Why Your Money Misbehaves | Smart Spending Habits with Penny Kidd and Jack Wang

Welcome everyone. Again, my name is Jack Wang, and I am absolutely thrilled to have my special guest and friend Penny Kidd all the way from Loveland, Colorado join us this evening. Penny is going to be sharing some tips around budgeting and managing debt, which is an important topic for everyone. I mean, for everyone these days, but everyone. Uh, just a quick background on Penny. She actually, she actually kind of went through this process herself. I know that you and your husband actually kind of got your own financial situation cleaned up. She is a financial coach, not a financial planner or investment advisor. That's actually, I think, a really important thing to, uh, to differentiate yourself. Uh, she is a graduate of the Dave Ramsey counselor training. She has facilitated a number of the Dave Ramsey Financial Peace Universities, which I know are popular around. She is an alumna of Colorado State University. Go Rams, right? I believe.

Right.

As opposed to Colorado Buffaloes, I think. She has a background in social work, and she is from Colorado with 2 grown kids. And ultimately what she does for people is she helps people create a customized plan be intentional with their money, teach some basic sort of money management skills, and ultimately be on the path to financial independence. I think I got all that, right?

That's right.

So Penny Kidd, it is really such an honor to have you this evening. Thank you so much for joining us. So why don't we get right into it? Whether it's pandemic time or not, People can always use some budgeting skills. But you have two terms I find really, really fascinating. I've never really encountered before. You talk about sort of money behaving or misbehaving, right? Which I think is just hilarious because it's like a little kid. You think about behaving or misbehaving. So share with us a little bit about those terms and what you mean and can you give some examples of each?

Sure. Well, my background is in social work, and that's probably why I think of it like that, because I think that we are about behavior, and I believe money management is more about behavior with your money than it is math, right? If— I mean, probably the vast majority of us know the math. It's getting our behavior to follow what we know we should do or what's going to move the needle, right, in the right direction, whether it is to increase savings or reduce debt. And so little actions over time with your behavior is what helps you win the race. And so I think coming from the standpoint that I don't have, I don't have all the education you have as far as the investing and the high-level finance. To me, it's about the day-to-day behavior in life and around money that helps us really get to the place where we have some margin in our life to invest and to do some greater things for retirement planning or college investing. But if we don't take control of the basic day-to-day behavior, we're not going to have any left because you can spend every dime you make. No matter what.

Absolutely. Yeah. I mean, that makes total sense. I can tell you that, you know, people often talk about the whole notion of trying to get a handle on their finances by not buying lunch, by not buying coffee. I can tell you that— I mean, I primarily work from home, so buying lunch isn't really a big deal for me. But there's a chain of gas stations/convenience stores around here where I used to always stop and get a drink. And it would literally be like my car would be pre-programmed to go there on the way out, right? Anywhere I was going, it would sort of have to go by there first. To the point, by the way, I have to admit that there'd be times where I would go there knowing I would have to get gas, but then just because it was so— like, it was so ingrained in me that I would just pull into the parking lot as if I was going in to get a drink, and then I would have to remind myself Oh, yeah, I'm actually here to get gas. And I would have to literally back out of the parking spot to go pull to the pump to go get— of course, then I would go get a drink. So it's a grain of habit. So talk to us a little bit about this. So give us some examples of what you mean by money behaving as opposed to money misbehaving.

Well, and obviously, money is just a tool. And we are the masters of that. The money itself cannot misbehave, but we can misbehave with it. And if it's not doing what we intended it to do, then I guess I would consider that to be misbehaving because, you know, we have expectations of what we want out of that money and what our dreams are, what our why is, what we want to do with money, whether it's to travel or to eventually quit work, put our kids through college, or give it to the you know, poor, you know, whatever charity, right? So we probably all have some ideas of what we'd like to do with our money. But if we're not telling it where to go, I mean, my favorite phrase is tell your money where to go instead of wonder where it went. And there's some real truth to that, that if you don't slow down and have a plan, it's just going to run through your fingers. And so money is not evil. And it's, it's, I don't prescribe any kind of judgment about money. It's just we have to sort of be the parent and decide what the boundaries are, what the rules are around that, and what our expectation is of that.

So that makes a lot of sense to me because a lot of finance really— I mean, there's this whole world now, behavioral finance, being intentional and understanding the behaviors, and it really transcends the money. So let's back up a little bit. So if someone, let's say, isn't very good or they don't feel like they're very good with money, which I hear pretty often, as I'm sure you do. Right. What are some basic steps or a couple, you know, a step or two that people should take if they want to start down this path of being better with their money and much more intentional? What are, what are some sort of basic tips that you can share?

Well, I think first of all, you have to be aware of your situation. If you don't really know what you make or what you owe or what you're paying in interest or you know, what you could be earning in interest, if you have no clue about that stuff, then you really aren't positioned to make any changes. You don't know what your expenses are. How much do you spend on eating out? How much are you spending on your cell phone bill or whatever? It's really hard to make changes if you, if you aren't even aware of where you're starting. You know, how do you know you're going to get there if you don't even know where you started? So I think that that would be the number one thing is to just start putting it all in one place. Writing it down, being kind of getting in touch with it. I think a lot of people avoid it because it feels uncomfortable. And there's a lot of shame and embarrassment to— oh, I don't really want to look at my number because 99% of time when I ask people how much debt they have, they, they don't really know. And they haven't looked at it. They don't even open statements anymore. They do everything paperless. And so they're not checking in, they're not signing in to look at that stuff. So I just encourage people to just look at it. You know, I always tell people, you know, the monster in the closet is a whole lot less scary when you turn the light on, when you can just see them, right? And let's just look because then we can make a plan for how to change things. So I think that's one of the first things. Is to just be aware.

So really, you know, that brings up a great point because I think one of the challenges for people, and this is something that I often hear, is that, you know, this whole notion of budget, right? So what you're really talking about in the beginning is really tracking, right? Like you say, you gotta know sort of where it goes so that you can then make a plan. So I know before we came on, I know you have a spreadsheet that you use with your clients, but what are some good ways sort of in general that people can even begin that tracking process? Is it a spreadsheet or is it an app or is it pen and paper? Well, you know, what do you find? I think it tends to be effective.

Yeah, it depends on your learning style or what you like. If you're a pen and paper person, get out a legal pad and write it down. I would say even if you looked at 2 or 3 months worth of back statements of all your checking or credit cards, wherever your money goes through, and get some high-level numbers. Like, I know when we first started deciding we wanted to eliminate debt, when I saw how much we were spending and eating out every month, it just about choked me. And I would look to my husband and say, do you remember any place we ate out last month? Because, you know, we spent $600 or something in dining and there was no fancy restaurants. It was, you know, picking up and coffees and chicken and lunch and pizza and whatever. It was not fancy. It just was frequent, you know, and so, you know, getting a number around that or clothing or travel or gas, you know, gas in your car, you just usually fill up because you just need gas, right? And that may not be someplace you can change, but you should at least know where that factors in, and so that as you're putting in your priorities, you can say, well, yeah, I got to get to work, so I need this much for just gas. That means maybe I have to adjust something else, whether it's dining or clothes or trips or, you know, there's lots of disposable areas in our budget that you can make some choices. There are some things you don't have a lot of choice on. Your utility bill is what it is. You can save a little money by turning down the thermostat or, you know, wearing extra clothes in the winter or, you know, there are some little hacks here and there. You can reduce some expenses around let's say cable or whatever. But if you don't, if you don't have any clue where you started from, you don't really know what to shave and what you're allowed to shave. So I do a budget in like an Excel spreadsheet. Basically, I do it up on Google Drive so that I can see it with my clients live. But some people like the apps. I have not had a ton of success with the apps personally, because so many of the apps are doing more of the tracking, they're not planning. You know, you can link things like Mint with your bank and you can see where you spent it. A lot of banks actually, I believe, will show you what percentage of the pie you've spent on different categories. But if you're not setting the plan intentionally up front, it doesn't really matter. You're just seeing what you did now. And it's kind of like driving, looking through the rearview mirror. If you're not going to look out the window and say, where am I going to go? Doesn't really matter what you did. So I wouldn't spend a ton of time tracking. But you know, sometimes even 2 weeks, if you don't even want to look back at old stuff, write it down for 2 weeks, everything you spent, or a month. And then at least then you start budgeting and you go, okay, that's a ridiculous number, we're not going to do that anymore. But I'm also— so even though you said I, you know, I graduated from the Dave Ramsey training program, I like to think of myself as a little kinder, gentler than Dave. And I work with people, you know, one-on-one. I don't do everything Dave does. I don't I don't shove that down people's throats. So if they, you know, people are kind of hot and cold about Dave Ramsey, which he's got some really great stuff that's helped a lot of really, you know, awesome people get out of debt. But you don't have to do it Dave's way. You have to find your way, right? And that's where I think it's not Penny's way either. It has to be what's going to work for you and your family. It wasn't realistic for me and my family to never eat out. I was working 50, 60 hours a week in a really high stress job. And so was my husband. We were gonna pick up pizza and chicken once in a while, but did we have to do it as often? Did we have to buy a drink every time? Did we, you know, could we use a coupon? There started to become ways where you can go, oh, there's more than one way to sort of fill the need and still hit your goal, right? Because our goal was, this is ridiculous, we're spending a ton of money that's, you know, in interest. You just might as well light a light a bill on fire when you're giving it to the creditors. And I wanted that money so that I could do something. I felt like I could be more responsible with the money than just giving it to creditors.

So, you know, that's a great point. So let me ask you a question before we move on to the sort of the managing debt part of things. As you work with clients, what are, what are probably the most common areas of expenses that people are really surprised once they go through this process, right? I would have to imagine that once they start tracking and as they start to formulate a plan, like you said about the eating out, they have that aha moment, if you will, like, oh my goodness, we spent how much on this? So what are some of the common areas where that tends to sort of pop for people?

Dining, for sure. That's different from your groceries. But how much are you eating in restaurants? Because it's typically more expensive if you eat any kind of quality food versus fast food, you know, dollar menus. You're going to spend more on eating out than you would cooking. So eating out, groceries— most people, I think, way underestimate what it takes to feed their family. And when we start budgeting, they say, oh yeah, I don't— you know, $200 is good. I'm like, Really? Do you really think you're going to feed your family of 5 on $200? You know, how long is that gonna— so food in general, I think, and because food keeps going up and it gets— you lose sight of what have you really been spending on just surviving. Entertainment stuff like subscriptions. There's a lot of— now we're buying Netflix and Hulu and Spotify and every kind of thing you can think of that has a monthly ongoing expense. Those are ones people forget about and just say, oh, it's only, it's only $8. It's only $10. Well, that's $120 a year, right? So when we start adding those up times 5 or 6 or 10 subscriptions or things you've forgotten that you even had, because again, they're not looking, nobody's balancing checkbooks anymore. They're not even looking at what's going through. It just money comes in, money goes out, and they, they never look at it.

Right.

Sometimes clothing for especially for children, clothing can be if you got growing kids, remember just almost being mad at my son when he would come to me and say, Mom, I need new shoes. I'm like, dude, you got to give me notice. What are you doing growing? You know, and they do that. They tend to grow out of stuff and they wear through their jeans or whatever. So if you're not realizing and sort of being intentional that over the course of a year, might not be all at once. And that's what's hard is the irregular costs. Throw people off when they say, well, I don't buy clothes every paycheck. Well, no, but spring is coming, summer's coming, you're going to need, you know, flip-flops and swimsuits, where you didn't need that in March. And then, oh, then there's school supplies right behind it. And you know what shoes and school supplies do. So those irregular things really can derail people's— because they don't— they know what their bills are often, you know, I know what my mortgage or rent is, I know about what my cell phone bill is. I know what my, you know, but they don't, they don't plan for the irregular things or the one-off graduation presents or a trip to see mom or a trip on a vacation or those irregular things. Really, those wind up on credit cards because they're not planning, oh, that's going to happen. You know, the car's going to need tires, the car needs some maintenance, just because, you know, maybe you don't even have a car payment. But you need to be setting aside some money because it's going to need a little TLC. Right.

So, so, so now, so, you know, speaking of credit cards, I mean, you make a great point where if people aren't mindful or intentional, as you say, about these, these expenditures that occur each year, right? Like you have to get tires every so often, right? Clothes or whatever. But they're not necessarily the regular payments like a rent or mortgage payment or a cable bill or whatever. So people kind of lose track. So of course, the net result of that is like, you know, people going to credit card debt, right?

Right.

So here's— so now when we— let's shift to sort of managing debt. So of course, here's the age-old question. I know that there isn't necessarily a right answer for this, but in your experience, do people, you know, the— how do people tend to answer the question of high, you know, pay down the highest rate versus the smallest balance, right? Or some other variation thereof, right?

So those are the two most common.

Yeah. So what do you typically find people do or what do you tend to lean to? And is there one that might be better than the other in your experience?

I think, you know, the age-old answer of it depends, right? It depends on the balance. So I like to list them smallest to largest so you can see there's two schools of thought. So it's debt snowball is you're paying off the little one, then that one goes away, whatever that payment was goes on the next one. So then you like double up your next payment, and then it just keeps, you know, going down. And you have— there's a real visceral feeling of, yeah, I got rid of one, right? And that's why I start with the budget before we really attack the debt, because you have to know what your monthly expenses are and what you're, you know, I tell people, Just pay your minimum on your credit card and pay for your groceries first. Because if you're not paying for groceries first, where's it going to go? It's going to go on the credit card. And then you're in that vicious cycle. So you have to break the cycle and get your basic needs covered first and then see what you have left to put towards it. Then the strategy comes in, like, are we, are we doing the debt snowball or what's called avalanche where we're chasing the higher interest rate? Right? And we're like, well, that one's a 24%. Why would we pay off, you know, the 12% or the 8%? Or And I guess I'm kind of a— I guess because I'm looking and helping people one-on-one, I don't just spew out a descriptive, everybody has to do it this way. Because I think there are some debts that are very emotional to us. Like, if I owe my brother money, that one's got to go because every time I see him, it reminds me, or he gets to criticize what I bought or how I spent my money or whatever. So let's just get him off my back and whatever, and Visa can be next. But I don't like paying any interest more than we have to. So if two debts were equal, like amount, $2,000 here and $2,000 there, I'd chase the higher interest rate. But if I had a little $500 one, I'd probably get rid of that just to get some traction and to feel like, okay, I did something, I got $500 gone, you know, because I help people track the total debt to start out with, you got to see the number. And if it's $55,000, whatever, put it down so that every month that you're paying minimums, you should be at least going down as long as your minimum is paying at least the interest, right. But then I also think it's a smart thing to go chase a better interest rate. You know, I don't really believe in debt consolidation because I do like to see them separate. And if you know, it's hard to attack a $30,000 bill, where if you have a bunch of smaller ones that you can write them off. I liken it to like when I'm getting ready to do something or chores around the house and you have your little to-do list. And I will put something on there like, you know, dust the house if I just did it, just so I have the joy of marking it off, you know, and feeling like, well, I did something. And I think there's some of that when you, when you list the little ones, at least you can go, okay, The $250 one, I can do that one in only this period of time. But my $30,000 student loan, hmm, yeah, I'm probably not going to chase that one first, because you give up if you don't feel like you're making progress. So it is, it's math and behavior, right? You have to feel like you're winning and that you are making traction. But the longer you do it, the more you want to chase, you know, let's get rid of that ugly interest rate first. What, or could I qualify for something else? Because I know that was one of the things you said, you know, how do you attack debt? Well, you eliminate interest in whatever way you can. So if you're really starting to make traction and you qualify for a better card, or then I'm okay with people transferring this debt to that 0%, or this debt to that, you know, bank loan or something because it's 10% less in interest, because then they're going to make greater traction on that one debt. But if you just do that, which most of us do that, you know, without any thought, like, oh, I found this great 0% credit card, but you didn't change any behavior, and then you go rack up the other one because now it has no balance on it, you're not winning the race.

Right, right, exactly. Yeah, you're going backwards. So it's interesting. So basically what you're saying is really for some people who need to feel that progress, right? This is the snowball method, which I'm a believer in personally. So if you have a smaller debt, $500, let's say, but it might be at 2.9% interest rate, you might still— and it's lower than anything else. You might just still want to do it just to sort of get rid of it. Just get that win, see the progress, get rid of it. OK, so really in that kind of thinking then, would it be fair to say then that the type of debt— credit cards, car loans, student loans, mortgages, whatever— really then doesn't really matter, right? There's this whole notion of sort of good debt versus bad debt. So if you're trying to make progress and the smallest loan, whether it happens to be a credit card or a car loan or one last little bit of a student loan or whatever, just what you're saying is if you're following that strategy, just do it. Just pay it. Right.

Yeah. I, the only one I think maybe has some validity in my mind of being a different kind of debt or a good debt would be a mortgage. And so I would never pay off a mortgage until you had the other things going away because the mortgage is the only one that you have some tax advantage. You know, you can write off some interest on a mortgage where you can't anymore on student loans, I don't think, and you can't on credit cards. And so You know, why hurry to pay off your mortgage? But I can tell you that when we paid off our mortgage, it freed up money to do college because we didn't have somebody like you in our back pocket helping us plan early on. And I truly never thought we would be able to help our kids with college. And I'm super excited to say I just graduated my second one with no student loans because we created a plan. Right? That's huge. And so not only do we have a paid-for house, we didn't saddle them or us with any student loans. So it factored into our plan. Now that I've been doing this a while, I might have done things differently. But at the time, that's what I knew. And it worked. And so at least what my— what used to be my mortgage then became some college tuition. What I didn't realize, because nobody was really helping me look at this, is that college tuition was more than my kids— or more than my mortgage. Right?

Right.

Because you think, well, surely it can't be more than that, right?

That's just, you know, you think about you bought another house. Exactly.

Pretty much. Right.

Right. But I would have to imagine that, you know, because there are questions around, you know, people have, should I pay off my mortgage first? Right. I think what you say makes a lot of sense. Take care of the other debt first, then the mortgage. But then, but then in those situations where people don't have other debt, You know, I do get asked questions like, should I pay off the mortgage first? Or should I take that money and invest? And oftentimes I give them the sort of, it depends. And yeah, there's so many factors that go into it.

There's no one right answer really for that. And I think, you know, I have learned from a lot of financial advisors that, you know, it does make a lot of sense to— you've got to also be looking at your retirement plan, not just because you can sit in this paid-for house but have no money to eat.. And so you have to be looking at both sides of that equation too. Like, are you also investing in your retirement? So it's not— they're not an island. You have to have a plan for both pieces. So because otherwise you're going to borrow against your house and you're not going to be any further ahead.

So you want to work hard to pay off your house to simply borrow against it. What was the point?

Yeah, exactly. Exactly.

Yeah, exactly. So we are getting close to the end of time here. You know, you share some really great tips. Just one last, you know, one last quick tip, quick tip about whether it's budgeting or managing debt that you'd like to just leave our audience with. One quick tip, like, here's my— if you take away nothing else, here's one thing you should take away. What would that be?

Do something. You know, don't keep hiding from it and avoiding it. You have to start somewhere because it is about baby steps and progress and You know, I'm not perfect at it. I fall down, you get back up, you know, and I think you just have to do something whether you do snowball or avalanche. Don't let that stop you and don't overthink it. Just start trying something.

Just do something. That's excellent advice. I know sometimes. Yeah, it's scary, right? Like you got those bills. You don't want— I know that from my past as well. I was there too. So, so Penny, so you are in— excuse me— Loveland, Colorado. I know you work with people all over the country. So please, take a moment and share your contact information in case anybody would like to get in touch with you to get some help.

Yeah, that's been great. Yeah, even before the pandemic world, I was doing everything virtually for the last several years. And it simplified my life and my client's life where we can just get on and, you know, I lose track of where people are because to me, they're just right there across the table. So I— probably the easiest way to find me is on my website. There's a contact button there, pennywisecoaching.com. And I have a Facebook page that if you search Pennywise Coaching will come up, or Pennywise Financial Coaching. I do probably most of my social media, Facebook, and a little bit on LinkedIn. I have a newsletter that you can register for if you want to get some monthly tips and, you know, some stuff there on that you can sign up through my website. So all my contact information is probably easiest to find me there, pennywisecoaching.com.

Awesome. Great. Perfect timing. All right. Thank you so much. I do. I will just pause for or ask for a moment. If you have any questions for Penny, please go ahead and take a moment to chat in. While, while you're— you may be doing that, I just want to remind everyone, thank you so much. And thank you especially to our special guest, Penny Kidd of Pennywise Coaching, with some great tips. Again, my name is Jack Wang, CEO of Longhorn Financial. I do these Webinar Wednesdays each week at 7 o'clock. So if you have a particular topic that you would like to see us cover in future installments of Webinar Wednesday, in the email that I send out with the replay link, there'll also be a link for just a quick one-question anonymous survey, right? So you can share with me what topic you might be interested in. So be sure to look for that in the next couple days. So I just got a couple of messages here saying thank you, I thought it was great. So that is it for this installment of Webinar Wednesday. I hope everyone stays safe. Again, thank you, Penny Kidd. It's great to have you on. I'm so glad, and I look forward to doing this again in the future with you.

You bet. Thanks, Jack, for having me.

All right.