The Price of a Paycheck: What is Money?

Money doesn't have to be stressful! Kerri Smith and Michael Gates of Self-Help Credit Union share eye-opening insights on what money really is and provide practical tips to take control of your finances. Learn how to build savings, reduce money anxiety, and use your hard-earned cash as a tool to improve your life.

Links:

Self-Help Credit Union

SC 211

Greenville Human Relations Commission

Transcript

Sponsor: This episode of Simple Civics: Greenville County is sponsored by Self-Help Credit Union. Self-Help is a family of member-owned, mission-driven credit unions, a nonprofit loan fund, and a policy advocacy organization. They work every day to expand ownership and economic opportunities for all. The mission is large, but Self-Help believes that much of it is accomplished by small acts: a member's first bank account, a loan for a small business, helping families buy their first car or first home, or reduce high-cost debt. Together with more than 188,500 members around the country, Self-Help Credit Union is increasing ownership, creating jobs, revitalizing neighborhoods, and building stronger communities. To learn more and to find a branch near you, visit self-help.org.

Katy Smith: What is money? This might seem like an obvious question but just think about the forms it can take. Paper bills, coins, checks, debit cards, cryptocurrency. What is it? Today, we're going to talk about what money is to you as an individual, what it represents, how it's tied in a lot with emotion, and how it can free you. I'm Katy Smith with Greater Good Greenville, and today I'm pleased to be joined by Kerri Smith, South Carolina President of Self-Help Credit Union, and Michael Gates, Self-Help Regional Manager. They'll walk us through this not-so-simple question of what is money with some simple strategies to make our relationship with it less complicated. 

Well, I'm so glad that Kerri Smith and Michael Gates with Self-Help Credit Union are with us today. I cannot think of two better people to talk to us about what is money. Thanks to both of you for being here.

Michael Gates: Thanks for having us.

Kerri Smith: Well, thank you, Katy. This is something I'm so passionate about.

Katy Smith: Great. All right. Well, so the main question is the title, what is money?

Kerri Smith: Well, money, and I aasksked this question to audiences, whether they're adults, or young adults, or even kids… And what we discover is everybody stumbles over it. You know, we tend to think of money about what we can do with it, or how we get it, but we don't really think about like the essence of it or the very basic definition of money. And so just to start off, money is a medium of exchange for our labor. So if we start thinking about it in that way, it really does take a lot of the emotion out of money.

Because if you start thinking about, okay, if it's a medium of exchange for my labor, and we'll just use something simple. And I do this with young adults all the time. I love shoes. I've always loved shoes. And so it's really hard for me to, I don't leisurely go look for shoes because I'll find something. And so I always ask young adults, I'm like, you know, so you want to buy a $300 pair of shoes. You make $10 an hour. How many hours do you have to work to purchase those shoes?

Katy Smith: And they might say 30 hours.

Kerri Smith: And then I say, but when you make $10 an hour, you don't bring home $10 an hour. So you may bring home $9.30. So now how many hours do you have to work to buy those shoes?

Katy Smith: I'd have to get out my calculator, but it's a lot more than 30 hours.

Kerri Smith: So you're looking at 34, 35 hours. So that's eight hours a day for four almost five days out of a week. Is it worth it? Are those shoes worth it? And I'm not telling anybody don't buy them. What I'm saying is, is it worth your time to spend that much money on a pair of shoes? And it really does start to take that emotion out of how we manage this tool that we have, because it is so much of our time, right?

Every day. And then you can look at, you can scale that up. You can say, how many hours do I have to work in a day for my rent, for my car, for my food during the week and, or going and buying Starbucks? And again, I, Starbucks, I'm like everyone else. I love, you know, that little treat every once in a while. But when you're spending $5 a trip, and some folks go multiple times a day, so is it worth that time that you've worked to purchase it?

And I think another thing about money that we don't understand is the power that comes with it. Because how you spend your money has a huge impact on our economy, our neighbors, our community, our small business owners. So it should be something that we do think about more consciously about what it takes to earn it and then how we spend it.

Katy Smith: I love thinking about money as power, too, because you can imagine if you're not wielding this tool properly, it has power over you and it's controlling you. If you are the one who's wisely using it, then you can have power over your destiny, over the things you want to do and in a helpful way over causes you believe in in so many ways. So that's a really helpful framing.

Kerri Smith: A lot of times, especially, you know, when we're having tough financial times personally, we don't feel like we have a lot of control over everything. And I've been there. I had 13 surgeries in six years and used all of my retirement and every bit of resources, couldn't work and almost lost our home. But because I did save for, you know, those rainy days, I was able to shoulder it a little bit longer than maybe somebody else could. But it's a reality.

I didn't even know what a credit union was when I started working in the financial industry all those years ago. And so I didn't have a good relationship with money. And when I talk about shoes and that emotional attachment, it took a lot of soul-searching. When I went through my financial education to be a financial coach, it took a lot of soul-searching to figure out why that was important to me and why I had a tendency to overspend on shoes. And it boiled down to as a kid, my grandmother, that was our bonding time. She took me shoe shopping, and she loves shoes too. And you know, and especially after she passed, I would find myself, especially if I was having a tough day, or I was going through some challenging stuff. It was almost like it was a comfort. But it was because of that emotional tie to that.

Katy Smith: All right, Michael, you have seen hundreds of folks, thousands of folks come through Self-Help Credit Union and turn what once might have been negative emotions about money into peace and security. What made the difference for them?

Michael Gates: Well, I think the big thing with most of the members that we serve is money is a great stressor. It's probably amongst the highest, if it's not number one, it's certainly in the top two of a person's stress in their life. And so how people manage money and the things that create that additional stress through emergencies or things along those lines, that's the thing that we deal with almost every day. It's just kind of dealing with the stress that people have over money and where it's coming from and where it's going.

Katy Smith: Yeah. So how have you helped people turn it from a stress into security?

Michael Gates: Well, I think the first thing that we do is we help people truly understand what money is all about, where it goes, and really the power that money has and trying to avoid emergencies. Emergencies are the things that people stress about the most when it comes to money. Studies have shown that people that have emergency savings accounts have less emergencies. We're coming into that emergency time of the year when everybody seems to stress over, well, if I don't give this person a gift for Christmas, then they just don't think I love them. And so we help people understand that there are ways around that.

Katy Smith: Yeah. It's such an interesting point that when you say people who have emergency savings accounts have less emergencies. I'm thinking they still have the same things happen to them, like needing a new car battery, having a tire go bad, having an unexpected health expense. It's just that it doesn't feel like the emergency that it is if you have no savings to help cover that.

Michael Gates: Correct. The stress is a lot lower because if you need a new set of tires on your car or a new battery or something along those lines, but you've got money sitting in the bank in a savings account, that is no longer stressful to you. Because you know that you can go out and replace those tires or that battery or whatever the case may be because you've saved for something that is going to happen somewhere along the lines. Emergencies are things that we don't plan on, but having that security blanket of a savings account with three or six months worth of income sitting in it alleviates a lot of that stress that people feel when those things happen to pop up.

Katy Smith: Can you talk specifically? So three to six months is a kind of specific timeframe. When you work with consumers who come in and they don't have any savings, how do you help them think about building up that account and what's a target you give them and how to do it?

Michael Gates: Well, the first thing we do is we sit down and kind of work through a spending plan. We talk about what income is coming in and do they truly have an ability to save money? If at the end of the paycheck there is nothing left, then that's when we start having conversations about those hard decisions. Do you truly need Netflix and Disney Plus and Hulu? Can one of them go to save some money? After we've kind of taken a look at where they're spending their money, if there is money left over, we tell them, pay yourself first. That's what a savings account is all about. You become the first bill that starts on January 1st. I'm the one that's getting paid first. And so what we try to do is we typically try to have them set aside 5% to 10% of monthly income aside for a savings account until they've gotten to that three months' worth of income sitting in a savings account. If they can get to six months, that's even better.

Katy Smith: I love that. And I just want to really drill down on that so that everyone really hears it. That idea of paying yourself first is I'm saying I'm looking at my monthly income and I'm saying if I am going to pay myself 5 to 10% of that, whatever's left is what is there to pay for my needs. But if there's space for my wants, like all the subscriptions, then great. But if not, they don't get paid.

Michael Gates: What I've actually told people to do is they should create a payment book with their name on it, with a certain dollar amount. So let's say it's $25 per week or $50 per month and put that in their payment bill file. So everybody keeps their bills. As that bill comes up in the first of each month, hey, here's the one I got to pay myself, you become a bill. And having a physical reminder of that bill is a great way to remind yourself that, hey, I've got to put money into a savings account. The even better way to do it is to have people take their paychecks and get in touch with their payroll departments and say, I want to take $20 of my paycheck each and every pay period and put it into my savings account. You give them the routing number, you give them the account number, and you don't even think about it. We have that program here at Self-Help. I put aside $20 of my paycheck every single week into a savings account. I don't think about it. I don't miss it. And as time goes along and you start seeing increases in your income, that $20 becomes less and less painful.

Katy Smith: Yes. All right. So the way you described having a paper bill to pay yourself along with your other bills is making me think so few people actually get a paper bill anymore, which is why Hulu and Netflix and the New York Times games subscription get you because it just comes off of your account every month and you don't even think about it. What would you suggest to people in taking a look at how much money is going out that they don't even remember?

Michael Gates: I think the first thing they need to do is pull up their checking account, assuming that's where those subscriptions are coming out of, and write down each day that that subscription amount's coming out of their account and how much it is. You need to have a grasp of how much money is coming out of your checking account each and every month. You need to know when it's going to happen. So if I have something new, for example, personally, if I have something new that I have to add that comes out of it, that goes onto my payment ledger because I have a ledger that says each and every bill, the date that it's due and how much I pay for each thing.

I try to, especially with things like your electric bill or your gas bill to do budget billing, so you know how much it is each and every month. We know in South Carolina it gets to be 95 degrees in July, but I know exactly how much my electric is going to be in July because it's the same every single month. And I do that anywhere I possibly can because that also helps balance the funds over a 12-month period. I think the thing that most people struggle with when it comes to savings is it sort of has this negative connotation, like when you use the word budget as opposed to a spending plan. People just think budgets are this negative thing and it's going to prevent me from doing something. People think savings are the same thing. Savings seems to have this four-letter word connotation to it that it's this bad thing where they don't realize that it's their money, it's there for them for a rainy day, and it really shouldn't be preventing them from doing something else. If it is, maybe they need to kind of evaluate what that something else is that they're being prevented from doing.

Kerri Smith: Well, and one thing I think folks need to think about, and this goes for people that are affluent, we do a lot of savings for retirement, but we don't do any savings for emergencies or short-term, unexpected expenses. And what I always say is, if you don't control your money, your money will control you. And so having that three to six months, think about if you're sitting in a job that you really are not happy and you're not fulfilling your purpose in life or whatever, or you're working so many hours, at least if you have that amount of money, you could walk away from that job or you can go get training to go into a field where you can be excited and do what you really fuels your passion. Without it, you're stuck, and you will feel defeated. And so I think for folks, the main thing, you have to know what's coming in and what's going out in a real definitive way.

Michael Gates: And I can tell you at Self-Help, we have certified financial counselors that will sit down with you and help you figure out where you're spending money, help you create a spending plan, help you set up a savings account, help you repair your credit if it needs to be repaired, help you build on your credit if it needs to do that, or even help you establish credit if you have none. This isn't about credit, but we have financial counselors that really help do all of that at our branches.

Katy Smith: That's so great. I really appreciate you pointing out that it feels like a negative, but it is nothing but a positive. It is freedom and peace to have control over your budget, to have that savings. That's what helps you thrive and relax and not have that stress.

Michael Gates: Yeah. I mean, money's the loudest voice in the room. And it's the one that's going to speak to what you can do on a monthly basis. It speaks to what you can do for your family. It speaks to helping in an emergency situation, and how you manage your money is going to help you speak loudly when the time comes and you need to.

Katy Smith: I love that. So if people really want to start on this journey to healthier habits with their money and freedom from stress about it, obviously there's the counselors at Self-Help Credit Union. Are there other resources in the community you'd point folks to?

Michael Gates: The county has some great resources. We send them to the Greenville Human Relations Commission. There's a lot of organizations that do what we do. And while, yes, we would love people to come to Self-Help, the biggest encouragement I can tell people is find somebody that knows what they're talking about and is there to help you.

Kerri Smith: And also keep in mind, these are free resources. There are paid resources too. You can even call 211. They have a list of organizations that help their clients through this process. And we partner with a lot of them, especially on the credit-building side, and getting that savings set up for them so that they can reach that financial success.

Michael Gates: There's a lot of resources out there. You know, we can't be everything for everybody. And so that's why it's nice to have partners that we work with that can do the things that we can't.

Katy Smith: Wonderful. Well, I think you all did a great job of making what sounds simple, but is actually very complex, accessible to folks and give people tools to make money, a tool that they can use rather than one that has power over them. So thanks for all that you do and for being with us today.

Michael Gates: You're welcome.

Kerri Smith: Thank you, Katy.

Catherine Puckett: Simple Civics: Greenville County is a project of Greater Good Greenville. Greater Good Greenville was catalyzed by the merger of the Nonprofit Alliance and the Greenville Partnership for Philanthropy. You can learn more on our website at greatergoodgreenville.org.