Budgeting sense adds up: Program takes financial literacy beyond basics

Columbus resident Brandon Malone knew little about budgeting, loans and retirement accounts before he received financial literacy training at Eastside Community Center.

“I really didn’t know what (financial literacy) was,” he said.

The training taught him a lot, Malone, 26, said. “Taught me to budget my money and not spend more than I budget.”

The Columbus native, who had received his GED with honors from Brown County Literacy Foundation, was living with his mom and stepfather at the time, looking for a job a few months after the 2008 flood.

Through the local unemployment office, he got a job at Eastside Community Center, making and delivering hot meals, sorting and delivering presents that were donated at Christmas.

Rick Scalf, the center’s marketing and IT manager, told him about the training — but also about an Individual Development Account, through which income-eligible people can get matching funds for up to $400 in annual savings to use for certain expenditures, including education, a home or starting a business.

Malone said he budgeted carefully so that he could save the full $400 annually. He got the first matching funds in 2009, which boosted the savings to $2,000.

He enrolled at Ivy Tech and used the money for a computer because his computer-aided drafting classes required a good PC for 3D modeling.

He has participated in the program for four years, and has saved all of the money except for the portion he spent on the computer.

Through a grant from Work One, the local unemployment office, Malone pays tuition and books at Ivy Tech, where he takes one or two classes per semester toward a mechanical engineering technology degree. He also works full-time as a machinist at Columbus-based Eco Plastics and part-time at Express Care, which performs oil changes and small car repairs.

“I’m a hands-on kind of person,” he said.

Financial advisers say that reaching a point where the household budget is balanced and people can even put a few dollars into savings is ideal.

Operating on a balanced budget, meaning that you’re spending is no greater than your income, is one of the basics, said Lisa Piercefield, regional operations manager for Apprisen, which offers services including debt counseling.

Apprisen has guidelines to help people stay within their budget, by identifying what share of their income they should use for certain expenses: That includes about 30 percent for housing, 10 to 20 percent on food, 6 to 20 percent on transportation (including car payments) and 4 to 7 percent on utilities.

Within those guidelines, people can make adjustments to fit their needs, Piercefield said. Some people may want to spend a little more on their home or car, but then they will have to spend a little less in other areas.

Sometimes, people have to make hard choices.

“You start looking at needs versus wants,” Piercefield said.

Can you lower your cable or satellite TV bill? Can you buy second-hand clothes? Can you buy higher quality clothes that last longer? Can you get rid of your smartphone data plan if you have Internet in your home?

If the family likes dining out, perhaps it can go into a restaurant that has a sale, where the second dinner cost half or the kids eat free, Piercefield said.

And you can plan your weekly meals around what’s on sale at local grocery stores.

Utility budget billing also helps, Piercefield said, because monthly expenses become more predictable.

If none of those steps brings your spending below your income, you can take steps to increase your income by taking a second job or an additional part-time job. You also may be able to change your tax withholdings so that you don’t get money back during tax season — because that will increase how much money you get in each paycheck.

“I really believe that people want to pay their bills,” Piercefield said.

However, people who fall behind with their bills often are afraid and then make the mistake if stopping communication with their lenders, she said.

But communication is critical, Piercefield said. The earlier people communicate that they have a problem meeting bills, the better it is in the long run.

Saving money, such as in retirement accounts is important, she said, in part because it often increases people’s income through an employer match. However, Piercefield said, Apprisen advises people to first pay off their credit card debt because of the high interest rates.

If people want to contribute to their retirement accounts, they also can make a promise to themselves to use their next raise for retirement savings only.

Malone said the money he has saved through the Individual Development Account has served as a safety cushion and has helped him stay in school.

“I’ve always known the money is there,” he said.

He plans to use the $6,000 that remain in the account for a down payment for a house. To be able to do that, he first will have to take more financial literacy training to learn about, among other topics, mortgages and interest rates.

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