Budgeting with Reid Frederick 

[Music]
Matt: Welcome to Bellingham Technical College’s Money$marts Podcast. I’m your host, Matt Benoit. And each episode we’ll talk to BTC students, staff community professionals and financial experts about financial literacy and wellness in order to help listeners navigate resources in the community and empower themselves financially. Our guest today is Reid Frederick from Whatcom Educational Credit Union, better known as WECU, how are you doing?
Reid: I’m doing great, thanks, happy to be here!
Matt: Awesome. So, tell me a little bit about yourself and how you got into your position at WECU?
Reid: Well, I guess I’d start with my education. I studied international business, concentration in economics, and then I went down to Seattle, got a job in copier sales, decided that wasn’t made for me, so then I came back up to Bellingham because I like Bellingham and I wanted to get in on the ground floor of a company that I liked. So, I started as a teller at WECU, was a teller for just about six months. So interacted with a lot of people, as they manage their money. And then I took a job as a loan officer, that gave a further depth, every time you’re doing a loan – you’re looking at basically the financial situation of an individual or family and so that kind of gave you a glimpse into the world of personal finance. And then I took a job, which is now, I’m now titled – Program Manager Community Impact and one of the main tasks, myself and my department do is being a resource in the community for financial education, financial wellness. And it’s one of my favorite parts of my job.
Matt: What do you love so much, and what interests you so much about that kind of work?
Reid: I just believe in the importance of it and I believe in helping people so kind of at the nexus of that keeps me motivated. I think it is really hard to enjoy life if you don’t have a good base of financial stability, it’s hard to enjoy the good side of life if you are constantly stressed about money. It’s kind of binary, you’re either stressed about money or you’re able to enjoy, you know, company of friends and all the other things in life you enjoy. And so, to help somebody move from that stressed state of mind to and all the stresses that come along with money to more of a mind frame where they can enjoy aspects of life, I think is absolutely, a worthwhile pursuit. 
Matt: Do you have any advice for students who are budgeting on a low income or for students who will have to pay off student loans?
Reid: Yeah, first, I mean, I think sometimes when we – the whole idea of a budget comes up maybe the mental image that flies across your face is like the idea of being a pauper, or you know, now you’re never going to have any kind of pleasure in life at all and I think that prevents people from actually doing the work. So, I guess, one of the first things I like to do is indicate two or three things that you really enjoy, that you can, can afford, but are non-negotiables, that are things that I’m going to find a way to pay for – maybe it’s going out to dinner once a week with friends or maybe it’s buying a good beer once a week. Maybe it’s playing on a soccer team, maybe it’s a subscription to… you know, indicate those things that have a really – you know, have a little bit of self-reflection, indicate those things that are really of value to you and you really want and then find a way to make it work right for those things. And then as you move away and you’ve established that those are core things that I’m going to keep it’s a lot easier to negotiate on other things like, but I do need to start making coffee at home or I do need to go to the library for some entertainment. When you’re negotiating with yourself from a position of, “I’ve given myself these things”, I guess for me, like when I started budgeting I was like “I really want to play recreational soccer and I really want to be able to buy a six-pack once a week, you know, of good beer.” From that kind of like, okay, I’m going to allow myself that, it was much easier to kind of negotiate on things that are kind of like pleasures or maybe more frivolous and I could cut down from that position of – knowing that I got some stuff that I wanted. And I think that that’s a really good point is to give yourself some stuff and then it’s just a matter of recognizing that you’re going to have to pay back everything – I think sometimes people use student loans to supplement their lifestyle and really it should only be used to pay for those school necessities to the extent possible. So, your goal to graduate with as little debt as possible is a really good goal. 
Matt: Those loans might seems like free money at the time but definitely not.
Reid: Yeah, so you do have to have some forward perspective but in the present, we are, humans definitely are present minded at things and that’s why I think giving yourself a little bit in the present, as I indicated earlier, is really important. But then, operate the rest of your budget around, “okay, I am doing this to better myself in the future, or give myself a better financial footing in the future” so you operate your budget around that fact so you don’t take on unnecessary debt.  
Matt: With that in mind, it’s obviously easy to have good intentions but cultivating the proper habits to actually follow through on those intentions can be difficult. When you were in college, what was some financial advice you wish you could have given yourself?
Reid: You know, I believe in honesty at all costs and I was actually pretty fortunate, my folks supported me through college, they paid for tuition, I had a job as well, I worked down at Anthony’s at the Waterfront. I’m not going to make up some story – I handled it, I do have a really stinky car, I think the best thing for me is that I owned it. I never felt ashamed of the car I drove or that I was a college student or that, and tried to live as if I was somebody that was making $100,000 a year or whatever, you know. I owned the fact that I was a college student. And I lived that way and I wasn’t ashamed to tell anybody that I can’t afford that right now because I’m a college student. I think that can be kind of liberating to own it and you can either make that as a weapon against you or just make it something that’s part of me and I don’t have the money for another car right now. And, so you kind of take the power out of any perceived judgements about that. But then, also, you know, I managed, for whatever reason, to live really cheaply. Lots of roommates.
Matt: Roommates and ramen [laughs]
Reid: Roommates and ramen, yeah. Even though I was supported well by my parents I didn’t, for whatever reason, I think I was fortunate that my parents preached frugality all throughout childhood. We often do what our parents teach us so if my parents have taught me to be frivolous. I might have really been that way. I think I was fortunate in that sense. Yeah, so I guess just owning the college lifestyle and knowing that that’s my lot in life for a while can be really helpful.
Matt: Focus on, focus on, instead of keeping up with the Joneses, because we’re so prone to compare ourselves to other it’s just keep up with yourself and…
Reid: Yeah, yeah comparisons, I think, are, especially in financial matters, there’s actually studies around it where, when people – if somebody were to plainly ask you how are you doing, financially, most people don’t really have a reference point for that. It’s kind of like a vague, “I think I’m doing okay. My bills are kind of paid, I have a little bit in savings.” But, do you have enough saved for retirement? Do you have enough for an emergency? Do you – are you saving for your children? Anyways, people – they kind of go blank and they don’t really have a reference point if someone were to plainly ask you “how are your finances?” So, what people tend to revert to is, this has been backed up by studies, is comparisons. So, they compare themselves to their peers. “Well, relative to my buddy, I’m doing worse. Shoot.” “Relative to how I was doing two years ago, when I had a really good paying job, I’m doing worse.” “Relative to some societal expectations, that these commercials are telling me, I’m not doing very good.” And so, to have that kind of external reference point, where you’re constantly comparing and you don’t know, internally, you don’t have an internal sense of “I’m doing ok!” Because basically, you don’t understand your balance sheet, you don’t understand how your bank account is and if you could, if you are doing okay, then you tend to fall on comparisons and that’s a really bad, not comfortable place to – you’re always going to be making less money than somebody. You’re always going to be… There’s always going to be commercials telling you that you should, you deserve something more or you should be driving this car… 
Matt: That you need something as opposed to wanting it.
Reid: Exactly, and so to, and so I’m glad you brought up the idea of comparisons because that is just a big thing for finances and it’s a really bad way to measure how you’re doing with your finances.
Matt: Everyone make a different amount of income, so relative to your monthly income or you know, are there certain things that students should be doing about, like set aside this percentage of whatever you’re making per month or are there any bench marks as to, you know, if someone doesn’t have a savings account do you recommend them doing that as soon as possible?
Reid: I really believe in the power of having what’s typically called an emergency savings which is usually defined as three to six months living expenses. So, if my living expenses are $2,000 then I would want to have $6,000 or $12,000, really even $1,000 is better than nothing, right? But having an emergency savings. And emergency is kind of, I think, it’s the wrong word. It should be called an eventuality savings. Because things are going to come up, you know, computer’s going to go, car’s going to break down, you’re going to want to move out and break up with your girlfriend and if you don’t have some money stashed away, what are your alternatives? It could be to stick it out in that relationship, it’s not a healthy relationship, it could be to go get a really bad loan. And so, to get firm footing and to get yourself a sense of freedom and, that comes with, that eventuality savings, so you can leave a job that you hate is so good for your spirit that I think that having that emergency savings is the first thing. So, whatever you can put away to get to that three to six months living expenses is good. As soon as possible, and then, I think a goal of, you know, a goal of saving 10% on top of that. But It kind of depends on what your goals are, whether your income allows for it. 
[11:44] For some people, that’s why I think BTC is wonderful [11:47]
Matt: So, we talked about getting started with a budget – finding those things that you enjoy that are non-negotiables, but how do you think students can get motivated to actually start budgeting or managing their money?
Reid: There’s a couple things about getting in the habit of savings, I think one is just creating the habit so, starting small is just fine. You know, if that’s all you can do right now is start – it’s less about the amount you save and more about getting in a habit. A lot of good finances is just about creating positive habits. The other thing you can do is one make it automatic. It’s been shown, time and time again that if you can make an automatic transfer, there’s a term, and it’s kind of a weird term and it’s called ‘pay yourself first’ which is– If I get my paycheck, the first thing I do with my paycheck is, if I’ve determined, okay, I’m going to save $20 a month or $20 a paycheck, you transfer that money the moment you get that paycheck and you put it into an account that’s maybe out of sight out of mind, right? All the better if you can make it automatic because if you leave it to your own devices you might not get to it. But, so you transfer that money, you pay yourself first for that future savings and then you just operate on your budget for the rest of your month and you don’t have to worry about savings, right? So, it’s kind of pulling off a Band-Aid method. So, pay yourself first is really good advice. It’s been around for a long time but good advice. Making it automatic is really good advice so you don’t have to remember to do it. And giving yourself, I think anytime with finances there’s a little bit of fear involved. Giving yourself permission to take smalls steps and have that be enough for the moment is good. So, if it’s $5, okay great, that’s a good goal, and then maybe you can be like okay that wasn’t that bad. Or maybe it’s, I need to, you want to intentionally take on your whole budget but at first you’re going to open up your credit card bills and you’re going to look at their interest rates and write them down and then give yourself permission for that to be okay for right now. After a while you’ll gain some momentum and you’ll probably take on the other stuff but at first it’s kind of just emotionally nice to just give yourself permission to take small steps. I think that’s really important to habit changing is to make it as incremental as possible. 
Matt: So, if you had a persona definition of financial independence what would that be?
Reid: Well, yeah, personal definition. It’s such a, let me think, I think, I guess, I would kinda come from it, I’d depersonalize it, I guess maybe. Let me depersonalize it if you want me to try to re-personalize, it I can. So, depersonalizing it is that, I think, sometimes as a society we think, when you say financial independence, I never have to work a day in my life.
Reid: Scaling back from that, like that’s complete financial independence. Scaling back from that to a more realistic, probably for 99% of us, perspective of financial independence. I think it’s, to a varying degree, the ability to leave a job for another job that you like, you feel like you have some independence and you can do that. Ability to leave a partnership that’s no longer working because you’re not so in dire straits that financially, for financial reasons, you need to stay together. So, that would be, financial independence. I think that having a grasp on your finances, so you know what’s going on, so you can freely enjoy the discretionary, the free money you have.  If you’re constantly worried about “can I really spend this money?”, “Is this okay to buy a new pair of shoes?” then I think you’re not that independent you are concerned about the fact of if you can really afford it. What a budget gives you is, “Yeah, I can afford this, I know I can because I’m meeting my other obligations and I can enjoy a new pair of shoes!” So I think that goes along with financial independence. And so it’s just a greater sense – money can be a tool for a greater sense of independence and freedom and hopefully you use it that way and not an opportunity to feel obligated and indebted.
Matt: So, for students who are interested in learning more, do you have any ideas for – what free or affordable financial literacy resources are there in the community here that you can recommend.
Reid: Yeah, I mean, the Whatcom Asset Building coalition, they’ve got a really good website. I think it’s just, is it, wabc.org? Whatcomabc.org. Yeah, and that’s a really good budget. They do their very best at explaining things in really understandable terms. We, at WECU do seminars that are open to the public, usually it’s in the spring or fall. So, that’s a freely available resources. The Whatcom Dream is a really interesting nonprofit. The Executive Director there, Trudy does a really convincing and good job of explaining how growing up in poverty kind of changes your entire interpretation of money. And so that’d be really, it was really illuminating for me as somebody who grew up in middle class, to see that. And you know, we live in the YouTube and internet age, I think Google usually gives you pretty good search results if you ask specific questions, you know, you just have to go out and look for it and be somewhat discerning. Does this seem like a reliable source? Does it seem… you know, in finances, if it seems it’s too good to be true, it probably is. There are some - we’re lucky to live in an age that a lot of things are a fingertip away and you can do some self-taught stuff as well. 
Matt: And the Whatcom Dream, I found out, offers a 10 week financial literacy course – if you’re interested in that the website is thewhatcomdream.org. Reid, is there anything else you want to add about the topic of budgeting, especially for any those students out there? We’ve obviously, covered quite a bit
Reid: Yeah, we have covered quite a bit. I would say, start small and do something and start where you are. What can you do today to better your financial situation – big or small, whether that’s tracking your expenses for a week or a month, whether that’s opening a bill, whether that’s deciding to pull your credit report – do something. Because that tends to lead to other stuff and the fear subsides step-by-step as you just start doing stuff. And there’s really, it’ll be empowering the more you do it. So, do something!
Matt: Do something! There you go! Alright, my thanks to Reid Frederick from WECU for being here.  And thanks for listening to this episode of the BTC Money$marts Podcast. Be sure to check out all of our episodes online, also on the BTC website. This podcast is produced by Cheryl Kennedy with music courtesy of Bensounds.com. I’m Matt Benoit. We’ll see you next time.