Stretch Your Money - Good Morning Texas

Thank you.

Well, lots of us are being extra careful with money right now. If you think you've got it bad, imagine being an unemployed college graduate out looking for a job. Wow. We're looking at ways to manage your money this morning. And cpa, owner of Gavreau and Associates, and money advisor Robert Gavreau joins us live with ways to stay safe financially. Good morning to you. Thank you for being with us.

Good morning, Gene. Thanks for having me.

Hey, listen, we originally thought of doing this segment just for kids who are graduating from college and out looking for a job and maybe parents who just footed the bill for college. But when I was looking through your information, it's applicable to every one of us. There are really important things that we can do to save money right now.

Absolutely. And, you know, to me, the very first and most important thing is to hang on to as much cash as we can right now. So look at all opportunities that we possibly can to defer payments and to maybe restructure our debt to make sure that as much cash as we can possibly contain that we hold in our hands right now. Because we never know, you know, what's going to come up in the near future.

Okay, well, you just gave away the number one thing, but really keep cash in your hands right now and use every way you can to do that. You say that's the most important thing at this moment. So let's go through some of your tips. Number one, this seems obvious, but a lot of us don't do it. Get a budget and you can start now if you haven't had one. Right?

Absolutely. And, you know, a lot of us, when we think of budgeting, we think of businesses, big businesses doing budgeting and having, you know, set expenses per department. But I think even more important than for big business is for individuals to go through their spending habits and establish what it is exactly that is consuming all of their money and taking their money from the bank account. So when I think of budgeting, I think of cash flow planning for individuals. And what that means is trying to measure out what the future cash inflow is going to be and what your future cash outflow is going to be so that we ensure that we have a surplus there. Because if we start going into the negative, that's when we start to feel a lot of pressure. We start to have strain on relationships and. And we really start losing sleep at night.

And one of the things you say about a budget is if it's in your account, you will spend it. So can you explain what you suggest.

People do, yeah, absolutely. So there's one financial concept that's called psychology of spending. And what that means is that if money is sitting in your bank account, you will spend it because you see it that it's available to you to spend. So one thing that we suggest is, and this is a good way to not only to budget your cash outflow, but also to maybe look at building wealth in your life, is to set fixed transfers out of your personal account into a savings account that you don't have access to. So whether that is putting that into an investment account or whether that is just getting it out of your regular spending account when it's not there and you don't have access to it, it's almost a forced savings plan that requires you to not spend the money that's not there.

Okay, Alana is standing by and she has a viewer question for you. So get ready.

Yeah. And Robert, I want to let you know I'm getting a lot of good information right now. Thank you. I'm going to change some things when I get home. Here's our question. We received our tax return. Do we use it to pay off our debt or save it for a little while in case we lose our jobs? Currently, we've been fortunate and only taken pay cuts, but the architecture industry is volatile in a downturn.

Absolutely. Great question. I feel like that's a question that's going to be applicable to so many. And again, I think the number one thing that we all need to be doing right now is hanging on to as much cash as we possibly can. So unless it's a debt like a line of credit that can be advanced and then re pulled back out if we need it, I would suggest holding on to the cash as long as possible. And we are fully aware that there's going to be some interest related to that debt. Interest rates are nice and low right now, but for me, I would feel much more comfortable having control over that cash than giving it away and then potentially needing it again in the future.

Wow. I'm happy about one thing. I've been telling my son exactly a lot of what you're saying. I said, Michael, this is a great example right now what's going on of when cash is really important to have cash on hand. A rainy day fund, if you will. Listen, speaking of Michael, there are younger people and older people for that matter, who are thinking, wow, everybody's telling me there's some great deals out there. I need to invest in something. You say, hold onto your cash. What do you do about the tension between that and taking advantage of some of these deals where you maybe can invest. How do you sort that out?

Yeah, absolutely. So, you know, I'm a pretty active supporter of low risk investments. And one thing that I'm watching very closely right now is the overall market. So, for example, the S&P 500, initially there was a huge drop in the market and it's kind of risen itself, probably halfway back up to recovery at this point. So if you're looking at a longer term investment that you can ride a bit of the waves, I would strongly recommend jumping into an index fund. So following the S&P 500 in 2019 and even the start of 2020, the markets were as high as they've ever been in history. And if you follow the history of the investment patterns at all, you see that they continuously rise over time. So although they're down now, it's a really good investment opportunity to maybe put some money in there again, if you have surplus money that you can put in, it's a good opportunity to jump into something like that and ride the wave back to the top.

Okay, so you're talking about trying to keep cash on hand. I've got a couple of questions about this because we did originally book you to talk about college grads and their parents. What about school loans and college debt? What do you suggest people do about that right now? If you're advising them to hang on to your cash?

Yeah, for sure. So, you know, there's two components of cash. There's. One is going to be, you know, the mandatory repayment requirement. Now, I think in a lot of situations right now that we're able to reach out to any of our lenders and try and renegotiate, you know, maybe some postponements right now, which just allows us again to hold on to some of that cash or to, you know, look at how we can extend those payments out over a longer period of time, possibly again, just to keep those payments as low as possible. I think for students, you know, the biggest thing is, and a lot of times what we see with students when they come out, especially professionals, they come out and they start earning money and they start spending the money that is coming in as fast as, you know, it's going out as fast as it's coming in. So one of the things that we recommend to them is also to again, when you're doing your budgeting, look at some of the future tax liabilities, look at some of your cash repayment, because income and expenses might be One thing, but debt repayment might be something that really puts you behind from a cash.

Position and you don't want to owe the IRS if you it's not a good idea. Alana has another viewer question.

Yeah, Jan, I hear that's a really bad idea and a bad position to be in too. Our viewer question is, are credit unions a safe place to save money right now?

I think anywhere, you know, any sort of credit union, any bank is a safe place to put your money right now. Again, my suggestion would be to get it out of your savings account because if you're looking at it on a day to day basis, you know, we're getting into the nice summer months. You know, there's lots of accessories that we can purchase to enjoy the summer a little bit more. If we have access to that money, we're going to see it and we're going to spend it. You know, for me, as long as it's saved somewhere. If it's in a credit union or if it's, you know, in a bank account, it's completely safe. Under your mattress is fine too, if you know that's a safe mattress to hide your money in. But truthfully, just getting it out of your visibility on a day to day is a really positive change to make in.

Ask you a final question here. For folks who have been through this and maybe this was the first really big challenge for a lot of people financially. Businesses are going under, people are losing their jobs. It's been brought home to us the importance of having cash or a rainy day fund. How much realistically do you think people should set aside? What percentage and where do you put it? Like for instance, in a money market that's going to earn no interest. But that's okay with you is what I gather you're saying.

Well, again, I think a lot of our strategies are long term, right? If you want to get into short term investing, then you're looking at, know, buying and selling stocks for short term gains.

No, I'm not talking about that. I'm talking about your average person who just wants some money set aside.

Got you. So what? You know, again, I would look at an index fund back to, I guess your one question is how much should we put aside? And truthfully, it's as much as we possibly can. You know, I would start with even if it can be, you know, $100 a week or $50 a week starting there and if you still have extra money in your account, bump it up, right? Get it up to 100, get it up to 200, you know, as much as we can put away. And for savings, that's going to help us build for our future and build for a rainy day even quicker. Right. So again, I think as far as an s and P500 or an index fund or a stock of any sort, that's a long term growth strategy for me. When we look at that, there's no capital gains tax on that, so we're avoiding tax implications until a later date, which is wonderful. We don't, again, like you said, we don't like owing the IRS any money. But if we put that in there and we kind of forget about it and it's a long term growth strategy, I think that's a really simple tool for anybody to implement in their lives.

Thank you so much for joining us this morning. I love your kind of conservative advice that we really do need to save for a rainy day. You've been extremely helpful. Stay safe and healthy and hopefully we'll talk with you again. Thank you very much.

Sounds great, Jane. Thank you.