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Extension Education Highlight: Budgeting ideas for the new year

A calculator and pen on top of a budgeting sheet.

Sariah Israelsen: This is Utah Public Radio. I'm Sariah Israelsen. Thanks for joining us for use for USU Extension Educational Highlight.

Alicia Nelson-Bell, program coordinator for the empowering financial wellness joins us this week to give some financial advice for this New Year. Welcome, Alicia!

First, I wanted to talk about money mantras, and why you use them — why they're important? And exactly what are they?

Alicia Nelson-Bell: Yeah, so a money mantra, essentially a word or a phrase that you'll repeat to yourself probably on a daily basis, or at least pretty consistently, so that it becomes a phrase that guides your decisions and your actions on a financial standpoint.

So, when you go to the store, and you're faced with some decisions that maybe might cause you to bust your budget, you can remind yourself of what your money mantra is.

Sariah Israelsen: And what is your favorite mantra to use?

Alicia Nelson-Bell: Yeah, so my favorite mantra to use is the power of yet. And this is based from a TED Talk that's called the power of yet.

Simply instead of saying, "I'm bad at this budgeting thing," or "I'm bad at this money stuff," you simply add the word yet at the end of it, and it helps open your mind up to being good at that thing, or continuing to become better at it.

So instead of "I'm doing bad at this budgeting," or "I'm not good at budgeting," say, "I'm not good at budgeting, yet."

An example from my life right now is we've been trying to do a no spend month as a lot of people are right now to kind of catch up from the holidays. And so last week was kind of rough, there were some good deals.

And so I ended up still spending a little bit more than I had hoped with the no spend challenge. And so I had to say to myself, I'm not doing good with this no spend challenge yet. And then helps me to remember that I could still do good with that.

Sariah Israelsen: I have never heard that mantra. I like it that; thanks for sharing that with us.

So, inflation is happening a lot right now. And a lot of us are focusing on the negatives of inflation. So, what are some positive things about inflation that we can look forward to?

Alicia Nelson-Bell: Yeah, so one of the biggest benefits of inflation is the savings and investing rates or dividends are being higher compared to a couple of years ago.

So, for example, an online savings accounts, many of them are averaging between three and a half and 4%. As far as the dividends, which is significantly higher than a couple years ago, or even your CD or certificate of deposit rates are a lot higher than they were even just a few months ago.

And so that's one of the main benefits. And then also there have been some others such as recently, they've upped the amount that you're able to contribute to a Roth IRA on an annual basis. So you're now able to contribute $6,500 annually, compared to 6000, to kind of help keep up with inflation.

And then another one is just that there's so many different opportunities out there. There's so many opportunities to earn.

And I like to look at these high inflationary times as times of high opportunity as well. You just have to get creative and be willing to try new things out there.

Sariah Israelsen: Going along with that, what is some really good advice you have for those that do want to invest this year?

Alicia Nelson-Bell: So a couple of things is to have a goal in mind. So, what is your timeframe? How much are you hoping to end up having your investment be at in the long run.

Next is to know your risk and your risk tolerance as well. So that will be determined a little bit based on your timeframe that you're looking to invest.

So if you're looking at your retirement investing, then for me, I'm still in my 20s. So I still have a long while until I'm looking to retire. So I could be a little more risky with my investments right now because I have more time to kind of ride the ups and downs of things in the market as well.

But then also just keep in mind that you might lose a little bit of money, unfortunately along the way, but you may also on the other hand, gain money as well.

And then it is important to understand what you are investing in and understand how they work as well. Don't just say, "okay, I'm going to go invest in a mutual fund because my neighbor is doing it or the social media influencer said that I should invest in mutual funds or in this risky stock."

That's not a good reason to be investing in different things, but you should understand how those things work as well. And then ultimately, be investing for the long term.

Really don't do the day trade because that's going to be pretty risky. And you may lose more money that way. And then you also have different tax implications by day trading.

So go for the long term, and then you will be able to ride those ups and downs better.

Sariah Israelsen: Thank you so much for that. And what advice do you have for those that, especially this month after the holidays of spending, how do they reward themselves with their money, but also still stay within their budget?

Alicia Nelson-Bell: Yeah, so definitely have an amount planned out in your budget, your budgets, ultimately, your spending plan, so plan out a few dollars, even if it's just five or $10 in the month that you don't have to feel bad using on something that you enjoy.

Even if it's $10, throughout the month that you're able to go get ice cream a couple of times, or whatever your favorite tree is. So I have a plan for it so that you're still able to reward yourself but not go overboard on it.

Sariah Israelsen: And I have another question. Why do you like calling it a financial plan more than just a budget?

Alicia Nelson-Bell: A budget oftentimes has a pretty negative connotation. And a lot of people think of it as being pretty restrictive. But I'm calling it your financial plan, or your spending and savings plan helps to make it sound and feel more like you are in control of your finances, rather than letting them control you.

Sariah Israelsen: What would you say is one of the biggest things that keeps people in poverty right now?

Alicia Nelson-Bell: Yeah, that's a great question. I would say that there's a couple of different main things that keep people in poverty.

First of all, I would say that that is their mind that that they have. And oftentimes, people that are in that situation are focusing a lot on what is out of their control, and isn't oftentimes they're focusing too much on the things that are out of their control, rather than the things that are within their control that they can probably do something about, such as even just their daily actions that can help with increasing income, decreasing expenses, or even simply educating yourself more.

There are so many different great resources out there, that people can take advantage of that can help in situations like that. And oftentimes people just aren't aware of all that's out there, they can be helping them.

And I'd say the second other thing that keeps people in poverty is just simply not knowing what's out there to help them to improve their situation.

Sariah Israelsen: What are some simple tips, you could help someone change that mindset and those daily things that they can do to get out of poverty?

Alicia Nelson-Bell: I would say definitely just educate yourself and also get creative. There are so many people that I've heard, say, "Oh, my job just isn't paying me enough."

Consider asking if you can get a raise or see if there are other things that you can do to make money, such as using your hobbies to help bring in income.

There's so many really, I should say, legal ways to bring in money these days. Obviously, there's the ones that we want to kind of avoid that are the illegal ones, but just get creative.

And as you kind of try to think outside of the box, it can help to kind of break that mindset of, oh, man, my situation is so bad, because of all these other things that are really outside of your control.

Sariah Israelsen: And for the younger generation that's just starting to come and move away from their parents and get their own finances in their own hands, what would be a good time for them to start building that credit, or to get a credit card or different things like that?

Alicia Nelson-Bell: Yeah, so as far as a good time for opening a credit card, I would say, is once you understand credit cards and how they work. So take some time to read the fine print and understand what you would be agreeing to.

And then also, it's important to have a budget first before you get a credit card, and make sure that you are committed and able to pay your credit card off each month. And that you're not charging more on your credit card than you can keep up with.

Because if you keep carrying a balance from month to month, that's when you can kind of have things spiral out of control, and then you're going to be paying those high interest costs. Right now the average credit card when you carry a balance from month to month is about 19%.

And that can really add up a lot. And not only is it going to be costly, as far as the interest costs, but then also your credit score can be affected as well, especially if you were to carry too high of a balance on your card.

And so definitely only be committed and able to pay your card off each month before you take one out, so know what you're going to use it for, kind of commit to it. If it's going to be like those things that are consistent payments each month, then make sure that you have money to cover those each month as well.

Sariah Israelsen: What would be a good thing to look for when choosing between credit cards?

Alicia Nelson-Bell: Yeah, so oftentimes, you can find a good credit card that meets your needs without having to pay an annual fee. So I would say that's one thing to be looking out for.

Because those annual fees can be pretty costly, upwards of 100 to even $300 Right there. Also just look for what meets your needs.

What are you hoping to get out of a credit card? Are you looking to get miles? Are you looking to get cash back? Are you just simply looking for one that will help you to build your credits, and then kind of pick one accordingly that will help you best meet your needs.

Sariah Israelsen: We were joined by Alicia Nelson-Bell, and thank you so much for coming on again. And make sure you guys join us next week for USU Educational highlights and we'll see you then.