If the pandemic placed you in a tough financial situation, one way to help is by using the bares-bone budget. This type of budgeting helps gain clarity on the types of expenses you have.
Oscar Velasco, a business financial specialist from LBS Financial Credit Union hosted the workshop via Zoom for LBCC students. Velasco establishes steps that show you how to save up and spend properly, which will allow you to have a more balanced budget for the long run.
“It’s really important to remember every single dollar spent because when you start nailing down and cutting down your expenses you will see how much money you can potentially save, ” said Velasco.
Velasco introduces steps such as nailing down your monthly spending, getting clear on your needs vs wants, slashing non-essential expenses which make up your bare bone expenses once defined. He gives a rundown on how to properly calculate each expense.
A crucial part in understanding the process of the bare bones budget is separating your needs vs your wants. Keeping in mind that rent, car credit payment and gas should be more of a priority which would be your needs. The wants would be money spent on Starbucks, Netflix and happy hour and this will help you recognize what’s most important.
“Every time you eat out you spend on average 60% more than you will do eating at home according to studies,” said Velasco.
“During lockdown I was stuck at home with nothing to do so it was easy to subscribe to streaming services like Hulu or Disney+ or also going online and cashing out on Amazon,” said Isaiah Escobar, a student at LBCC that attended the Zoom event.
It is important to look at your nonessential spendings and ask yourself if they are really things you need. For instance, putting in effort to cancel unesserary subscriptions that are difficult to cancel when they require more than a phone call.
“You’re going to total your brand new expenses and you will see how much you can save by stopping all of the wants, whatever the number is, is the number you will use for motivation to stay on track,” said Velasco.
Giving up Starbucks coffees, concerts, going out and overall unnecessary spendings isn’t easy however the money you save up is what you can use as motivation.
“Be aware of what ATMs your financial institution allows you to make free withdrawals at,” said Velasco.
Velasco also discussed how within a month you may be spending around $20 in ATM withdrawals, which adds up to $240 a year. This is money that could go into a savings account.
“40% of americans by the age of 40 do not have $1000 in a savings account,” said Velasco.
Oscar Velasco hopes that these steps help students with creating an emergency fund for any given occasion or simply understanding how to spend money effectively and to be aware of the fees that may come with those purchases.