Let’s talk about recession-proofing our budget, and things that we can do that really make a difference when salaries are tighter and we may not have as much wiggle room in our finances.
Today’s guest is Lauren Peterson. She is a Certified Financial Planner™ and, in addition to her work with The Wealth Edit, runs a boutique, full-service financial firm, HighTower Somerset Advisory, in Birmingham, Alabama. Lauren has designed and crafted hundreds of financial planning scenarios in her decade-plus career in the field and is deeply committed to the clients she serves through her work. After years of drafting hundreds of plans for families, Lauren saw the deep need for women to have a space of their own to understand wealth outside the context of a traditional advisory relationship. As important as her work is to her, her faith and her family come first in her life – her husband, Andrew, and their three smart and brave daughters are the No. 1 priority in her life.
The Wealth Edit is an online, membership-based community that educates women on how to develop a modern skillset for their personal finances. Women of all ages gather, learn, and plan their financial journey through virtual courses, weekly guest speakers, and educational content. They are the opposite of stuffy and stodgy. They are relatable, approachable, and anything but uptight. Visit them at wealthedit.com or on social media @wealthedit!
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Producer: Drew Erickson
[00:00:00.130] – Hilary Erickson
Hey, guys. Welcome back to the Pulling Curls Podcast. Today on Episode 192, we are talking about recession proofing our budget. Let’s untangle it.
[00:00:18.870] – Hilary Erickson
Hi, I’m Hilary Erickson, the curly head behind the Pulling Curls Podcast: pregnancy and parenting untangled. There’s no right answer for every family, but on this show, we hope to give you some ideas to make life simpler at your house. Life’s tangled, just like my hair.
[00:00:40.020] – Hilary Erickson
I’m excited for today’s guest. She is a certified financial planner. She runs a full service financial firm called Hightower Somerset Advisory. But I found her on the tikkety tok under the wealth edit where she was just talking about recession proofing your budget. I thought what she had to say was so simple and easy to understand. I invited her onto the podcast. I want her to introduce today’s guest, Lauren Pearson.
[00:01:02.540] – Hilary Erickson
Do you ever just feel like it’s unfair that some people can have company over at a moment’s notice? Their house is just super easy to clean up and they can relax on the couch with Netflix while you feel like you always have things to do around your house. That can totally be you. The Organized Home is here to help you simplify organizing. We’re talking about decluttering zones, organization systems that actually work. We’ve got assignments and challenges. I hope you’ll join us. You can use coupon code Untangled. Look for the Organized Home link in the show notes.
[00:01:32.820] – Hilary Erickson
Hey, Lauren. Welcome to the Pulling Curls Podcast.
[00:01:35.530] – Lauren Pearson
Hi, how are you? Thanks for having me.
[00:01:37.500] – Hilary Erickson
I am so excited. I love to talk about money, even though a lot of people don’t. My dad was an economist, so money was always a talk at our house growing up. I think it needs to be more open and out there because I think everybody sees on Instagram that I’m on a cruise 24 hours a day because that’s the only time I post.
[00:01:56.280] – Lauren Pearson
Sure. Yes. Online images can be deceiving sometimes.
[00:02:01.480] – Hilary Erickson
Yes. You are seeing when I am spending the largest quantities of money. I did not Instagram last night when I was pieing through my dried bean collection to decide what to make for dinner. Okay, so I loved your video, Lauren, about just a shifting your budget, like you would shift your diet or you would shift other things. When you’re in a recession, you just might change the way that you look at budgeting.
[00:02:24.260] – Lauren Pearson
Sure. Yeah. It’s hard because for a really long time, the government has been signaling to us to spend, to invest, to grow. Interest rates have been low. So we’ve been taking the cues and living in a low interest rate environment for a very long time. It starts to skew your thinking of reality. You could afford more if you were looking to buy a home.
[00:02:53.290] – Lauren Pearson
There’s all of these things that we just got. You could grow a business. Everyone’s feeling very… The sentiment was really good around growth of the US and what we’re supposed to do. But there is also a good bit of stimulus happening, again, from the government saying, grow, grow, grow. And when all of that stops, which it has, starting at the beginning of last year, we got a very clear signal from Fed chairman Powell that we are going to raise rates until inflation is under control. I am one of those people that always believes the Fed.
[00:03:29.280] – Lauren Pearson
There’s a saying that says don’t fight the Fed, and that’s real. And so the signals change. But if you spent 13 years in a low interest rate, let’s grow environment, post financial crisis or more, really closer to 15, that’s when it gets a little confusing because things have to change beyond what you could potentially afford in a house.
[00:03:50.150] – Lauren Pearson
It’s everything. Things are ridiculous. Everyone’s talking about how much eggs cost right now, but that’s just an easy thing to point to the larger issue where it’s like you just have to cut to make sure your family or you as an individual can adapt to different market conditions.
[00:04:08.840] – Hilary Erickson
Yeah. And I think that’s so important because I think, I mean, my son… I Was explaining to him about interest rates when I was little because I was born in ’76. So when I was little, ’80s interest rates, and he was like, What? He just had no idea. And I think really for the vast… I probably only know about this because my dad’s an economist. For the vast majority of people, 50 and below just literally have no idea that anyone was ever paying more than 5 % for their mortgage rate on their home.
[00:04:37.390] – Lauren Pearson
Truly, nobody saw that. I remember my mom and dad talking about 18, 19 %. That seems unfathomable to us. But they really do have to use the errors that they have in their quiver. And interest rates going up is one of them, and it’s an important one. So fair point.
[00:04:56.900] – Hilary Erickson
What do you do? Because there are still things you still have to… We’re all still buying eggs. We’re probably buying less eggs because I’m like, breakfast for dinner, we’ll have dried beans instead. But we all still need to make eggs for our family. So what do you do? What tips do you have for us?
[00:05:13.940] – Lauren Pearson
Sure. The first thing I do, and I’m not sponsored, so you can just take this for what it is. But the first thing that I did, because I’m not admittedly even being in wealth management and doing this all day and helping other clients with cash flow, your own cash flow is different. I think that the reason people hire advisors is because it’s very difficult for you to have realistic perspective on your money.
[00:05:34.180] – Lauren Pearson
And so you have to condition yourself to do that. So the first thing that I did was use what’s called Rocket Money. It’s a new name. I can’t remember what it is. I think it used to be called True Bill, but I use it and I give them access. They have a back end system called PLAD that basically can link all of your credit cards, checking accounts. So it’s basically studying what you do as a monthly household as far as spending, income, all of the things that would make up who you are financially. So I started doing that and I found that that was an extremely helpful efficient system for our family because we have five people in our family, everyone, to some degree, is spending money.
[00:06:18.970] – Lauren Pearson
My kids have what’s called a green light card so I can control what they spend, but they’re still learning good money habits. But Rocket Money has really taught me, okay, this is how much you spend on a monthly basis, and this is how it’s different from last month. The longer you use it, the more in tune it gets with your spending, which I think just the idea of really, truly the idea of just watching your money, becoming a student of your money, I think is number one.
[00:06:47.790] – Lauren Pearson
So whether you have a little tool like Rocket Money that helps you, whether Excel is your best friend, whether some people use You Need a Budget, there’s all these different things that you can use that can be helpful and powerful to help you become a student of your money. But you really need to know what you spend. That goes for anyone. It doesn’t matter how much you spend. A lot of times people, I think also getting into the… And this is going to be my second point. But the behavioral aspect of money, there’s a lot of guilt around money, whether you have it or you don’t or you were taught good money habits, or you weren’t.
[00:07:24.120] – Lauren Pearson
You just get a lot of people that I know when they come in to see us for the first time as advisors, they say, Oh, my gosh, I just spent so much money. I started looking at it since you asked me that question, and I feel so embarrassed. It doesn’t matter if they’re spending $50,000 or $450,000 or a million dollars. They all feel something about what they spend, whether that’s valid or not.
[00:07:48.280] – Lauren Pearson
I guess my second thing is, once you become a student of your spending, really get in tune with what you’re feeling around that. I think that’s where people sort of ostrich. If they’re going to, that’s what I call it stick their head in the sand at that point. There’s a wonderful woman who is a friend of the wealth edit called Helen Owen, and she calls this facing the tiger. So really saying, Okay, this is where I am financially.
[00:08:13.400] – Lauren Pearson
And the good news about being an American about… You can be a different person today than you were yesterday. You can make different choices today about your health, about your resources, and there’s no judgment there. So I think it’s just acknowledging you don’t have to be the person today that you were yesterday financially and really living into all of that.
[00:08:35.440] – Lauren Pearson
I guess those are my two main points and I have some other ones, too. I think the next thing to focus in on is separating out your need to have expenses versus like to have expenses. And people approach this differently, too. So in our family, we’re doing what’s called a no spend year. Now, this is very difficult because we’re going through renovations. You have to decide what that looks like for you.
[00:09:03.100] – Lauren Pearson
For my family, because we’re going through renovation, house expenses are still allowed because we just have to. That’s just where we are in life and we allow ourselves to replace. So I had a pair of tennis shoes go out and so I’m able to buy something to replace something old.
[00:09:16.990] – Lauren Pearson
But even that act has really given us so much power in that we spend a lot on conveniences, at least my family did, on things that we don’t actually need that have become habits but aren’t necessities. And I think separating out habits and necessities, when you get to that point, again, it’s going to take you a few months. Rome wasn’t built in a day. So it’s going to take a few months for all of these things to become something that you really enjoy doing or really want to pursue.
[00:09:47.520] – Lauren Pearson
And I always say it’s like landing a plane. So it’s not an overnight process. And that’s how I really would hope people would frame these discussions in their head, realizing that for most of us, a situation like what’s happening nationally is going to cause us to have to pull back in some way, shape, or form. So going with that versus getting paralyzed or feeling like, Oh, my gosh, I can’t do this.
[00:10:15.310] – Lauren Pearson
That’s all going to be very important. The fourth thing I would say, and this is an important one too, sometimes when things are contracting, it’s very important to think about worst case scenario. What if I lose my job? Recession proof yourself, your personal finances.
[00:10:35.100] – Lauren Pearson
How long could we go if that was a reality? How long if you’re married, could you go if that was a reality for one of you to be out? And then you need to have an emergency fund if you can to figure out that math backwards. Like, okay, I would more than likely be out of work for three months, or I would more than likely be out of work for six months. Typically, the more money you make, so over $100,000, those jobs typically take longer to replace if you’re truly out of work.
[00:11:04.870] – Lauren Pearson
So really estimating that. So if you’re a dual income family, both people are making over $100,000. A typical CFP would say three months net savings would be enough. I would propose maybe it’s more like six. So take that for what it’s worth. But really recession proofing. And we have that. We have a wealth edit guide book we actually do a recession proofing of both your personal and business finances in the book. It’s very important to know that. Yeah. So that’s four. What questions do you have from there? I can keep going if I need to.
[00:11:38.570] – Hilary Erickson
I love the idea of a no spend. Now you’re going a whole year, but people could start with just even a no spend week. This week is not going to spend. Because obviously you’re still buying groceries because everyone’s going to eat. Correct. So what are some basic rules that people make in that no spend week?
[00:12:00.570] – Lauren Pearson
Sure. So maybe they say it’s a cutting back. So for example, my daughter’s dance. And so because of that, there’s one night a week where it’s like, we actually have to eat out. There’s just not another… Unless we pack a snack and then it’s going to sit in the car for a little while. It just doesn’t make any sense.
[00:12:16.410] – Lauren Pearson
So maybe saying instead of getting take out three nights a week, you really look at where you might need to eat out, or maybe as a special treat for your family. If you’ve had a great week, you get pizza on Friday nights, whatever the ritual is, maybe we say rituals are in, but ancillary, just lazy spinning around meals is out.
[00:12:34.500] – Lauren Pearson
One thing that we really took, we are big Costco people, so we build on our Costco. I’ve almost figured out a map of what I need to replace every two weeks at Costco versus every week at Costco because you’re buying more bulk. And so maybe we’re getting yogurt for lunches every two weeks versus just not thinking about it and having the habit of putting it in your cart. So yes, groceries are still a mess. We cook in more.
[00:13:01.080] – Lauren Pearson
And it was amazing how quickly you could get down that miscellaneous category of just target runs. We just don’t do target runs anymore. I always say target has a $200 cover charge. I love you, target, but I just don’t need that right now. I think if people were to start with the week, then what would be good is to say, okay, we’re not going to eat out. That’s a big one. No, just ancillary spending on cute shirts, things that I might see on Amazon or an influencer that has this great thing that’s 47 % off this week.
[00:13:34.260] – Lauren Pearson
Anything like that, I think you can just cut it out. The other thing that’s incredibly helpful as you’re beginning this, this is what we say in our Financial Minimalism course, is to write down what you’re spending twice. So have a little notebook. If you do this for a week, it’s much easier than a year because it’ll be like a novel. But have a tiny little notebook where it’s like, okay, 57 bucks on gas, 25 bucks at the grocery store if you’re just picking up stuff. So write it down while you’re spending real time or in your phone or something, and then write it down again at night so that you can log everything that you’ve spent.
[00:14:10.450] – Lauren Pearson
That exercise of writing it down twice is so powerful because you’re actually giving yourself the mental margin to say, this is a commitment I’m making to myself and I’m going to get better at this. So that’s a little fun trick that we found that works really well for people. It’s pretty powerful.
[00:14:27.180] – Hilary Erickson
Yeah, just like what you’re eating. Even if you just write down, I had three Snickers bars, it just makes you rethink, was that my best choice? Could I have just had one?
[00:14:37.140] – Lauren Pearson
Yes. For me, the funny thing for me just habitually is I’m a snacker and just cutting out a lot of the snacks where I just pick up something at the gas station or whatever just because I’m a busy person. Just being slightly more thoughtful can actually have pretty powerful ramifications when you’re spending.
[00:14:58.350] – Hilary Erickson
Yeah. All right. I think this was great. And I think people immediately pull back. They’re like, Oh, I don’t want to spend less. But sometimes I have to remind myself that a lot of times I’m not even noticing that I’m not spending these things, especially in my happiness level. If you think of your happiness level is on a graph, right? My dad was always like, Are you getting the same benefit of that the 10th month of Netflix as you got in the first month of Netflix? That first month, you’re overjoyed.
[00:15:23.550] – Lauren Pearson
[00:15:23.800] – Hilary Erickson
The world is your oyster. You have everything. And on the 10th, you’re like, Is there really anything to watch? And he’s always like, Just cancel it for a few months, save yourself the $45 or whatever. And then when you’re missing it, then that joy comes back and you get a happiness boost again from that back to the first month.
[00:15:41.920] – Lauren Pearson
I love that. And one thing that I’ve done with my girls, which has been fun is I’m doing a lot of free advertising on your podcast today because, again, I’m not sponsored by anybody, but you can also play little games with yourself if you’re going to do an extended no spend year. So we’ve been giving out of our closets to this service called Thread Up, and then we get a little credit.
[00:16:01.930] – Lauren Pearson
And so we’ve allowed ourselves to use that credit. We’re like, okay, A, it’s more sustainable just for the Earth and the environment. But it also gives us a little incentive to clean out our clothes that we don’t want anymore, get paid for it, which is an incentive to do that. And then you can shop a little because we’ve got a little bit of cash. Or if you sell things in your home, there’s all sorts of ways that you can learn to be resourceful and just do some fun things that actually are so much more rewarding to your point than just the wine spending that we get in the habit of doing on certain things.
[00:16:33.940] – Hilary Erickson
Yeah. You know what is most disappointing to me is to get home from a target trip and be like, Oh, I have to find places to put all these things? And then I’m like, Why did I buy this? If it wasn’t directly like, I know exactly where I’m going to use this. I know exactly where I’m going to use this. I know exactly where I’m going to put this. Why did I purchase it? Because now I’m decreasing my happiness. Where am I going to put this? Where am I going to store this until I might need it? Right?
[00:16:56.720] – Lauren Pearson
Right. Exactly. And really, we don’t realize how much mental margin all this stuff that surrounds us. I have a friend who’s a Minimalist just by nature. It’s the way that she is. I’ll tell you, it is amazing how she… I just feel like her life has a greater sense of calm than mine. And I think especially if you have children, children often are little hoarders. To help them create these habits where they’re able to be in a wonderful space.
[00:17:25.020] – Lauren Pearson
And I don’t do this well, so do as I say, not as I do. But really, we’ve worked on for one of my daughters, she’s not naturally very tidy. She just doesn’t have a lot of stuff. It’s easy to tidy her room because she doesn’t have a lot of stuff. Contrast that to my third child, my little creative bug who has all the things, saves all of the beautiful artwork, all the pictures. And it’s really difficult and demotivating to clean her room because she has too many things in there and they don’t fit to your point. So really being mindful of where is this thing going to go and where am I going to enjoy it for life?
[00:17:58.560] – Hilary Erickson
Yeah. Is this purchase actually going to make me happy? Because we all think back about the week, what did you buy that made you happy? And then all the other things you bought, I know there’s always going to be the can of beans, whatever that’s not going to make you happy. Paying my mortgage probably didn’t make me that happy, but living in a house when it’s raining is amazing.
[00:18:18.840] – Lauren Pearson
It’s pretty great. Yeah, I love that.
[00:18:21.460] – Hilary Erickson
Yeah. I just think we need to be more open on the things that we’re spending, how we cut back, which is why I love people should follow your channel to just show that families can still have splurges, like remodeling their home, but can still cut back on other things to make that life possible, right?
[00:18:38.930] – Lauren Pearson
Yeah. That’s another thing. I think most people that come into our private practice really have a deep desire for their children to be good with money, especially if they’re people who are overfunded for their lifetime. It’s like they feel the burden that their children are going to grow up and have a lot of privileges and things that they… I don’t know the right word to say, but they’re going to just inherit a bunch of things.
[00:19:07.660] – Lauren Pearson
So how do you make sure that these people are still great contributors? How do you make sure that these people… And you really don’t want your children to be rotten tomatoes. That’s how I think of my kids in my head. If I’m giving them too many things, they’re like a tomato that’s rotting on my counter. That’s not what you want.
[00:19:22.880] – Lauren Pearson
You want your kids to be healthy and good with money and to feel a great, deep confidence that things aren’t going to fulfill them. Really, there’s so much more than what we can spend our money on out there to invest our time and our talent and, yes, our treasures. But I don’t know. I just think that when you start to get kids involved, that’s when things get real because you do. You want them to be good with money, too, and you want to teach them great habits. And I think just the open dialog around, yeah, we’re not spending as much this year because we’re doing this kitchen renovation or whatever it is. They need to know that money does not grow on trees as our parents and grandparents and great grandparents said.
[00:20:02.860] – Hilary Erickson
Yeah. And I will say, so we’re pretty churchy at our house. And I don’t know that my oldest has taken a lot of my churchy thoughts, but that kid has taken every single financial lesson I have taught him. And it is deep in his heart. He is very much like, this is my time to put money into retirement. He talks to me about that all the time. And nothing has been more fulfilling to me as a parent as me talking to him as I was like filling out my retirement sheet at a new job or whatever and just saying how important retirement is. It stuck. Like, yeah, I did one thing right. Yes.
[00:20:35.270] – Lauren Pearson
Well, good job, mama. And you really do with anything in parenting, you want to be that first cloud. You want to be that first concept that a child is introduced to and some of these great habits. I think that’s wonderful.
[00:20:48.770] – Hilary Erickson
Yeah. So great. Just think about it more. Think about your happiness, follow the wealth at it, because a lot of times when she comes up, it just reminds me to be, is this money making me as happy as I could? Are there places we could cut back without impinging on the happiness? And the answer is yes.
[00:21:03.580] – Hilary Erickson
So. Stop being so lazy in my purchases, Hilary, is mostly what it reminds me. So thanks for coming on. I hope this gave some ideas to you guys. If you guys have ever done a no spend day, week, month, year, tell us in the comments on Instagram. We would love to chitty chat about it. Thanks for coming on, Lauren.
[00:21:19.400] – Lauren Pearson
Yeah, absolutely. Thanks for having me. This has been fun.
[00:21:21.610] – Hilary Erickson
Okay, we didn’t talk about it in the show, which is just how unsalesy Lauren is, but she actually has an online membership based community that educates women on how to develop a modern skill set for their personal finances. I think that a lot of people just really are not good at finances. And so if that’s something that you’re lacking, I would encourage you to check that out under the wealth edit. I think she’s very realistic and very helpful. She also has a co founder who is a young widow. So you get a lot of advice from different sides of things. And I think that’s really important and exciting. So if you’re looking for more financial information, be sure and check that out. Thanks so much for coming on, Lauren.
[00:21:57.790] – Hilary Erickson
Be sure and stay tuned. Next week, we have a Deja vu episode on splitting up chores. And then the week after that, we are talking about pregnancy nutrition, so we have some great episodes coming up.
[00:22:07.940] – Hilary Erickson
Thanks so much for joining us on today’s episode. The Pulling Curls Podcast grows when you share us on social media or leave a review. If you do, please tag us so that we can share and send you a virtual hug, which, frankly, is my favorite hugging. Until next time, we hope you have a tangle free day.