S3 Ep.4 5 Things You Need to Know: Financial Wellness

Money problems got you down? Have no fear, Brad Barnett is here!

Join us on this weeks episode of the podcast as Lauren talks with James Madison University's Director of Financial Aid and Scholarships, Brad Barnett, to discuss establishing good financial habits.

Resources:

To sign up for Every Dollar click here.

To sign up for You Need a Budget click here.

 To learn about The Millionaire Next Door book click here.

Click here to view the full transcript of this episode.

Transcript

0:00-0:22

Intro: 

Hey there, welcome to Well Dukes. This podcast is brought to you by UREC Health Promotion. Tune in every other Wednesday for conversations that we hope challenge what you know, think or do in regard to your own health and wellness and helps you be well dukes.

0:22-0:34

Lauren: 

Hello, Dukes and welcome back to the Well Dukes Podcast. I'm your host Lauren Shutt. And today we are joined by Brad Barnett. Brad, would you like to introduce yourself to everybody?

0:34-0:44

Brad:

Well, hey, yes, I'm Brad Barnett. I'm the Associate Vice President in Access and Enrollment Management and the Director of the Office of Financial Aid and Scholarships here at JMU.

0:44-1:06

Lauren:

Wonderful, we're very happy to have you here today. And today, our topic is going to be on the five things you need to know about financial wellness. So to kind of get started at number one, Brad, what is the first thing that you'd like everybody to know about financial wellness?

1:06-1:47

Brad:

Well, financial wellness is mostly about good, solid behaviors. I think a lot of people have this feeling and this misconception that I need to be a higher level economist or understand all the ins and the outs of how money works in the economy. But that's not true. Knowledge is certainly important to some degree. But it's mostly about good behaviors and good habits. I mean, there are a lot of people out there, Lauren, who don't make a lot of money, but are financially pretty healthy, just because they have great behaviors. Conversely, there's a lot of people out there who make a whole lot of money, don't have anything to show for it at all, just because their behaviors really don't line up with their spending and their saving.

1:47-1:59

Lauren:

Absolutely. So one of those behaviors is our spending. So at number two, what can you tell us about spending and how that reflects on us?

1:59-2:56

Brad:

Yeah, well, one of the other things I do at JMU, is I have the privilege of being able to teach personal finance classes called Dollars and Sense. And then I also do some financial counseling outside of my role at JMU. And so I've seen this on a practical basis in the real world for years, either with students with clients I serve, or just people I know. But one of the things that we know is, if I really want to figure out what is most important to you, and what you value, I just need a couple of minutes to look in your bank account. And I can tell you exactly what's most important to you. It's not complicated, just just follow the money. So people will spend money and time on the things that are most important to them. The problem is, people always don't realize that. And there's a disconnect sometimes between what your spending is, and what you say your values are. And when those things don't align, life becomes a little bit messy.

2:56-3:11

Lauren:

So on those, the messiness, what can you speak to at number three, as far as money problems, and what they can mean for anybody that's experiencing them?

3:11-7:04

Brad:

Yeah, so let's, let's break down the disconnect a little more, because this is where the rubber meets the road, so to speak. And this is where so many financial problems happen with people. You know, you often hear you read the headlines money's the number one reason people fight, money's the number one reason for divorce, and you just hear all the money problems, money problems, money problems, and those snippets. That's what makes the headlines. That's what gets the news and people's attention. But the reality is, money problems are almost always a symptom of something else. It's not often that money is the actual root of the problem. It's a symptom of an underlying issue. So I'll, I'll give you an example. And I see this sometimes with the clients I serve and with students to some degree, but I'll give you kind of a bigger example. It's not uncommon that I'll get some people to come meet with me, and they'll be in their 40s. And maybe have a couple of kids and they just kind of woke up and realize that, hey, I'm not going to work forever. I got to start putting some money away for retirement. And in that stage, I've got nothing put away. So they've got a kid, they've got car loans and got student loans, maybe they're still paying off credit cards, mortgage, nothing saved for retirement. And they're freaking out, because they're trying to figure out how they're going to be able to build up this, this nest egg. So I'll have them track their money for a month. Just every dollar that comes into the house and every dollar that goes out literally track where it goes and, and at the end of the month, sometimes what we end up seeing when they come back to me is we'll see they spent maybe $1,200 on food, a lot of it dining out and nothing going into their retirement account. So they're telling me that retirement is important to them. That's their stated value, but their action is going out to eat is actually more important to them because that's where they're spending their time and their money. So there's this disconnect between what I say is important and what I'm really doing, mechanically, super easy fix, right? You just stopped going out to eat a little bit more, you take some of that money you put into a retirement account, you know, Bada, bing, bada, boom, all of a sudden, things are better. And now your values and your actions are aligned. And that reduces the stress. The problem, which is going back to number one, this is all based on behaviors. This is all based on habits, and we're creatures of habits. So what happens is, if you've got, you know, 10, 20, 30 years of doing the same thing, it's really challenging to flip that switch and change it overnight. So it takes time to do these types of things. But that disconnect, that's the underlying issue. It's the this is what's important to me, but I'm actually doing something different. And that creates money problems. We see the same things with students, you know, not necessarily retirement, you know, I mean, 18 to 21, it would be great. And I would love it if every student was just pounding money into their retirement account, because man, the compounding interest on that over the course of the next few decades is huge. We could have a whole nother podcast on how easy it is for you to become a millionaire. Just by starting at a young age. It's, it's amazingly easy. The financial world overcomplicates it, but again, maybe that's a topic for another day. But with students, it's the same thing, there still is a disconnect. And a lot of that comes from things that students may say or feel are important to them. But there's a pressure to spend and do and participate in different ways, the FOMO, you know, or just to be a part. And that's what creates the money stress. In most cases, there's ways that you can live on a very modest meager student income. And there's ways that you can make it really challenging. And all of it bases on what are the decisions you make? And how do you choose to maneuver yourself through the day?

7:04-7:15

Lauren:

So speaking to some of those, specifically, with students, what are the common, specific money problems that you've observed that students have?

7:15-7:33

Brad:

Oh, to a tee, Lauren, I, you know, have been doing this for a long time. And I always ask in class, you know, where is someplace that you probably spend five and a half to $6 a day, you know, and if I was to ask that question to you, what would you say?

7:33-7:37

Lauren:

I don't, but I know a lot of people on coffee.

7:37-9:56

Brad:

Coffee is always it. It's like always the number one thing, I'm not a coffee drinker, so I don't I don't get it. But coffee, is it? So? So here's the scenario, right? It's thinking about today versus tomorrow, it's if you spend five and a half dollars a day on coffee, you're spending, you know, roughly $165 a month on coffee, roughly a couple $1,000 a year on coffee. If instead of putting that money in that coffee, you invested it from now until retirement, just based on even lesser than a current stock market average, you'd have roughly one and a half million dollars. So it's like would you rather have coffee every day or a million and a half dollars when you retire? It's the occasional student who says coffee, you know, we'll split the difference, have coffee every other day or buy a coffee pot, you know, and make coffee at home. It's those types of things. So what I see a lot with students is just  nickel and diming yourself kind of to death as you maneuver through the day. It's the you know, we're in the middle of class, the class I teach is two and a half hours. So you know, I give students a break in the middle and they go out to the vending machine and spend, you know, two and a half dollars $2 on a little package of cheez-its, you could have gone to the grocery store and bought a whole box of them for half that price. And eaten them for a week. Right. So it's the convenience spending, it's the nickel and diming. It's moving throughout the day, it's really a lack of being intentional with your money. And when you're intentional with your money, then your money has power. And then it's aligned up with your values. And then the stuff you can do with it is just amazing and incredible. But again, it's habits. It takes a little bit of time, a little bit of organization. But you know, my wife and I have been doing this for a long time. And now because it is a habit and it is a behavior. It's just we don't even think about it. We just operate life in a way that's very different from a lot of people because we decided there are things that are more important to us than some of those every day little nickel and dime, convenience things and it adds up over time. It adds up a lot, either for you or against you.

9:56-10:09

Lauren:

So speaking on the intentionality of it at number four, could you kind of give an explanation of the zero based budget and how that kind of works to align your money and your values?

10:09-15:01

Brad:

Yeah, so if you're not, if you're not a money person or that a topic of money kind of intimidates you, please don't let the term zero based budget freak you out. It's not complicated to understand. I do know, because I've seen this with many students over the years. Some are just intimidated by the concept of having to deal with money. And they have a lot of skills, and a lot of interest in other areas. But money is just a bit of a standoffish. So here's how it works. I'll give you an analogy. You as a student plan to get things done during the day, or you plan to get things done during the week, you have classes, you have assignments, you have to be very intentional about the time that you put into it to get it done, you have to manage your time, right? It's the same set of skills, that we're just talking about applying to your money, you already have the skills, you just aren't applying them to your money. So the way this works in the budget world is we usually do this on a month by month basis. So as you and I are recording this today, it is September 28. So we're just a couple of days from October. So what you would do in a zero based budget world is you'd sit down right before October begins. And you would say, Okay, how much money am I going to have in October, if you're working a job, that's your income. If you're pulling money from your savings account, this is a little bit different than the way most of you are operating. Most of you operate, where I'm going to spend, and then I'm just going to pull money from my savings to cover my spending, this is different. This is where you would say if I have, I'm just going to make up numbers. If I have $2,000, in my savings account, you make a conscious decision saying I'm only going to spend 500 in October. So then 500 is your income from October, because that's what you said you're going to spend. If your parents are giving you money, then the money coming from your parents, that's your income. So you just have to determine: Where's all my income coming from October, then the fun begins. Then you sit down and you say, Okay, I've got X amount of dollars for October. What do I want to do with it? How do I want to be intentional with it, and then you sit down and I mean, you can do it old school on paper and pen. There's all kinds of budgeting programs and software out there. There's Excel that you can use, there's all kinds of things which we can talk about. And you basically take your $500 and you spend it before the month begins all the way down to zero. It's like how much do I want to spend buying food? How much do I want to spend going out? How much do I want to spend going to a concert, how much do I want to spend doing this, and you keep working yourself down until your income minus your expenses equals zero. Now mathematically, super easy sixth grade math, it's just pluses and minuses it's not complicated at all. Here's where it gets challenging. If you stick with this, the things that are most important to you will make your budget, the things you value the most will be above the line, the things that you don't pay are going to start falling off the line. Because the reality is most of us don't have enough money to do every single thing we want. So this kind of puts you in a situation where you have to look at yourself in the mirror and say, Okay, what is really more important to me, because this is all I have to spend. And I need to make sure that it works towards those. When you do that, it's probably going to require you to make a few changes in the way that you spend the way that you move through life, some of the things that you do. But that's not a bad thing. That's not a bad thing, because it will also end up in the long term reducing a lot of stress. Because you get this habit down. Here's the cool thing, then you get to use your income to build your future instead of using your income to pay off your past. And that's where so many people are is they're paying off credit cards and student loans and car loans and all this kind of debt for decisions they made and kind of living above where they could afford to live today. And then they spend their future, earning money to pay off all the decisions they made yesterday. My hope for people and true financial wellness is getting rid of paying for the past and using your money to enjoy your life today but also secure your future. From a financial wellness perspective that takes all the stress out of money and then aligns your values and your actions together and all of a sudden life is a bit more peaceful. And you can handle the ups and downs a whole lot easier. When you don't have mounds of debt you're trying to pay off from the past.

15:01-15:14

Lauren:

So speaking to that debt, what kind of advice do you have for those who are struggling with paying off of credit, paying off those loans, stuff like that, that is a little hard to get out of?

15:14-20:20

Brad:

Yeah, it can be. And I appreciate that. Most of the people who I work with are coming to me because they have a lot of debt, and they're trying to figure things out for the future. Not all of them, but most of them. And then, obviously, in class, I've seen students, you know, anywhere from no debt to upwards of $100,000 in debt getting ready to graduate. And, you know, for each one of them, they have different challenges and opportunities. The first thing I'll say is, if you have debt, please don't feel guilty about it, don't beat yourself up about it, don't bang your head against the wall, you know, what's done is done. You cannot change the past, and beating yourself up about it is not going to be productive or helpful at all. So once you get past the kind of deep breath, alright, here I am, what can I do? Now? How can I tackle it? And how can I get out of it? We talk a lot in class about strategies around how to get out of it. So you know, for the purpose of this, I'll give you kind of just a couple of things to marinate on. At this stage, most of the debt that I see with students are student loans and car loans, sometimes credit cards as well, but oftentimes, it's student loans and car loans. And student loans would be multiple loans and might be a loan from each year, you know, so you may have a loan from your freshman, sophomore juniors, you can have four loans or five or six loans. So there's a smattering of debt. So one of the most effective ways to get rid of debt is with a method we call the Debt Snowball. Again, don't freak out with the term if you're not a money person, super easy. Just that's the term and that's what you'll hear. And when the Debt Snowball, you take your debts, and you line them up in order of the one that you owe the least on to the one that you owe the most on. So if you have five debts, you know, and one of them you owe $1,000. And then on the highest debt you owe 6000, 1000 is the first, you fill in the middle with all of the others and 6000 is the end. So it's a hierarchy. And then with the snowball approach, you pay the minimum debt, a minimum payment on everything except the smallest balance. So in our example, that $1,000 That you would pay as much as you possibly can, above and beyond the minimum payment. So again, minimum payment on all the others. And on that first one, you attack it, and you just kill it as fast as you can. So if it's like a part time job, or you go sell a bunch of stuff that you don't need, you just do whatever you can, and you pay that $1,000 off as fast as you possibly can. Now the snowball happens, then you go to the next lowest debt. And you take whatever you are paying on that lowest debt that you just paid off, you add it to what you're paying on the next debt. So now you have a much bigger payment, kind of a snowball method. And then you pay it off. And then you take all of that that you were paying, and you add it to the next one, and you pay it off and you keep going. I have run debt snowballs for people for years. And I can tell you that under a normal debt cycle, if you're just making minimum payments, we've been able to take situations where it would have taken a decade or more to pay off some debt. And we've been able to create a scenario where people can get out of debt within a year or two, just by aggressively attacking this with with a snowball. So that's the first thing is you got to get organized. And once you get organized, you can figure out how to attack and be intent intentional. The second thing I would say, is the harder pill to swallow, so to speak, if you're if you're a college student, because nobody wants to move home when you're done, or everybody has dreams of what their life is going to be when they graduate. But I can tell you stories from alumni who have graduated JMU who were in my class and then wrote back to me afterwards to give me stories to share with the current groups of students and they have all talked about the sacrifices that they made, right after graduating of lifestyle choice sacrifices to pay off their debt as fast as they possibly can. And some of them were different living decisions. Some of them were moving home. Some of them were different roommates, some of them were just different types of I'm gonna make short term sacrifices for long term gains, and they paid off 10s of 1000s of dollars of student loan debt in just a year and a half, two years. All because they decided that it's worth it to me to sacrifice a little bit right after school so that I can be debt free for the rest of my life until I get a mortgage kinda thing, getting a whole other podcast. And, then I can use my wealth to my income to build wealth and just to enjoy. So Debt Snowball is a great tool. And then you really have to look at what are the short term sacrifices you're willing to make to throw as much as you can on top of it and get rid of it. So that's kind of the paying it off.

20:20-20:46

Lauren:

Well, thank you for those tools and insight. So with our last number, number five, we'd love to hear a little bit about both on campus resources that you can recommend applications, like you'd mentioned, Excel and a few other financial apps, just so students and anybody else listening has a better idea of how they can start on their financial wellness journey.

20:46-26:49

Brad:

Sure, yeah. The first thing I would say is, this is a little challenging when you start getting into the kind of the everyday world situation because there's so much noise in this space. And you know, people are throwing stuff out on financial advice on TikTok, and, you know, there's everybody's got a YouTube channel, and, you know, people are like, Hey, we can pick the hot stocks. And there's so much craziness out there, the Kryptos, the NFT. I mean, it just gets mind boggling. I understand how it can be really overwhelming. The reality is, it's not that complicated. Once you break through all the white noise, and you get through some very simple kinds of things, like long term wealth building, not what's the next hot stock, you know, do people hit it every now and then? Absolutely, they do. But more people than not, don't, you know, but if you want a proven way to do this that has worked for ever, then there are some kind of principles and resources you could stick with. One of them is the zero based budget. Just be intentional, you know, and you can build a zero based budget using Excel. There are great budgeting apps out there. Every dollar is a great budgeting app or every dollar.com, you can go to the website to sign up, there's a free version, there is a paid version, the free version works just well. I actually assign that every semester for students to sign up for the budget program just so they have it. I've had several people over the years telling me that they used it and it works really well for them. There's another budgeting app called you need a budget. So if you go to you need a budget.com. That's another great one. Both of these work off of the zero based budget principle, you need a budget does have a small fee to it. But I believe they still have a free membership for students. It works the same way. And those are two really good apps for students who like apps. So that and there's Excel, if you're familiar with Excel, it's easy to use, which we've mentioned, some people just write stuff down, literally their old school kind of paper and pencil and notebook and that kind of stuff. So that's obviously another way to do it. I have used for years a free download program called Microsoft Money Sunset. So Microsoft money sunset, it doesn't work with Macs, it's only compatible with PCs. So I have a PC at home. And that's what I use it on. And like any good tool, you can do a lot more with it than what I do. I just use it for budgeting, I don't do all the other stuff when I don't need all the other bells and whistles. It's just a neat little budgeting tool. So those are kind of four good tools that you could probably get started with and find something in there that will help you want to budgeting for it. You know, as far as resources on what to do, you know, we've talked about getting rid of your debt. So you get into wealth building, you know, there's a lot we can talk about. But the real meat and potatoes strategy behind long term wealth building is investing in low cost mutual funds and exchange traded funds. ETFs. Again, there's a lot to talk about with that. But if you can live on a budget, get rid of your debt, and invest in good low cost mutual funds and ETFs for the long term. I mean, that's kind of the secret sauce in a nutshell. There's a lot more to talk about in that. But you just set all this stuff up on autopilot, and then you just let it ride for the next few decades. And you turn around later and go wow, look what happened. All of a sudden I have money. And it's an amazing kind of thing that just happens when you use time. And for the audience of this podcast time is your biggest asset. I mean, you're 18 to 21 years old, you've got 40 years, for money to compound, we just have to get it in the right place to get it working. So you can use that moving forward. So those are some resources off campus. There's some good podcasts you can listen to. There's some good books. I do recommend everyone read this particular book. There's a book called The Millionaire Next Door. It's one of my favorite books. It isn't an economically heavy book at all. It's a study of millionaires over the course of a couple of decades. And it just talks about their lifestyle choices, the decisions that they make to live, you know, for example, most of them drive used cars. Most of them could care less about what the person next to them thinks. They're more concerned about financial independence than spending to please somebody else. Most of them invest in good long term investments, like what I talked about, and let them ride out the ups and downs of the market. It's just behavior stuff. And it's a really easy read, it's a really kind of a fun read, if you want to figure out what are some habits that you can do. So those are a few off campus resources. On campus. I wish we had more. I wish we had more resources on campus. I know there's a class in business 160 that talks a lot about financial literacy within the curriculum of that, it's a Gen Ed course. And a lot of students have the ability to take it and the professors who teach that class are fantastic. And if you need a place to go, that's a good place to go to get some course based curriculum that touches on many aspects of financial education, financial wellness. Obviously, the classes that I teach, the whole curriculum is based on financial wellness. And that's the dollars and sense course, in the fall and in the spring. And in the summer. There are online versions of it called personal money management, the same course it's just summer and has to have a different title. So dollars and cents and personal money management are two courses that students can look to take while they're here.

26:49-27:02

Lauren:

Well, thank you for all those awesome resources. And thank you for this wonderful, wonderful topic and expanding on it for everybody. Do you have any closing thoughts for us?

27:02-28:23

Brad:

Yeah, so one last closing thought is, it's okay to talk to each other about this stuff. I just can't tell you how many times over the years in working with students that, you know, the comments about, I just, I can't talk to people about it, or I'm just kind of going along to be a part of my friends. And oftentimes, in those friend groups, there's one or two people who are kind of feeling like, Hey, maybe I don't want to spend this, but nobody has had the guts to say anything. And I've heard time and time again, as soon as somebody does. There's usually somebody else who feels that way and somebody else who feels that way. And I've heard stories of friends kind of changing the way that they socialize. Once somebody kind of crack that can open to say, yeah, maybe we should do something a little bit different than just going out to eat every night. But there's this fear of this topic and I get it. I do get it. I mean they're your they're your friends are your people who socialize and it's a risk. I can't tell you it will always work. But I can tell you so many times when it has worked, and the feedback I've gotten back from students when it's worked has been life changing for them. So if you're comfortable, comfortable enough for the people you socialize with, just start talking about some of this stuff. Then do it and you might be pleasantly surprised.

28:23-end

Lauren:

Well closing out Dukes I just want to remind you to go ahead and follow jmuurec on both TikTok and Instagram we love our social media it's how you can stay up on all things Well Dukes and UREC and as always be well Dukes.