Picture of Ben Joergens Over the past several years, I've encountered people facing financial struggles due to a variety of unexpected circumstances, from a government shutdown to the economy shutdown because of COVID-19. Workers couldn't pay their mortgage payments or were worried about being late on their car payment and other bills. When I encounter people in these situations, I think about what we can do as a bank to help them.  

Every day, in my role as Old National’s Director of Financial Empowerment, I work to educate people of all income levels on a variety of financial education topics. One topic, while it might seem very basic, is one that I get asked to speak to the most, and that is budgeting and banking basics. Many Americans today are stretched very thin on their finances and live paycheck to paycheck. In a recent nationwide online study by 20 Something Finance, 25,000 American Adults were surveyed, and the results were astonishing. 41% of respondents report spending less than their income, 36% spend about equal to their income and 19% spend more than their income. When you break this down, 55% of Americans are living paycheck to paycheck, or worse!

When individuals live paycheck to paycheck, they can get into serious debt trouble if that income quits coming in. Many are forced to borrow money to help, and many of those borrow at a high interest rate on their debt. These individuals tend to be stressed, can’t build emergency savings and find it very hard to even think about future financial goals, let alone accomplish them.

From my perspective, so many Americans live paycheck to paycheck because they have so many monthly commitments to pay, yet they continue to sign up for more. For example, if someone wants to get the latest and greatest phone every couple of years, they are adding $25-$40 a month to their bill. While $25 may sound like a “low amount,” that turns into $750 over the course of 30 installment payments. Would I like a new phone? Sure! But I would much rather put that $750 toward an investment that will pay me money over time, versus a product that will go down in value over time. We need to constantly ask ourselves, “Is this a need or a want?”

I help educate thousands of individuals each year, and they ask daily; “How can I get out of this mentality of living paycheck to paycheck?” The answer and solutions really aren’t that difficult. First, we just need to want to get out of this lifestyle and commit to changing our financial behavior. One of the most effective things I encourage individuals to do is build a financial platform that puts them in control over their money, versus their money controlling them. I would recommend the following steps:

Open BOTH a checking and savings account.
Many Americans spend all that they make, and we need to make sure we are putting some of that money back for a rainy day.

Automate Savings. Pay yourself first! Every time you get paid, have some of that money go directly into an emergency savings account. Even if you cannot commit a lot, small amounts add up over time. Just $20 a week will give you $1,040 a year. A recent CNBC poll showed that 22% of Americans have fewer than 3 months’ worth of monthly bills saved up and 23% have nothing in their emergency funds. When you can automate your savings, you don’t see the money and don’t miss it, but you are sure glad to have something to fall back on in case of an emergency.

Live on a budget. I can’t stress how important it is for families to live on a budget. And if you are married, make sure you do this together! One of the biggest causes of divorce is financial issues. When I ask people why they don’t put a budget together, I usually get the same responses. Some will actually tell me they are “too lazy!” Others says, “I don’t want to know what it looks like!” We have to get beyond these statements, if we want to get in control of our finances.

Steps to building a budget

I think there are three simple steps to put together a successful budget:

  1. Track your daily spending. You can use our Daily Spending Worksheet. Write down everything you spend for a week. EVERYTHING! Most people don’t realize those small dollar items we buy each and every day can add up to be a lot over time! For example, a $5 cup of coffee, if purchased every day during the work week for a working lifetime, would add up to $52,000! That is a latte of money, people! Many people tell me they run out of money before they get paid again and wonder where the heck it went! We will never know until we get an accurate report of how we spend on a weekly basis. Try this for one week and evaluate the next week. It’s hard to cut back on expenses, if we don’t know where the money is going.

  2. Complete a household budget. A budget really isn’t that difficult in concept. It’s just income minus expenses. You can use our Monthly Income And Expense Worksheet. You will list all of your regular income on one side (monthly bring home income), and on the other side you will list your expenses. I break the expenses out between fixed and variable. Fixed expenses are the same every month (rent, mortgage, cable, etc.). Variable expenses are those that may change each month (utilities, gas, etc.). For variable, put an average of what you typically spend. Once you complete both sides, simply subtract income minus expenses, and this is the money you SHOULD have left over. Many tell me, “This is great, Ben, but I don’t see any of that money. Where is it!?” This is when I bring back out their daily spending worksheet. Most of our extra money goes toward things we really just want to have. Another great way to track spending is with the Money Management tool within Old National Online Banking.

  3. Work to reduce expenses. Think of yourself as a business. Your goal is to have extra money left over each month for savings and other goals you set personally. You want to be profitable (have more income than expenses). If your business is not profitable, we have two options. Find additional revenue (tougher) or cut expenses (easier). For example, cutting the chord with your cable company can save you over $1,500 a year! Also look at your expenses that you have paid off. Where is that money going now? For example, when someone pays off a car, what do they typically do next? Buy a new car of course. Think about continuing paying that $400/month payment, but to yourself instead. Going one year without getting a new car can add $4,800 to your emergency fund. Go two years without a new car, and you have nearly $10,000 in the fund!

Now that we have a grip on how to put together a budget and automate savings, I challenge you to save 3-6 months’ worth of your expenses in this emergency fund. This way, if something comes up and you don’t have income (like many government workers experienced), you have a healthy reserve to cover those monthly bills, which will help maintain a solid credit history, and put you on the track to reaching your financial goals and dreams!

Need to start your emergency fund?

Set up direct deposit to a savings account, or automatic transfers from your checking to savings, and you'll be reaching your savings goal in no time! We even make it simple to open your savings account online.

Ben is responsible for enhancing Old National financial literacy initiatives by partnering with schools, colleges, universities, businesses, nonprofits and government agencies. In 2017, Ben was recognized by the National Financial Educators Council (NFEC) with its coveted Financial Education Instructor of the Year Award.

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