NerdWallet's Smart Money Podcast

Episode: Live Financial Planning Session: Expert Budgeting and Spending Tips
Release Date: December 30, 2024
Host: Sean Pyles, Sara Rathner, and NerdWallet Personal Finance Experts

Introduction to the Live Financial Planning Session

In this special episode of NerdWallet's Smart Money Podcast, hosts Sean Pyles and Magda Domini welcome Brinker, a listener from Chicago, to participate in a live financial planning session. This episode marks a departure from the usual format by offering personalized financial advice based on Brinker's real-life financial challenges.

Meet the Guest: Brinker

Brinker, a 30-year-old executive assistant residing in Chicago's South Loop, shares insights into her personal life and financial journey. She works in affordable housing and enjoys spending time with her dog, Penny, and her family. Brinker highlights the contrast between her professional environment surrounded by wealth and her personal upbringing marked by financial instability following her parents' divorce.

Brinker's Financial Background and Upbringing

Brinker discusses how her family's financial struggles after her parents' divorce have influenced her money habits today.

• Quote [06:59]: "I ended up moving into a complex called River City... I used a company called the Guarantors... [which] drained all the money I'd saved over Covid."

Brinker reflects on the disparity between her private school experiences and her home life, leading to an internal struggle with money management and aspirations influenced by her environment.

• Quote [08:29]: "It's definitely altered my little lizard brain, unfortunately. Some for the good, some for the bad..."

She acknowledges the aspirational standards set during her upbringing, which drive her career ambitions but also contribute to financial challenges like lifestyle creep.

Current Financial Challenges

Brinker candidly reveals her struggles with budgeting, debt, and impulsive spending.

• Quote [09:44]: "Ooh, irresponsible. I am so irresponsible... I just realized, ooh, probably shouldn't have bought a $50 item at 2:00 in the morning."

Her financial difficulties stem from significant debt accumulation, including personal loans and credit cards in collections, totaling approximately $25,000.

• Quote [12:11]: "I would really like to just kind of save in general... and get this debt out of the way because it's about 25K."

Brinker outlines her monthly income and expenses, illustrating a precarious financial situation where spending habits leave little room for savings or debt repayment.

• Quote [15:00]: "As long as my account's not at zero, I can afford it, theoretically."

Expert Advice from Magda Domini

Magda Domini, a Certified Financial Planner from NerdWallet Advisors, provides Brinker's first personalized financial advice, focusing on addressing both spending habits and debt management.

1. Understanding Spending Patterns

   • Magda: Emphasizes the importance of comprehensively tracking expenses to identify key spending areas.
   • Quote [14:58]: "The first thing I want to tackle is your spending and what's happening here."

2. Implementing Behavioral Changes

   • Returning Unnecessary Purchases: Suggests dedicating a day each week to return items Brinker regrets buying.

     • Quote [19:00]: "Pick a day that you do returns... you could save maybe hundreds of dollars."

   • Capping Uber and Uber Eats Usage: Recommends limiting rides to a specific number per week to reduce expenditures.

     • Quote [29:09]: "Maybe three rides a week... and then you can make conscious decisions."

3. Debt Reduction Strategies

   • Prioritizing Smaller Debts: Advises tackling smaller credit card debts first to alleviate the emotional burden and build momentum.
     • Quote [27:13]: "We could tackle a lot of these... pay down three of these cards."

4. Establishing a Savings Habit

   • Automatic Transfers: Encourages setting up automatic payments into a high-yield savings account, even if it's a modest amount, to build an emergency fund.
     • Quote [31:16]: "Set up at minimum, an auto payment from your checking account into a high yield savings account."

5. Adopting a Minimalist Approach

   • Reducing Impulse Purchases: Suggests practicing minimalism to curb unnecessary spending.

     • Brinker: "I implemented minimalism years ago... but lifestyle creep has challenged that."

   • Visual Cues for Enough: Recommends physical reminders, such as viewing her current possessions, to reinforce spending limits.

     • Magda: "Sometimes I will go to where my enough is, which is my closet..."

Specific Strategies and Recommendations

Magda provides Brinker with actionable steps to regain control over her finances:

1. Deep Dive into Budgeting

   • Detailed Expense Tracking: Utilize budgeting apps like Monarch to categorize and monitor where every dollar is going.
     • Quote [17:54]: "It's very detailed."

2. Addressing Debt

   • Snowball Method: Focus on eliminating smaller debts first to create a sense of accomplishment and reduce the number of active debts.
     • Quote [26:02]: "The avalanche and snowball method are the two pretty common ways... prioritize some of these smaller debts first."

3. Building an Emergency Fund

   • Auto Savings: Start by transferring a small, manageable amount each month to a separate savings account to gradually build a financial safety net.
     • Quote [31:16]: "Get a separate savings account so we can start to build an emergency fund."

4. Behavioral Adjustments

   • Return Days: Set aside specific days for returning unnecessary purchases.
   • Spending Caps: Limit discretionary spending categories, such as dining and transportation.

5. Utilizing Resources

   • NerdWallet Advisors Membership: Brinker gains access to ongoing support and personalized advice through her one-year membership, ensuring she doesn't navigate her financial recovery alone.
     • Quote [33:03]: "You'll be working together as you have this year long membership in NerdWallet Advisors."

Conclusion and Future Steps

By the end of the session, Brinker feels empowered with a clear roadmap to address her financial challenges. She expresses newfound confidence in tackling her debt and implementing the strategies discussed.

• Quote [32:47]: "I feel like I have a really good rote map so far and I'm ready to tackle it."

Magda reinforces the importance of continued support and encourages Brinker to utilize her NerdWallet Advisors membership for ongoing guidance.

Key Takeaways

• Comprehensive Budgeting: Understanding where money is spent is crucial for effective financial management.
• Behavioral Changes: Implementing small, consistent changes can significantly impact spending habits.
• Debt Management: Prioritizing smaller debts can provide emotional relief and pave the way for tackling larger financial obligations.
• Savings Habits: Building an emergency fund, even with minimal contributions, is essential for long-term financial stability.
• Support Systems: Leveraging professional advice and resources can facilitate successful financial transformation.

Notable Quotes with Timestamps

• Brinker on Financial Irresponsibility [09:44]: "Ooh, irresponsible. I am so irresponsible... swipe the card, ching."
• Magda on Lifestyle Creep [14:42]: "It's all about figuring out how we can fit that lifestyle in and still accomplish your goals."
• Brinker on Spending Motivation [24:18]: "I want all of it. You have enough."
• Magda on Savings Habits [31:16]: "Get a separate savings account so we can start to build an emergency fund."
• Brinker on Financial Roadmap [32:47]: "I have a really good road map so far and I'm ready to tackle it."

This episode serves as an insightful example of how personalized financial planning can help individuals like Brinker navigate complex financial landscapes, offering both practical strategies and emotional support to foster long-term financial health.