Kristina Johnson is the creator of Cents + Order, a personal finance blog empowering readers with the money skills to live the life they dream of. We had a chance to sit down with Kristina to learn how to manage money properly – even during unpredictable times.
Tell us a little bit about yourself. Why did you decide to start a personal finance blog?
I’m a total numbers geek! I worked in the banking industry for over 15 years and have a bachelor’s degree in finance. During my time in banking, I watched far too many people struggle with their finances. They worked hard, but could never seem to get ahead financially. There’s a big market segment that needs help to get their finances in order.
I started this personal finance blog back in 2014 as a way to encourage readers to live their dreams by making smart money choices. It’s all about finding the right balance of priorities. I strongly believe in saving money on the things that don’t matter so you can have the money to spend on what’s important to you.
Do you think that growing up in a financially-struggling household is a big reason why you are so skilled at personal finance management today?
Growing up in a financially-struggling household taught me the importance of sound financial management. I watched my family make poor choices with their money, and there was nothing I could do about it. When I earned money from babysitting or other odd jobs, I learned to pinch pennies and define my priorities.
The biggest impact it had on me was making me determined to create a better life for myself. I am successful today because of all the hard work I put in along the way, from working seven days a week while taking college classes to finding ways to earn extra income while working full-time and raising a family. When you put that kind of work in, you want to make sure every dollar is used wisely!
Since you encourage readers of your blog to “calm the chaos,” could you tell us what that means in terms of personal finance and money management?
It represents setting a good foundation for money management. To get your finances in order, you need to have an organization system, a way to create and track your budget, and a solid plan to work on your financial goals. You need to figure out what systems and processes work for you so you’re not stretched in a million directions. When you try to stick with a system that isn’t working for you (such as spreadsheet budgeting, if you’re not techy), it’s just going to leave you feeling stressed about your finances.
As someone whose financial situation changed drastically a couple of years ago, could you give us some insight into the importance of, and advice on how to build and maintain, an emergency fund?
You never know what curveballs life will throw at you. And sometimes, you get a whole bunch of curveballs all at once.
In 2015, I found out I would be losing my job due to a merger and became a single mom shortly thereafter. Even after cutting every possible expense, my income did not cover all the bills and expenses with the marital home. I am grateful that I had an emergency fund to fall back on to help make ends meet until I was able to sell the home and downsize.
An emergency fund can be your saving grace when times get tough. We never know what the future holds, and having an emergency fund helps to hedge against that risk.
The best way to build your emergency fund is to make it automatic. Have a small amount from your payroll directed to a secondary account each pay period. Or set up a weekly transfer from your checking account to your savings account. Another way to build your emergency fund quickly is to tap into any windfalls. For example, if you are paid weekly, every few months there is an extra week. Take that money and send it straight to your emergency fund. Bonuses, tax refunds, and rebates can also build your savings fast!
If someone were to say to you, “I’d like to start budgeting, but it seems like my monthly expenses vary so widely that it’s hard to predict them,” how would you respond?
Just start! Using the prior months as a guideline, make the best guesstimate you can. You should be able to come up with an average, so set that as your budget. Then if you have a month where expenses are lower than your budget, you can set aside the excess for a month when expenses are higher than your budget. Budgeting isn’t a perfect science, but over time, you should start seeing patterns and be better able to predict your expenses.
Do you have any “secrets” for people who want to build up their credit scores?
Even if it’s just the absolute minimum required payment, pay your bills on time. On-time payment history is a huge factor in your credit score; and even if you have negative items on your credit report, you can see your score increase as you continue making payments on time.
How can a prepaid debit card help someone maintain control over their personal finances?
One of the biggest problems people face with their budget are those categories that fluctuate, like groceries, entertainment, or clothing. If there is a category where it is difficult to keep spending in check, a prepaid debit card is a great solution. It’s very similar to using the cash envelope system – without having to carry all that cash around! For example, if you have decided you get $100 a month for “fun” money, just load the card up with that amount. (You could do weekly amounts too!) You’ll know that once you’ve spent that amount, you are done for the month!
When we see a larger balance in our checking account, it’s difficult to picture all the different categories, so it’s easier to overspend. Having a separate balance to use creates a mental division and makes it easier to keep spending under control.
Finally, could you tell us one thing that almost anyone can do today to start saving money and/or lowering household expenses?
Have a very clear goal and keep it in the forefront of your mind. When you are tempted to make a purchase, go out to dinner, etc., pause for a minute and ask yourself, “Is worth sacrificing my goal?” When we want something bad enough, we will do everything in our power to make it happen! Sometimes we just need that mental reminder of why we are saving or cutting expenses.
Why not give the “separate balance” idea a try? Get a prepaid debit card today!
The views and opinions expressed here are those of the author and do not necessarily represent the views of Green Dot Corporation.