quickly, especially, right now, obviously, with the interest rates they are. Yeah, that's a whole other subject that we could possibly just hit upon. But again, you know, paying yourself first and putting that money into a savings account, and seeing that savings account grow, gives you a feeling of accomplishment, and really, you know, it allows you to spend that money then on what you need to.
So, I think we've kind of we've, we've sort of touched on this a little bit, throughout our normal, or throughout the discussion we've had so far. But if we can talk just a little bit about some of these challenges, so like, what kind of, in your experience, what are the biggest challenges people have, when, when starting a budget or trying to stick to a budget?
I think really, sometimes whenever you are trying to adjust your spending to stay on a budget, it can be really hard, because I think sometimes you feel very restrictive. And sometimes you feel like, okay, I can't do the things that I want to do. And that obviously can have an effect on you. But the one thing that I can say is, you know, you need to constantly look at your budget, and you need, just because you, it's not set in stone. So, just because you, you know, one month, you set your budget for the first time, the second month, you need to relook at your budget and make sure that you know, everything is still obviously working because there's so many other variables. I mean, you could get a raise at work, you know, expenses might change, and goals are changing. And so, I think the biggest thing is just being able to be flexible enough to change your budget the way you need to.
I think too, sometimes after you do a budget for the first time, you get through a month, and then you realize that there were five or six things that you pay money out to every month that you didn't remember, when you first added it to your budget, you kind of have to go back and add those things. That's exactly right. We briefly, I know you haven't had a chance to hear this yet, but we, we just had a conversation the other day on a, on a Two Cents mini episode about, about subscriptions. And those fly under the radar so easily. When you have things like Netflix and Hulu, and maybe it's a, you have your cat food on subscription with Amazon or whatever it is, but those they kind of fly under the radar, and they just sort of auto debit. And then you forget to add them to your budget, and then suddenly you've, you're looking at your budget numbers and you're going to why am I $50 shy? Well, it's because you have all these subscriptions coming out and you didn't think about them. So, you said about like having to sort of, you kind of can feel restrictive sometimes because you're used to spending money in a certain way. And then you have to sort of cut back. Is it kind of like a diet? Like if you fall off the wagon, maybe it's you don't just throw the budget out the window, you kind of just have to just okay, I slipped a little bit, I'm going to try to refocus.
That's right. I mean, that's, that's a very, very good analogy. I think that, you know, because you feel restrictive, and if you do slip, if you do kind of, you know, maybe slip for a month and you spend a little bit more than you need to, or that you should, it's okay, it's okay. I mean, you know, a budget is something that, like I said, is not set in stone. And sometimes emergencies come up, or sometimes maybe, true, just another want comes up that you want to spend money on. But in that case, if you do decide to do that, or need to do that, then you're going to need to make sure that you make up for it the following month.
So, and again, I know you know, the weird thing about a podcast is we're living in a certain time, but then, you know, people are listening to this at a different time. But we're recording this around the holidays, and I think that's another time when people tend to overspend. So, are there anything, is there anything out there that you can think of that, you know, may be a good way to try to sort of, sort of anticipate that, that holiday growth and spending, that can try to help with something like that?
Sure. And again, you know, that comes into a savings account. And a lot of banks even have Christmas clubs where you can put money into a Christmas club and that money again can automatically come out of your paycheck, so you don't even see it. You don't even know that it came out and it automatically goes into the Christmas club. And then every year, you know, a check is drawn, or it's transferred into your checking account. And it could add up depending upon what amount of money you decide to put towards it every month, or every pay. It could amount to a couple of $100, and that could be your Christmas fund. And then another way, interestingly, just a few weeks ago, so I bought two books that I saw advertised, and they have little pockets in them, I bought one for my daughter and one for myself, okay, and there's, they're little plastic pockets, and it tells you how much to put in there. Because really, you're not going to miss it, if you have, you know, a few bucks in your wallet, you're not going to miss that. So, you start out small and you may put, I don't know, $2 or $3 in the first one, and that's your first page of pockets. And the more the further you get in the book, with the pockets. Right? The higher get so like it, maybe it's $5 the next month. And by the end of the book, that right there is almost $500, oh wow, that you've, you have saved, and you didn't even realize it. Yeah. But $1 here, $5 here, you know, again, just like you said, we don't, we don't really, I guess comprehend how much in a month we spend when we do go to Starbucks every single morning, spend that money on coffee, or, you know...
Going out to lunch. Yes. I mean, you know if you're, it sounds really like a dumb thing. Because you're thinking oh, well, you know, how much is my $6 or $7, that McDonald's or Burger King really costing me but when you think about it, if it's, if it's $7 a day, five days a week, that's $35 a week, that's $140 a month. And I'm impressing Kerri with my quick math, mental skills. But that's $140 a month you're spending on lunch where, you know, if you bought some, some chipped ham, and some buns and whatever, and I'm letting my Western Pennsylvania come through with chipped ham. But you can I mean, that's, that's a way to cut back and you're still eating lunch, but you're not necessarily spending as much money.
And that's a great example. And people tend, you know, when we look at it, we think oh, five bucks here is nothing right? But, and that's how most people look at spending money. They don't really add it up over time. But when you do it in the way you just did it, it really does amaze you on how much money you're spending on, on, you know, things that you possibly there's another way of, of getting around.
And going back to that sort of diet analogy, like, okay, you know, maybe you don't go cold turkey. You know, if you're used to eating lunch out every day, you know, maybe you say okay, well, next month, I'm only going to eat out three days a week. You know, and then the ones after that maybe two, maybe one you know, so you treat yourself you give yourself that sort of like permission to sort of spend one day but you don't have to go like just cut it off at the at the limb, and that's well that's it, I can't do that anymore.
And I think you're right. And I think that that's important whenever you're just starting a budget. It's not as though, and I think like I said, when we go back to feeling restricted, when you first start a budget, it doesn't mean that you have to account for every single dollar that you're spending. I think when you start a budget, you know, obviously you want to list your expenses, you want to list your income, but it doesn't mean that you have to stop everything, right? Anything or like whether you want, if you want to go get a coffee maybe once or twice a month, you can do that and kind of just back off gradually, but eventually you're going to see exactly, you know, what it is and how much you can spend each month on those kinds of things.
Yeah, so let's talk a little bit too about some, some, some ways that maybe you can overcome certain hurdles, like for example, like, it's not even so much a hurdle, but just life changes. You know, I mean, I think it's important too, that you know, you set a budget, and then kind of like you said, like, you've got to look at it every month, especially when you're first starting. But after you get sort of comfortable with a particular budget and your, your income and so forth, you kind of fall into a pattern. And then something changes, like you get married, or you have a child, right, or something happens where you, where you all of a sudden have a whole set of new expenses that you never had before. So, one way of course, is to try to cut back, right, which we've kind of talked about, but I think sometimes the other side of a budget is well, maybe I need to look for some additional income. Right? So, what like, you know, does that mean you know, changing your, your, your everyday nine to five does it mean adding a side hustle, like how what are some ways that maybe like you can adjust for major life changes?
Right and, and I think that that's important. I mean, obviously I know a lot of people that do have side jobs that can possibly supplement your income. But that can be hard, right? That can be hard on you, that can be hard on time, especially whenever you have a family with small children. I think one of the biggest things that you can do when you start your budget, as another step is to set realistic goals. I think, you know, once you start sifting through all of the information that you've tracked, you start making a list of your short term and your long-term goals. And so throughout that budget, you know, your short-term goals might be like, I don't know, three to five years. And that might include things like setting up an emergency fund, or possibly paying down credit cards, but your long-term goals are where you're looking at maybe getting married, or you're saving for retirement. So, you have to incorporate those into your budget. So, that, that's another step. When you sit down to make a budget, I think that's just as much, it's just much as important as just determining where your money is going at that time.
So, that kind of goes back to making yourself a priority to a certain extent, and just understanding that your life is not always going to be exactly what it is today. That you even when you're starting a budget, you know, if you think that's something that might be in your future, try to start budgeting for it now.
I mean, I think goals are everything. And you know, we have goals in every aspect of our lives, whether it be career, whether it be you know, whether it be anything, it definitely could be incorporated into a budget as well. Yeah.
So, you know, if you were, other than listening to this, you know, incredibly useful podcast, what, what kind of resources, would you recommend somebody look into if they were looking to start a budget? Like, is there, is, are there any websites or apps or books or anything like that, that you could sort of point people to?
Yeah, I mean, again, Drew, I think that anytime that you can, I mean, honestly, if you just go out on the internet, and you Google, there are tons of free apps out there, I know that there's apps on bank websites that you can also use. But again, sometimes the simplest form is the best form. And that's what I choose, I'm not using an app, I'm just, I'm using an Excel spreadsheet. And sometimes, you know, again, it works for me, but I think that the biggest thing is just finding out what works for you. And there are tons of books out there on budgeting. And, you know, I know that we have done classes, and there's different educational tools out there too, that you can use. And especially important to for you to teach your children just as much as you know, when you're sitting there doing a budget to have your, your teenagers or however old they are, if they're, they need to be old enough to understand the value of money, but to have them sit down with you and to really understand exactly what it is and where that money is going.
You know, that, that is I think, that's a fantastic point, because we're sitting here talking about this in terms of okay, well, you know, there are people that literally don't understand how, or have never had to create a budget before and they're adults. And whether it was because their parents just felt like that wasn't something they'd be interested in learning when they were kids, or maybe their maybe their parents didn't have a budget either, and they, they were sort of floundering financially. I think that's a really good point to make, that incorporating your kids and teaching them the value of financial education and financial literacy is a really important thing.
You know, I remember whenever I was young, you know, like, we always heard our parents say that, you know, money doesn't grow on trees, right? Yeah. And, and I think today, I think a lot of our teenagers, you know, just think that they can, they can go out and they can buy what they want, and the parents can usually fund it for them. But in my experience of teaching Junior Achievement in high school, there is an exercise that we do with the students, and we basically have them choose what, what we think that their life is going to look like, right? What kind of car do they want to drive, where what do they really want to do in their careers, what kind of housing do they want, do they want some kind of loft or, you know, a terrace apartment or something? But by the time they get done, there's numbers that are, that are affiliated with each one of those, and when we take the income, when they take their income of what they're gonna make, and they take the expenses, they find out that they're, not only do they have they don't have any money left during the whole negative and so it kind of wakes them up a little bit as to okay, this might not be as easy as I thought it was going to be. Yeah.
And, and too you know, we talked at the very beginning of the episode about you know, that, that average annual income of like $94,000 a year, but, you know, that, that also depends a lot on where you live. You know, if you're the type of person who grew up in a small town where the, you know, the local population, maybe, maybe in your town, your, your, your average salary, or the average income for the family was maybe a lot less than that. And you want to be the type of person that says, well, I want to live in New York, I want to live in Chicago, I want to live in, you know, Atlanta or something. Suddenly $94,000, even though that might be twice what your parents made is still not enough.
That's exactly right. I mean, the cost of living in different areas can really, really have an effect on, on what your budget is. I mean, that dollar may not go as far as what you, what you thought whenever you were growing up.
Yeah, I mean, we, you know, we're in Pennsylvania, and I was reading something the other day that said that Pennsylvania ranks 33rd in rent cost, okay. So, and 33rd, meaning that, like 51 is the most expensive, right? So, including, including DC, Pennsylvania is 33. The average rent, monthly rent in Pennsylvania is $1,660 a month. And I can tell you that around here, that would be just, that would be a really nice house payment. It certainly would be. But you know, depending on where you live, that, that can be a big deal. So, again, that $94,000, if you're if your rent is almost $2,000 a month, that's not as much so sometimes maybe it's a matter of also being realistic about where you're living, and, and what kind of job you want to have where, you know, sometimes if you want to be an actress, you want to be a, you know, you want to be a racecar driver, you, you have to live in a certain area. Right? But most of the time, there's some flexibility in terms of well, I can do this, and maybe, maybe remote work comes into play, nowadays that sort of thing. I don't know. But I think your budget also depends on, I think it's a long way round of saying I think your budget has a lot of where you are.
Absolutely. Absolutely.
Well, I'll tell you, I think we kind of got through most of, most of what we were going to, what we wanted to discuss today. Was there anything else that you can think of that maybe we, we want to make sure that we share with, with listeners before we sort of let them, let them go?
No, I think I would just as a reminder, I think that you know, just sitting down and, and really just getting started probably is the most important step in determining your budget. And, you know, starting out by listing your income, listing your expenses, and, and finding out exactly where you stand, and then reviewing your budget regularly and setting goals. Those are some of probably the most important things that we talked about in setting a budget. Especially in today's economy when the inflation obviously is so high and your dollar doesn't go as much, I think is now probably the most important time to really sit down and really take a long look at, at your money. Yeah.
And that's, that's, that's probably a conversation that we could have another entire episode on the whole concept of inflation and all that, but it is, it's, it's crazy, crazy how much you know, things cost today, compared to the way they were even five years ago. I mean, the pandemic just didn't real number on the economy.
It really did. It really did. And, and your dollar just certainly does not go as far. And so when you go to the grocery store, and you know, you budgeted, you know, $100 you know, to get your groceries and it actually, you know, right has come to maybe $150. Yeah, that's $50 that you didn't budget for. So...
Yeah, well, that goes back to what you said, you gotta, you gotta keep on top of your budget too.
You can't just set it and forget it. Right. You need to track it regularly.
Yeah, what was it's not Ron Popeil. It's not set it and forget it. You know, Kerri, thank you very much. I really appreciate your time today; I know that you're a very busy person. But it's, it's really nice to be able to get your insight on some of this stuff. And I think that people really can benefit from, from a lot of what we talked about today. There are a lot of articles, if you visit ameriserv.com, we have a series of financial literacy articles out there under our Financial Library section that you can visit. There's all kinds of stuff, there's stuff in there about the 50/30/20 rule, there's stuff in there about household budgeting as a general concept, so please feel free to check those out. They're free, you can go to the website, you can look at them. You can, there's even coaching sessions, you can kind of be more interactive with that sort of thing. And but yeah, thank you. Thank you very much for your time.
Thank you for having me. Absolutely.
This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts with a goal of helping to take some of the mystery out of financial and related topics, as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast and any resources available for download from our website or other resources relating to bank chats, is not intended, and should not be understood or interpreted to be financial advice. The host, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The host of Bank Chats is not an attorney, accountant, or financial advisor, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation. We want to offer our sincere thanks to Kerri Mueller, Senior Vice President of Retail Banking at AmeriServ for providing her time and expertise on the show today. Ultimately, the key takeaway from our conversation is that any budget is better than no budget. Start small, stick with it, and don't be discouraged if you fall short. If you're comfortable with using budgeting software, that's great. But a few envelopes and the ability to dedicate a short amount of time each month to planning out your spending are all that's really needed. We also appreciate all of you who have liked subscribed and follow the podcast. If you haven't yet done so and you like what you're hearing, please consider helping the show by subscribing. Plus, you'll never miss a new episode. AmeriServ Presents: Bank Chats is produced and distributed by AmeriServ Financial Incorporated. Music by Rattlesnake, Millo, and Andrey Kalitkin. Production assistance by Jeffrey Matevish. Previous episodes can be found on ameriserv.com/bankchats, or by finding the show on your favorite podcast app. For now, I'm Drew Thomas, so long.