Charged Up! podcast: Save money without sacrifice

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Episode 60 with author and personal finance expert Kristin Wong

 



Personal finance writer, video
producer and CreditCards.com contributor Kristin Wong shares everything she knows about saving money without
feeling like it, negotiating down bills and upping your credit in a short
amount of time.

In this episode, Wong shares some
of her best financial secrets, taken from her new book “Get Money: Live the Life You Want, Not Just the Life You Can Afford.” 

So, let’s get Charged Up! about
learning money hacks to live well while still saving!

Transcript:

Jenny Hoff:  Kristin, thanks for joining us today. It’s a
pleasure to actually get to talk to you and we’ve worked together a lot at CreditCards.com, so it’s fun to talk about your book now.

Kristin
Wong:  Yeah, thank you for having me. It’s good to
talk to you again.

Hoff:  So, let’s hear a little bit about your
background, you’ve been covering a lot of financial issues and credit issues
for several years now, so talk a little bit about your own background and how
this book came to fruition and how it reflects your own money journey.

Wong:  Sure, so I’ve been kind of fascinated with
money from a young age. I think I read Dave Ramsey’s “Total Money Makeover”
when I was like in high school maybe even. Growing up my family was poor, and I
know a lot of people kind of, that word gets thrown around a lot, but like we
qualified for food stamps, we qualified for welfare. And I saw my parents sort
of go on this journey from being poor and making it work.

And as I got older, they started
earning more money, so I had always kind of been in my childhood fascinated
with money and how it can hold you back and how it can give you a sense of
freedom and options. And so I was always kind of interested in figuring out how
to get money because we didn’t have any. So I wanted to know how to get it in
like a literal sense, like I wanted more money so I could do things and get it
in sort of mentally and emotionally.

So, I started writing about it as
I started freelance writing and then I became a financial expert. People
started calling me a personal finance expert so to speak. And I guess that kind
of just means somebody who was terrible at money and figured out how to get
better at it. And I did and I wanted to share what I learned with everybody, so
that’s how the book came to be.

Hoff:  And your book is great because you do take it
through simple steps to also more complicated steps that people can do, but you
have exercises throughout the book, so people don’t have to necessarily go find
a notebook and get it all figured out and a million excuses as to not do those
exercises. They’re right there in the book. So you talk about the concept and
immediately someone can put that into practice, and we’re going to talk about
some of those concepts that you talk about in the book.

This year a lot of my podcast
guests have talked about goals and using different systems to set the right
kinds of goals and to take care of those goals. And you have talked about in
your book about how you had a goal of going on this trip to Europe or a goal of
paying down debt and you were amazing at saving and following that and putting
that money away, and then you accomplish the goal, and then you would kind of
get back in the cycle of mindlessly spending without really having a goal in
mind.

So how do we set the right kinds
of goals so that we don’t fall back in the cycle of saving for short amounts of
times and then just going back to the bad habits we had before?

Wong:  So I think the goal has to be really specific,
like you have to really drill down and how much do you want to save, when do
you want to save up by, how much can you save each week? Breaking it into
smaller milestones is really crucial because it’s a lot easier to save a
hundred dollars a week than it is $2,000 in, and I can’t do the math of however
long it takes.

It’s easier to save in the short
term, but also in addition to being specific I think your goal also has to be
meaningful to you. A lot of times I think people want to get better at money so
they’re like, “Well, my goal is I just need to start saving for retirement
or I just need to start saving, period.” But if you’re not saving for a
meaningful purpose then you’re just accumulating money, and that really is, I
mean, it’s good, but what is the purpose of that money?

Because money is just a tool,
it’s not something you want to accumulate. You want to use it for something, so
you have to really ask yourself – what do I want to use this for?

Hoff:  So you’re having some kind of a purpose with
it. And so when you do have that purpose, let’s say you had that great trip. I
want to go to Europe. I want to save $5,000 for a great trip to Europe. OK, I
did Europe. Now I go back to kind of what I did before. Do you have to just set
another goal immediately or what if your goals are to save more for retirement
and put money into kind of an emergency fund and do these kinds of unsexy goals
that are not really that motivating? How do you get yourself motivated to do
them?

Wong:  Well, I think it can still be meaningful like
why do you want to retire, why do you want to save for an emergency? I know I
wanted to do those things because when I was saving for an emergency fund I
wanted to have that so that I felt secure when I went on that trip to Europe.
So when I was spending my money on whatever I wanted to spend it on, I knew
that I wasn’t going to go back and sort of blow my budget because I had this
emergency fund.

So really my goal there, the
meaningful goal was security. So I think financial security or just security in
general is a great goal to have. If you’re saving for retirement, your
meaningful goal is to maybe not work one day; that’s a great goal too.

So I think you have these really
specific goals for like, “Oh, I want to save for a trip to Europe,”
that’s very specific, you can come up with the numbers, you can do the math.
And then you have these overarching, more meaningful goals of what are your
goals in life, like what matters to you in life? And I think if you have that
in mind then your actions and your behavior with money is only going to support
what’s meaningful to you.

Hoff:  Yeah, so it seems like something kind of
simple to do – just write down why you want to save this money. But what you’re
saying is it has a much bigger impact than that, because if you do put a little
bit thought into it and you write it down and you kind of make it as a personal
goal of yours, it’s something that you will more likely to think about every
time you make a purchase or every time you swipe your card.

You did mention emergency fund,
let’s talk about the importance of an emergency fund. What should it look like?
And let’s also talk about the F-off fund, which you also talk about in your
book.

Wong:  Yes. So an emergency fund is basically a fund
in case of an emergency. So a lot of experts say like you should have six
months or three months or twelve months, and I think yes that’s absolutely
true. But I think if your discretionary income, the money you have left over after
you pay your bills is not that much, well, then saving six months worth of your
income is going to be completely overwhelming.

So I think just start small, like
my emergency fund I started with $100 because I was really broke back then and
I had a hard time paying my bills but I knew I needed to have an emergency
fund, I knew $10,000 was I couldn’t fathom that number, so I thought just a
hundred dollars. But then once you save that then you get it to about 200 and
500. And so just work in small increments.

And then the idea of an F-off
fund is just my friend Paula who had this idea. Her F-off fund idea is
basically giving yourself the freedom to be able to, in her case, leave a
really terrible relationship. Maybe you’re not in a really terrible
relationship, maybe you’re in a really terrible job and you have no way out
because you’re so dependent on this relationship or job or whatever the
situation is for money.

But with an F-off fund you
empower yourself to be able to say, “You know what? F-off. I’m going to go
do what I want with my life.” And that goes back to the meaningfulness of
money, which I think it sounds really cheesy but you really do have to think
about what your relationship with money is.

And she does such a great job in
that article of giving some symbolic property and giving some meaning to money
beyond just, “Hey, I need to save for an emergency.” She gives it
meaning.

Hoff:  Absolutely. And I’ll say from personal
experience there is nothing that feels as great as the freedom that comes with
knowing you have enough money in the bank that you could quit your job any time
you wanted.

For some reason even if when you
get angry at boss or angry at your colleagues or you just hate waking up at
that time every day, you might not quit your job, but it feels good to say,
“I can quit this job if I wanted.” Because they have that money in
the bank and I think that that is an important just psychological factor in
there to make you feel not so beholden to your job but rather you’re choosing
to go there every day instead of the other way around.

Wong:  Exactly.

Hoff:  Let’s talk about frugality too, and of course
growing up without money that will affect the way you think about money, so you
encourage people to use it as a tool. What do you mean by that?

Wong:  So a lot of times you can think of frugality
in one of two ways. You can think of it as virtue which is my mom is completely
that’s her, she thinks of frugality is a virtue, like if my mom was a
billionaire she would still be frugal. She saves her take out boxes, she will
save ketchup packets and she has a little drawer.

And then there are people who are
frugal for the sake of it’s just a practical thing, like that’s kind of me. I
am frugal, I cut back, I’m really cheap on certain things in certain areas so
that I can spend lavishly in other areas.

So it’s like sometimes my friends
will be like, like I have my coupons where I’m going, I go to the grocery store
and my friends are like, “Kristin, why are you couponing? You’re so
cheap.” But then I spend like crazy on travel, and so they might think
like I’m kind of a spendthrift in that area.

So yeah, there are two different
ways to think about frugality. And in the book I don’t really talk about the
virtues of frugality because I think that’s just up to the individual to figure
out. But frugality can still serve a practical purpose even if you’re not super
into it.

I see this a lot in the personal
finance world where you have this save more versus earn more crowd, like you
have some personal finance writers who are like frugality is stupid, I just
think you should earn more money. And you have people who are like frugality is
everything; we need to stop wasting so much stuff.

Both sides I think have merit but
like in my household I grew up where my mom was super frugal and my step-dad
was kind of the opposite, he was like he took risks, he was the investor, he
was all about earning money. So, I kind of lived in this house where I had earn
more and save more, and I saw the merits of both. But in the book, yeah, I talk
about more of the practical side of frugality.

Hoff:  And so talk about some of the tools of how you
can be frugal without having to feel like you’re living cheaply?

Wong:  One tip that I have is do a bill haggle day.
It does require some effort, right? You have to call your bill providers and
ask them for a lower rate on your cell phone bill, on your internet bill, your
cable bill, whatever you’re paying for. But you’re going to continue saving
every month, so you only have to do the work once and then you save for the
entire year.

So just take a few hours out of
your day and make a list of all of the bills that you pay for. And in the book,
I talk about like exactly what you can say to try to haggle them down and what
bills you can haggle down. And just take a few hours out on a Saturday and call
every bill provider and ask for a lower rate.

Hoff:  And I think a lot people would say,
“Wait, wait, wait. I don’t think I’m going to be able to get a lower rate.
I signed my deal. I have a contract for my cable or I have my cell phone that I
use and I don’t have to go through the hassle of getting another rate.”
What are your suggestions like as far as like the easiest bills to change the
rate on and kind of how you should approach it?

Wong:  One bill I see people over pay for often is
their cell phone bill. There are so many discount carriers out there nowadays
that you can get like, I mean, I know people who pay $20 or $30 a month for
their cell phone bill and they still have data and they still have their
minutes.

I think if you just do research,
there’s this website called Whistle Out where you can compare different cell
phone plans depending on how much data and minutes and text you use. And you
don’t even have to switch, you can just call your carrier and ask, “Hey, I
saw this other rate.” Even if it’s a major carrier, Verizon or Sprint,
they’re offering much lower rates to try to keep up with that competition. So
it never hurts to just call and ask.

But even your credit card
interest rate, that’s a big one that I think a lot of people don’t even think
to negotiate. They just pay the interest and that’s that. And I think CreditCards.com did a study
like not too long ago that’s like 78 percent of people who call and negotiate a
lower credit card rate
get it, but only like I think it was one in five or
something like that actually even do it.

So the point is most people don’t
do it but when they do it they get what they want. So that’s one of the
challenges I have in the book, just call your credit card company and ask for a
lower rate, because the worst they can say is no, and, OK, so fine, you’re
paying the same amount. But you can really reduce your debt if you call and if
you’re paying less in interest.

Hoff:  And what do you say, “I just want to
reduce my rate,” or do you threaten to go to another card? What if you
carry a balance on that card that they know they’ve got you?

Wong:  For CreditCards.com we did an experiment in
this where I called, and all I said was, “Hey, I’ve been a good customer.
I pay my bill on time and I’ve been a customer of you guys for a long time.
Would you consider a lower rate?” That’s all I said. And they were
immediately like, “OK, yes, here’s what we can do.”

I think I tried to negotiate down
further, they knocked off like five points or so, something like that, and I
think I tried to negotiate further and they wouldn’t budge. But all I said was,
“Hey, I’m a good customer, I pay my bill on time, would you consider
this?” And they said yes. That’s not always going to work but it’s worth
asking.

Hoff:  Absolutely. And hey, if you especially know
that you might be carrying a balance in the future because you have a big
purchase to make and you definitely need that interest rate to be lowered, that
is a good time to call and to negotiate it maybe before you have a massive
amount on the card and they’re like, “No. Sorry.”

Wong:  Yes.

Hoff:  That might be a good time, beforehand, before
you might be putting a lot of money on that card.

Wong:  Right.

Hoff:  In your book you have how to lay the
groundwork for your financial health. And then you move on to optimizing your
finances, including learning how to handle credit and making sure your taxes
are done right. Can you go into both of these? And what are the things people
should know?

Wong:  Yeah, OK. So first we’ll talk about credit and
how that works. The main thing is you want to pull your credit report. And I
think a lot of people don’t do that, they have no idea what their credit looks
like, they might not have any idea what their score is. And it’s easier than
ever to find out what your score is and whether it’s good or not.

I think it’s important to
understand the five
FICO factors
that go into your credit score. You don’t have control over
all of those factors, but many of them you do. Credit utilization is a big one,
so the more credit that you’re using basically the worse that is for your score.
You want to have a lot of credit available to you but you want to be using less
of it.

So that’s why a lot of finance
experts, and I talk about this in the book, think twice before you close an old
card because ideally you just want to not use it because you want that line of
credit open but you want to show that, “hey, look I have all this credit
open but I’m not using any of it.” So that’s going to make your credit
score go up because it’s going to look like you have control over your money
and your credit worthy, but you’re not easily taking on debt.

And for taxes I think there are
so many freelancers nowadays, right? I think Intuit estimated that by 2020 like
40 percent of the workforce will be freelance, and so many of us have no idea
how that works when it comes to our taxes. It kind of bit me in the butt when I
first started freelancing because I didn’t know you had to pay estimated
quarterly taxes, and I ended up owing a bunch of money in April.

So I think if you’re freelancing
you for sure need to figure out how to navigate your taxes because you don’t
have an employer doing that for you. I think it can’t hurt to like talk to a
professional. There are some, Turbo Tax is great, it kind of walking
self-employed people through all of that. That’s what I use.

But a tax person can really help
you break it down and help you understand the nuances of filing your taxes as
an independent freelancer and making sure you get all the deductions that you
qualify for, because that’s a big one too.

Hoff:  OK, absolutely. So those are two really
important things to do if you want to like optimize your finances. And when you
say optimize that means get past the basics of having a little bit emergency
fund and having no debt to actually like going further now and having a little
bit financial freedom.

Wong:  Yes, exactly. So once you get the basics of
finances in order and you’re like, “All right, I got a budget. I can stick
to it. I’ve figured out my relationship with money. I’m OK at money now.”
Then I think it’s nice to get to the next step where you’ve created the machine
now you make it a well-oiled machine.

So the book is broken down into
three stages, and the first stage is sort of the power up. It’s called power up
and it’s all about the basics of money. And then the second stage is optimized
as you said, and that’s kind of all the money hacks and just ways to make your
finances even better. Not just pay off your debt but supercharger debt plan.
Not just do your taxes but figure out how to squeeze every last deduction that
you can, just that sort of thing.

Hoff:  And then I also want to talk about, you talk
about in the book getting out of a consumption mindset. And I recently
interviewed a woman who actually went to the extreme of that. She said, “I’m
going to do no shopping for a year.” It turned into no shopping for two
years. And she said, “I just want to get to the point where I am no longer
just impulse buying or emotionally spending as soon as I have a problem in my
life and I don’t want to deal with it.”

And so she kind of took it to
that extreme. Now that’s not necessary, you don’t have to cut off all shopping
for a year. But in your mind what are the things that we can do to start
getting out of the consumption mindset and being just more mindful with
whatever we buy?

Wong:  Well, I think being aware of some of the
cognitive biases that you have toward shopping. And these are your kind of
biases to put it in a nutshell is basically just the way your brain works
against you when you don’t want to spend, it’s like, “No, no, you should
spend.”

For example, one of these biases
is a sunk cost fallacy, and that’s when you’re like, “Oh, I need to go to
Best Buy and buy this new laptop case.” But the laptop case isn’t there so
you’re like, “OK, well, I came all this way. I fought for parking. I’m in
the store. I got to spend on something.” So then you look for something
else to spend money on.

So I think just figuring out the
way that your mind kind of works against you to spend is really important. A
lot of us have excuses. Common excuses that keep us from saving our money when
we want to is like I deserve this – at the end of a hard week you’ve worked
your butt off and you want to buy a 200 pair of jeans because you deserve this
so you’re going to go shopping and you kind of going on to shopping spree and
you derail your goals.

But I think, yeah, just be paying
attention to kind the scripts you use and where your mind is when you’re
shopping impulsively helps more than anything.

Hoff:  Now I want to get to the part of your book
where you talk about getting that credit score into the 800s. What are some of
your strategies? And let’s take a couple of different people. One person their
credit is shot, it is very low, they do not qualify for credit cards or any
decent deals and they want to get their card up. What are some of the
strategies they need to employ? And then let’s also take somebody who’s maybe
got in the 600s, like high 600s, but they want to get to the excellent credit
category. So what are some strategies for both of those people?

Wong:  One strategy that’s kind of controversial but
that I’ve used with my husband and it’s worked is adding someone as an
authorized user. So basically how this works is you have a parent or a spouse
or somebody who trusts you and you get them to add you as an authorized user on
their card. And that gives you access to the card and the credit line, but
ideally then you don’t have the card and you don’t spend it and they have good
financial habits and they’re not spending on that card either. There should be
no revolving balance on that card.

And what that does is it
basically makes it look like you have a good credit history with that card
because you’re now linked to it. And that can really boost your score.

How much it boosts your score? It
depends on where your score is at already. But that’s one that I actually used
with my husband and I just didn’t give him the card and I just added him and
his credit score, like his credit score’s better than mine now but that’s not
just because of that, that’s because of a lot of reasons. So that’s one hack
you can use to improve your credit score.

It really comes down to just
paying your bills in full and on time, that’s going to help more than anything.
But there are these tips and tricks in between that can kind of help you boost
it, but more than anything if you just pay your bills in full and on time
that’s really going to improve your score.

Hoff:  And what about maybe opening more credit
cards? There are people who once they’ve paid off their bills they want nothing
to do with credit cards anymore, anything like that. And I know we work with
creditcards.com, and so obviously there there’s a lot of information on the
credit cards. But in order to have a good credit mix and to have a low credit
utilization rate is it important for people to open credit cards and then
freeze them or do whatever they need to do so they don’t actually use them but
at least have that credit available to them?

Wong:  Totally, because it goes back to credit utilization,
like you want a lot of credit available and use none of it or as little of it
as possible. So if you open more credit cards then yes you’re going to have
higher credit utilization.

But I think if you are tempted to
use those cards at all and you think that opening this card is going to get you
in debt and get you in trouble then just don’t do it, because I really think
your financial health is more important than a good credit score. It’s more
important to not be in debt than it is to have good credit.

Hoff:  OK, but if it is somebody who you feel like
you’ve learned your lesson and now you just want to get your credit score up
and you can’t control your spending, then opening a credit card or two will
help your credit utilization rate, it will help your credit mix if you have
maybe also a mortgage or an auto loan.

Wong:  Right.

Hoff:  And so those are the things that go into
credit scoring. So if you do need a loan that will be available for you. And
you go through some of those tips in your book too. What are three things
somebody can do right now to start getting their financial life on track? What
are the three most important things you think they should do?

Wong:  I think number one get clear on your goals. I
know that sounds like not money related at all, but I think it’s an important
one because you want your money to be working for you not the other way around.
And when you have a goal then everything you do with your money is to support
you and your goal, you put yourself in the driver seat.

Number two I think tracking your
spending is another thing that a lot of people don’t do. Just go through your
bank statements and see where your money is going or maybe keep a spending
track or worksheet and write down every purchase for a month, and then evaluate
it. Was it worth it? Did you really need it? Just kind of get clear on what
your spending looks like.

And then number three I want to
say budgeting, but people mess up their budgets a lot. But I think it’s because
they don’t have a clear goal for it. And one of the experts that I interview in
the book Dr. Brad Klontz, he’s a financial psychologist, actually hates the
idea of budgeting and he promotes spending plans instead.

Now these are the exact same
thing, a spending plan is a budget, the details look the same. But a spending
plan is basically you have a clear goal for what you want your money to do. And
then you are just budgeting according to this plan to reach your goal. So
that’s why I think I will say number three is budgeting but with your goal in
mind.

Hoff:  OK, so have some sort of a financial plan
there of how you’re going to spend your money throughout the month and where
your money is going to go, as long with having your goals and tracking your
spending which isn’t easy. But I was thinking about when I was young I had my
little check book with me everywhere I went and I didn’t care what I bought, I
wrote down exactly everything I bought in my check book and I kept a tally
there.

And I think that being up by gone
era is a little bit of a detriment to us because we’re not keeping track
anymore of what we spend. And so maybe even taking a checkbook and using that
back part with you and keeping it in your wallet or your purse, and every time
you buy something writing it down, just there, that might be the easiest way to
keep track of your spending so you know what you’re spending.

Wong:  Yeah, totally.

Hoff:  And finally, Kristin, what gets you charged up
about helping people master the money game?

Wong:  I just love empowering people and seeing them
feel like they have some control over their finances, because I think a lot of
people, most of us don’t feel like we have any control at all. We’re like,
“I earn this much, and that’s all I’m ever going to earn, and I can’t pay
my bills and I’m stuck in the cycle of paycheck to paycheck and that’s all it’s
going to be.” And we feel like we absolutely have no control over that.

But when I get like emails from readers
or viewers who are like, “Hey, I watch your channel or I read your blog
and I paid off my debt this month because you had these monthly
challenges,” like that gets me so excited. It makes me actually want to
keep writing about money. It’s very encouraging because it’s just nice to see
people feeling like they have some control over their money.

Hoff:  Exactly. And it is such an emotional thing for
many of us, where we either feel a lot of shame or we feel excitement. And to
be able to just handle it and feel in control of it, there’s probably nothing
that feels better when it comes to controlling something in your life. Kristin,
thank you. It’s a pleasure to talk to you. It was fun to talk about your book.

Wong:  Me too.

Hoff:  And I really encourage people to check it out,
because you’ve got a lot of fantastic tips in there and exercises to get you
started on feeling confident in money again. Thanks, Kristin.

Wong:  Thank you.

See related: Charged Up! podcast: Making financial goals stick




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