Nobody Wants to Upset the Budget Bitch

Carmel McCartin (otherwise known as the Budget Bitch) since 2007 has run a company that helps people out with their budgeting. Would you believe her clients came up with the name Budget Bitch. But it’s all for their benefit as they get out of debt and save money. We were lucky to talk to her and grab some advice from someone who deals with home budgets, day in and day out.

For more information why not go to www.budgetbitch.com.au

Maybe for our readers who don’t know who you are, can tell us how you became the Budget Bitch?
Let’s go back a few years to when I was working as a real estate agent; it was a great job and I loved it. But it’s somewhat concerning as a real estate agent when someone purchases a house, then they come back in two to three years time saying they can’t afford to keep it and need to sell. I hated that part of real estate and I used to blame the mortgage brokers because some of my clients would be told they could borrow $300,000 but weren’t told how much it would cost them per week or month. They weren’t told what the repayments would be.

Then my situation changed and I needed to start working from home. And would you believe - I became a mortgage broker.

What I found was instead of doing a lot of new home loans, I was doing a lot of debt consolidation. This is where you put all their debts into one basket and people can pay it off that way. Now this is not such a bad idea because it gives you the opportunity, if you keep making the same repayments, to get rid of your debt quicker. But what I started to find, was that after about six months, I was getting called back to the same people to do it again. So I started thinking, what’s going on here?

I started to say to people, “Hang on a minute, we did this six months ago. You told the bank you were going to get rid of those credit cards and loan and we have rolled them into one debt. But now you have two credit cards again.” The answer I generally got was, “We just went and got another one.” But I would say, “Your budget can’t afford this.” And they would say, “What budget?” At this stage a lot of people would become defensive and say “we don’t have to do a budget”. But what they were really saying is, “We don’t know how to do a budget.”

This is why I started teaching people how to do budgets. I started with spread sheets, but found that they didn’t really work all that well. People get very excited about it in the first week because I’m there to motivate them; after that they lose interest. Let’s face it, who wants to write down every single cent every single day. On the other side of it, who can forecast every cent you are going to spend on haircuts a year in advance. What happens if you lose your hair?

So I went back to a very simple system, the way I was taught to do it. I started teaching people this system and it worked really well. From there I started getting busy just doing budgets and ended up not doing mortgages.

Were you always good with money, or was a skill you had to learn?
That is a tough one. I come from a family with nine kids and I am the second eldest. There was not a lot of money around, and my parents had to watch every penny. Being careful with money was probably an ingrained thing.

When you are young, once you start working full time and earning a good income you can start to spend a lot of money. You have the attitude that “nobody’s going to tell me what I’m going to do with my money”. Most people are like this. Have I ever got into serious money problems, no; but I haven’t always been exemplary either.

You have helped a lot of people out with money. Is there a case which stands out in your mind?
Our clients run the full gammet of people. I had a phone call from some aged pensioners. He is about 70 and she is a couple years younger than him. He wasn’t well, and had to give up the part time job he was doing. Now I know what you are thinking, why would you still be working when you are seventy? Well, it’s because the pension is so little and because we are so used to living in excess and to keep up this lifestyle we must keep working.

For this married couple, the pension is around $600 a week. They have to pay $150 per week rent out of this amount which includes some rent assistance from the government. Plus, they need to pay all their bills and other stuff. I asked these people “Have you ever done a budget before?” Of course the answer came back, “No, we have never needed to do a budget.” Then he said, “If we had done a budget we probably wouldn’t need to talk to you today.”

So we sat down and worked out a budget for them on an ongoing basis. They still don’t have a lot of money but at least they have some parameters as to what they need to put aside each week to pay their bills. And they know how much they have to spend on whatever they want to spend it on. Prior to this, it was all out of kilter and they had no idea. They never thought about doing it and didn’t know where to start.

There was another young couple that I saw a few years ago. They were in their late 20s; they had some kids and they were really struggling with their money. He had quite a good job but they had no idea what to do with it. They had a bit of debt, but they also owed grandma some money. We talked a bit about borrowing money from family and how it can cause bad blood. It might not right away but down the track it does. I have seen so many people who have loaned money to other family members and this is where the bad blood has started.

This guy had never had a job in his life. It was the first job he had ever had and he had been there six months.

When it came time to pay me, I knew if they paid me they wouldn’t have any money for food to eat that week. I would be literally taking food out of their mouths. So I told them to pay me when they could. Six months later I got a phone call from him and he asked if we could meet up because he had my money! He said, “We took your advice and paid grandma back first, we didn’t think you would mind waiting.”

I wondered if they would ever pay me. But because someone believed in them and helped them, they have gone forward. They are doing really well; recently I had an email which said they had saved a deposit for a house and were looking around for one to buy. That was all in the space of three years.

Have you ever worked with someone who earns a great wage but just can’t keep their budget on track?
Like the person who earns $650,000 a year. He has no debt, but also has no assets or money in the bank. This person wanted to get some assets behind him, but did not know how.

I have a couple of millionaires who are clients. The first millionaire that I saw had over a million dollars of cash in her account and assets worth 15 or 16 million dollars which could be liquidated quite quickly. I was interested to know why she came to see me. Her response was that a lot of it had been left to her and she was worried that she would end up like all the people who win the lotto and have nothing left in five years. Her budget is very different to yours or mine. But she still has a budget.

A huge wage doesn’t necessarily solve all your problems because most people are used to spending every single cent that they earn, every single week.

Another young couple that I saw recently earn over $500,000 a year. They have no debt and no assets. They only had about $10,000 in the bank. Both these people had grown up with money and their parents were very wealthy.

The couple did have money before. But in the GFC they lost one million dollars and their parents lost everything. As she has said to me, “We never had to think about money.” They both had very good jobs and earned very good money. But she said, “I’m having sleepless nights because we have no money and we don’t know how to save or cut back.”

We worked out a budget and what was important to them. After just one month they had saved $7000.

I asked them about the GFC, and if they thought that losing their money was their fault. And they said, “Yes 50% was our fault because we invested in stuff with high interest and high risk to make quick money.”

If you could go back to your 21^st birthday and give yourself some advice what would it be?
Save a little and save often. It’s 100% one of the most important things. It doesn’t matter if you can only save $5 a week or $5 a month; you have to do this all the time. Saving is something that as a nation we have forgotten how to do. Most people’s attitude is that they will start next week.

If a couple came to you really drowning in debt and they couldn’t see the light. What is the first piece of advice you would give them?
You need to look at why the couple is in debt. What are the underlying reasons? They need to snap themselves out of their spending and debt patterns. Sometimes we get into debt for good reasons or sometimes for bad reasons.

But what I would tell couples is don’t expect to get out of debt overnight. Most times you didn’t get into debt overnight. So don’t expect some magic wand to wave it away overnight either.

There is always light at the end of the tunnel; you just have to work your way towards it.

You have written a budgeting book on money. Can you tell us a bit about it?
To me it’s just a book of common-sense. There are no secrets in this book. It’s a book of do’s and don’ts. For example the book says: Don’t be an ostrich and bury your head in the sand. But the positive side says: Do talk to someone about your debt.

Here are some examples:
Don’t underestimate the coins in a moneybox.
Do get a moneybox and start saving.
Don’t get plastic cards when you can pay just as easily with cash.
Don’t forget to reward yourself.
Don’t forget to ask for a discount.
Don’t buy flowers if you have a garden.

The reaction I have had from most people is that there is nothing in the book that they didn’t know already. However, it reminds them of what they’ve forgotten. My thought is that if people take one positive action as a result of reading the book, then it’s done its job.

Everybody who has read it, has always said, “I’m going to go and buy a money jar. Or I’m going to go and do this or do that.” It’s great! It’s a very simple book but it is designed to be like that.

Is there anything you would like to add?
There are two really good questions I like people to think about…

1.If you lost your source of income tomorrow, how long would it be before you had to line up for welfare payments?

2.If your hot water service died tonight. Would you have the money to go and buy a new one?

Thanks for your time Carmel McCartin (Aka the Budget Bitch). You have provided some great advice.