"I know that I need to to do it... ..but ugh!"
I left the morning before with all sorts of intentions, not unlike the valiant knight with brandished sword; but I came home with tarnished armor, my helmet in my hand, my sword dragging behind me on the ground. I was ready for my recliner - not to sit at the desk and do battle with more numbers.
Well, I know that procrastination did get the best of me from time to time, but the end of it came down to my own maturity. I had to step up, or better yet, grow up. I took a lot of inspiration from The Dave Ramsey show, grateful to hear callers who were worse-off than me, others who were better off, and still others in pretty much the same place - and I realized that the difference between the callers who had done things right and those who were like me was entirely audible. Fridays on Dave's show became very good for me. On Fridays, crazy excited people call in to yell, "I am debt freeeeee!!!!"
There is a difference between that crazy, jubilant scream, and my own look what the cat drug in appearance coming up the walk. In order to get through the debt, we had to stop the poor spending habits, and that required a real, written plan that my wife and I could both agree.
It isn't some mystic or scientific ordeal to arrange a good budget. You can do it with any piece of paper and a pencil - maybe a calculator for those of us who need a little mathematical verification. A good budget is one that takes care of the priorities first, then works its way down the list in descending priority. I recommend this form or something like this...
I mimicked the same thing in an Excel document that we still use. It works well for us because we set it up for us, but if you want to take a swing at it let me know and I will send that to you to take a gander...
Dave and Crown both have budgeting software that you can also purchase. I just don't recommend getting bogged down with anything if you are just beginning a budget.
Don't get crazy on the details. Don't over-extend your spouse's attention span when you have it done. Don't get absorbed in some software financial program. Just put it together, then go over it when you're done in about a ten minute meeting with Honey. You make it, your spouse vetoes, you revise, then you present it again - until you have a plan. I know, it sounds simple... but this is where our money fights really ended. We both held each other to the plan that we both agreed to stick to.
Start with the essentials. Every good financial planner that I listen to will advise this.
Give/Save - if you put these at the bottom, they will never get funded. Give your offering as you are led. Save until you have a small emergency fund (we did the $1000 "Baby Emergency Fund") put away in a saving account. (Do this by paying minimums on all debts until you have it funded.)
Start with the Rent or the House payment - on time, or ahead of time.
Food - I was surprised at how much we were spending on food. And I was disappointed to learn that there was rarely a shortcut in this category. On the other hand, my wife is a great bargain hunter and we have found ways to manage this category really well. Our total spending in this now averages around $400/mo. but we went for a while at $300/mo. (Eating out had to end for a while, however, and does not belong in this category at all, but somewhere nearer the end...)
Auto/Repair/Gas - I tend to lump these together a bit. If you have a car payment, then be sure to keep making those payments - it gets you to work. I hope to explore the car thing another day, but do check out the link on the sidebar... We have had to make a number of adjustments to the gas part - essentially it doubled twice since the time we started. We include oil changes and minor repairs here as well.
Medical - you can bet that this will happen if you have kids, so put some money here. (Keep in mind that though you plan to save for the emergency, you can plan for prescriptions and deductibles.)
Once you have covered your necessities, then add lines for the creditors. When you run out of money, then you are done. Will they like this, no. I have to say that God helped us to make all the minimums throughout our payoff.
Continue to put every expense family into the budget. Be sure to include money that you will spend - even though it isn't a real category. We found that having $10/check for each of us to spend however we wanted made sticking to the rest of it easier.
In this way, you spend everything on paper, every time you get paid. This worked very well for us, and we still follow it.
This is just the basic budget concept. If you have a sporadic income, then you will need to focus on another concept, which is to pay the minimums, but save the leftovers so that you have something to draw from later. People who are on commission - such as realtors or self-employed business owners - will most likely have to do this. Save the leftovers so that you have a few months of expenses covered, then pay off the debts.
Here are some free forms from the Dave Ramsey site...
If you have an unexpected or overlooked expense come up, then you and your spouse both decide what other category suffers. Never use the credit card. Stay away from the drive-thru and avoid spending with your debit card for planned purchases. I think this is another subject to cover, but we use the debit for gas and cash for everything else. Occasionally, like tonight, I will stop to get a few things from the store for dinner with the gas account debit card, but this too could be planned for in cash. It is way too easy to blow the budget with that little piece of convenience.
On a future post, I hope to point out some possible areas that you might be over-extended, and may be able to curb some of that for some relief in the budget.
Until then, God Bless.
2 comments:
Good post Ryan. We are always looking to be more organised with our budget. That list you linked to is much more specific than what we are currently doing, and worth checking out. Thanks.
Are you going to make another post on the cash vs card debacle? I seem to be the primary shopper in the family! I have the habit of rarely carrying any cash, of putting absolutely everything on the credit card & then paying it all off the same week. The reason I do this is because we collect points for either cash back (what I always get) or gift cards, items etc. Is this kind of thing actually not good? We need to spend about $800 in order to get $40 cash back. Or are you saying its unwise because of the temptation to over spend?
This is a great question! And it is one that I had planned to tackle, but in short the answer is cash.
There are lots of reasons for this. No matter what though, the plastic (both credit and debit) is a budget buster and we tend to overspend %12-%18.
Cash, on the other hand makes you think about the purchase from an emotional viewpoint. You get to the register, and have to reach for that $100 bill and hand it to the clerk - and it hurts.
Speaking for myself, I was "good" with a card until I was between jobs once. At that point everything from gas to food went on that card until I got the next paycheck.
I was good until I got to a place in life that I was tested... The lesson was learned over the next 6 or 7 years while I continued to cycle that debt up and down, but never got away from it until we went to cash.
As for the "rewards points", this is rarely an actual benefit. Nearly %80 of people never cash in on these.
To me, after having gotten behind once, I agree with Dave that the cards are too dangerous. And speaking from Proverbs, I would put the whole idea in the debt category anyway - something we should avoid, as a gazelle in the hand of a hunter.
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