Now I am going to talk about money…yes gasp! That’s how I felt when I even began to think of talking about money on my blog. Money is a hard topic to discuss for many people, including me. My husband and I have made many financial blunders together and separate along our way but we finally have a plan that’s working. The fact we have a clear plan is huge. I struggled with starting this topic up but I have felt a strong pull from God to share as much as I can about our journey with money and help others in any way I can.
Ever since we started our plan, I have wanted to scream out loud all the time “Budgeting is amazing!!!!” I know that sounds weird and some people are going to read this and say “Duh!” but this hasn’t always been the case for us. I used to think budgets were restricting, confining and just annoying. I didn’t know what a true budget was or how to make one work for me and my family. So, yes, we are going to talk budgets.
I do not plan to share exact numbers or any personal information but I do plan to share what is working for us. If I can help just one of you change how you feel about money and go from hiding from it and dreading bills to be excited about paying them and face your money head on then this will be worth it.
Dave Ramsey, who you will hear me talk about a lot because while we don’t follow him to a tee I am a HUGE fan because that man knows what he is taking about, he says that money isn’t always about the numbers and is more about behavior and how we feel about money. We have to change our behavior to begin winning with money. I am not saying we’ve won because we still have a long way to go before we are debt free but we are on that road and let me tell you it’s amazing! I can see the light at the end of the tunnel! I can see a future that doesn’t involve living paycheck to paycheck. I know life is going to throw stuff in our way but with a plan we’ll go a whole lot farther than just winging it.
So, let’s talk budgeting…and the first two of Dave’s five baby steps because they work if you follow them.
Before we dive into the steps, the first thing you need to do…and this isn’t going to be easy but it’s vital…you need to sit down and write down all your debts and total owed on each; and if you are in a relationship their debts too because their debt will be your debt or is your debt if you are married. I’m talking every single thing that you owe money on. This includes but is not limited to student loans, car loans, credit cards, medical debts and that cousin you borrowed $50 bucks from. List them all and then put them in order from smallest to largest. Also include next to these your monthly minimum payments owed.
Take a moment to look at these debts, this is your past that you are still paying on. These are all the impulse buys that you had to have and now months if not years later are still paying on. These are the wants or imagined needs that you bought and are still paying on. Get annoyed, get frustrated, get angry! Look at it and say NO MORE! No more debt than what is in this list. Let’s get all these paid so that each month when money comes in…it’s yours! You get to do with it what you want instead of paying for your past. You’ll get to invest in your future instead of paying for your past. YOU can do this!! Just remember to look at it and soak it all in. Don’t be scared…you are about to make a plan.
Next, you need to create a budget. Dave says to use a zero based budgeting system, which essentially means creating a budget that every dollar has a place to go. Now, before you start hemming and hawing about how hard budgeting is, give yourself some grace. It’s going to take you a minimum of 3 months to get your budget to really work. So plan for the first couple months for this budget to be a moving target and even after the first three months you will see that budgets are flexible within reason. You can also use an online system for your budget like YNAB(You Need A Budget), or Dave’s EveryDollar online budgeting. Both of these have apps that can be downloaded and have free trials or a paid service along with them.
Neither of these worked for me because I wanted total control of our budget. Budgeting for the whole month didn’t work because it’s not how we are paid or how my brain seemed to work. I opted to create my own budget through Google Sheets and I break it up in 2 “budgets” a month that span about 2 weeks each. You can view an empty sample budget and make a copy for your personal use here, I will go into further details how it works in a future post. Basically, my husband gets paid every other week and I get paid twice a month so we figure out how much we will get paid in the first 2 weeks of the month and what is due. We then budget out each expense for that 2 week period such as debts owed, utilities, groceries, family fun money, pet, each of our personal spending budgets, and more. We include a miscellaneous category to catch things that come up that don’t fit into any of our other budget categories. I’ll go into further details about some tricks that I’ve learned to make this work for us in a future post. However, make sure you plan out all your expenses and that you are telling your money where to go before the period you are budgeting starts. Plan a meeting with your partner/spouse and agree to the budget together. The big piece here is that you have to work hard together and stay under budget and you have to budget realistically. If you spend that much on groceries, than budget that much. In the beginning, budget the way you have been spending until you can work out how to decrease those expenses. It also helps if you have time to go back and look at your past transactions and categorize each of them to see where your money went…trust me this will be an eye opening experience.
Okay, now that we are armed with our budget and our list of debts let’s start the baby steps.
Baby Step #1: Save $1000 for an emergency fund. When we first started this journey, we went to a certified financial counselor that was free through our credit union. She was amazing and helped us both get on the same page about budgets and our plan. Her main goal was to get us caught up and moving in the right direction but she skipped emphasizing this first step. After reading The Total Money Makeover by Dave Ramsey (told you he’ll come up a couple times), I realized that if we didn’t start with this first baby step then any emergency that comes up would require us to use credit and put us back a step so we had to start here. Dave recommends saving this up as fast as you can!
Before we started saving for our emergency fund, my husband and I sat down and discussed at length what constitutes an emergency. This was an interesting discussion and we had to make sure that we were both on the same page. This also introduced some items that we have created sinking funds for, which I’ll discuss further at a later time.
Baby Step #2: Pay off your debts smallest to largest. See all those debts listed out on your nice sheet of paper. Let’s start paying these down. You are going to only focus on one at a time, all the rest you are going to make minimum payments. Start with the smallest total owed and work your way up. This isn’t going to make sense because you want to start with your highest interest rate but we are trying to change behavior here. Once you knock out that first small debt, you will be so excited to tackle the next one. You will then take what you were paying on that small debt and snowball it up and pay that plus any money you can find towards the next one on your list and so on. This will snowball your payments and eventually you will be making large payments on your bigger debts and will knock them out faster.
We are in Step #2 and will probably be here for quite a while. Not going to share how much debt we have but we have quite a bit. Since starting this plan, we’ve made quite a big dent in our debt though. Mainly by stopping all use of our credit cards, and focusing on the little debt first. It’s rewarding to see the overall debt number decrease as you go!
There are more steps but we’ll go into them in future posts. But for now we’ll focus this post towards those starting out on this journey like us. It’s not easy to discuss money and often times it leads to arguments but trust me making a plan will help those discussions and once you get on the same page with yourself, your partner, you can move mountains.
Do you keep a budget? Any tips or tricks that have worked for you?