Kumiko Ehrmantraut is an Accredited Financial Counselor® and creator of The Budget Mom, an online resource that helps women with money management. Recently, Kumiko spoke with us about the ins and outs of budgeting and also offered some advice on how to reduce household expenses.
Tell us a little bit about your background. Why did you decide to start a blog?
Working in the finance industry made me take a hard look at my personal finances, and it led to me creating my very first budget. It was that budget that ultimately changed my entire life. Over the last five years, I have paid off over $10,000 in credit card debt and more than $15,000 in student loans. It also led to me developing this crazy deep passion for financial literacy. After witnessing the positive changes that financial education had in my life, I wanted to help other people discover the same freedom and success.
After getting my Accredited Financial Counselor® designation in 2015 and learning all of this really amazing stuff, I opened my laptop on February 11, 2016, and wrote my very first post for The Budget Mom for the world to see. What started out as a hobby has turned into a full-time side gig with over 100,000 monthly page views.
I am always learning new things about finance, but my real passion is budgeting. I love the organization of it, the way it drowns out my stress by giving me a plan and the freedom it gives my family. I never dreamed that I would be selling my own products, but my blog helped me turn my dreams into reality. It has also given me more financial stability and has allowed me to pay off more debt.
What do you think is the most daunting aspect for women about putting together a household budget?
I think the hardest part is just starting. A lot of women want to start budgeting, but get overwhelmed when they first start out. I was the same way. Do you start with your spending first? Do you list your bills first?
If you have never done it, taking an in-depth look at your finances is really scary in the beginning. It’s almost like a slap in the face. For me, I took one look at my bills and said out loud, “how did I not know I was spending money on this?” If you are putting together a household budget, take one step at a time and know your priorities.
How does your household budget account for unexpected expenses like car repairs trips to the pediatrician?
Having money set aside in a special savings account dedicated for “emergency” or unexpected expenses is one of the most important things I have when it comes to my household budget. Before I started budgeting, bigger expenses got put on credit cards. That was the reality of my life. I just didn’t have enough saved to cover the bills.
I started putting $50 from every paycheck into my emergency savings; and after a little while, I made my first purchase in cash for an unexpected expense. It was an incredible feeling. I think a lot of women underestimate the power of an emergency savings account. My advice: start saving now, even if it’s a small amount.
What is your opinion on stay-at-home parents taking on a part-time “side job” to increase their household’s income in addition to (or in lieu of) focusing on reducing expenses?
I have always been a working mother, and I am at peace with that. I say do whatever you need to do to support and provide for your family.
Having a side job, such as opening a small Etsy store, running a blog or even selling homemade goods at your local farmer’s market, are all smart ways to increase your family’s income. This is especially true if you want to do more “entertainment” activities or things that are more outside of your regular budget.
There are only two ways to stay on top of your budget: make more money or reduce your expenses. Sometimes, cutting back on expenses is not an option. Don’t be afraid to get creative and look outside of the box to bring in more income for your family.
What are a few wise financial steps to take before a couple wants to start a family?
Before having my son, the first thing I did was contact my health insurance carrier. There is nothing more important than forecasting your expected costs early. Health insurance is a somewhat complicated subject. It varies drastically depending on which health insurance you have and even where you live. The best thing you can do right now is to understand your coverage and know what costs to expect. Educate yourself and learn the vocabulary terms of your health insurance. Get a pen, call your insurance provider and start asking questions.
Also, does your work allow paid time off for having a baby? This is the first question you need to have answered. Some workplaces may or may not have an official maternity leave policy, and even if they do, it might not be paid. If you are compensated for taking time off, it might not mean it’s fully paid. If you are not happy with the length of maternity time you get off, don’t be afraid to ask if you can also use paid vacation time as part of your maternity time.
When planning for time off, make sure your bills and all other essential expenses are covered. When planning for my son, I was able to calculate how much our essential expenses were going to cost, and then I subtracted them from our expected income at the time. It’s never too early to start crunching numbers to figure out exactly where you stand on finances during your time away from work. If you are lucky enough to get paid time off for maternity leave, keep in mind the money you receive is just like any other paycheck. You will have to pay taxes on it just like it was your regular salary.
How can prepaid debit cards help families achieve their goal of staying within their budgets?
Having a limit to what you can spend makes it a little easier to stay within your budget. Using prepaid debit cards allows you to allocate a certain amount of spending for categories in your budget that I identify as “weak spots.” These are areas in your budget where you find yourself overspending every month. Note: don’t forget to set aside money for any fees associated with prepaid debit cards. (View Green Dot’s simple fees here.)
Finally, give us one simple cost-saving measure that most households can start doing TODAY.
The first thing I always tell readers or clients is to start with what you are already working with. Call your mobile phone company and see if any plans would be cheaper than the one you currently have. Can you get on a combined plan with your spouse?
Start cutting out expenses from your budget that you no longer need. Do you need cable? If not, ditch it and start using other providers such as Netflix. Don’t forget: if you are an Amazon Prime member, you have access to Prime video that offers a lot of TV series and movies.
Are you spending money on subscriptions you no longer use? Take a look at where your money is going and start cutting expenses from there. Go through your budget line by line and start making adjustments. You can usually find a couple of areas where you can cut back.
Sign up for a Green Dot Prepaid Visa® Debit Card today. (View Green Dot’s simple fees here.)
The views and opinions expressed here are those of the author and do not necessarily represent the views of Green Dot Corporation. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.