Friday, July 3, 2009

Budgeting Tips

I’m trying to think of any unique tips I can give on budgeting, but there are so many websites out there with how-to rundowns of budgeting. So basically I’ll just say this…

A budget needs to be flexible. Not so flexible that it defeats the purpose of having a budget, but flexible enough that if you need to move things around, you can.

Your goal, though, is to get a lot of things (like food, clothing, gas, etc) settled after a few months. After a while, it’s pretty easy to see how much your spending in various categories. Other things may take a while to figure out how much you spend, and you may not be remembering every little thing you need to budget for.

For example, we realized that we needed to budget for our car registration. A few weeks later, we realized that we needed to be saving for oral surgery to get my wisdom teeth taken out. A few weeks after that, we realized that we should be saving for a new rear tire for dh’s motorcycle (his main work transportation). So our budget changed three times in a few weeks. We had to change how much we’re spending on groceries, how much we’re putting into our baby emergency fund, and how much we put in the “blow money” category.

The moral of this story is that your budget should be flexible – but don’t make it so flexible that you defeat the purpose of having a budget.

Thursday, July 2, 2009

A Written Budget

The first part of Dave Ramsey’s Baby Step 1 (BS1) is to get on a written budget. Fortunately, we had already been working out the kinks in a budget since we moved here for some more military training. So when we started to do the TMM (Total Money Makeover), we had a step ahead. We just fine tuned a few things and started squeezing money out of every corner we could find.

We are currently living on $300 a month in groceries (for myself, my husband, and our two year old. Our 3 month old breastfeeds exclusively, so that’s one less mouth to feed for a while) and $100 a month in gas. We’re trying to sell our car and downsize to free up another $300 a month to throw at debt (so far no luck there, but we’re not aggressively perusing that). Anyway, we’re spending as little as humanly possible (we’re allowing about $30 a month for spending money divided between us). That may not seem like a lot, but we don’t have a lot of time to do anything anyway! Plus, there are a lot of really cool fun free things to do here – not to mention the gorgeous beach that is a stones throw away from us! But no matter where you live, you can always find fun free things to do. We spend about $10 a month on movies by mail so that we can save money on going out to see the latest greatest movies. We don’t spend gas getting to the theater, we don’t spend money on tickets, and we don’t spend money on a sitter, since we just watch the show after the kids are in bed.

I’m getting really adept at using Quicken to balance our checkbook. I’ve set up “line items” in our checking account so I can “save” without actually putting the money in another account. I use my Quicken balance as my actual balance, since there is a bunch of money in our checking account that is sitting around waiting for the day we pay for car insurance, registration, oil changes, dental work, etc.

We’re really learning how to live well within our means. We have definitely felt the blessings for following the counsel of our Prophet to get out of debt and save a little for a rainy day.

Our Story

We have never had any debt in our entire lives, until we got married. That wasn’t hard for me, since I got married at 19. Unfortunately, I married into debt. Not a lot of debt, since my husband didn’t even know he had debt when he asked me to marry him.

When my dh proposed, he didn’t have any money in savings, not that he was living paycheck to paycheck, he just wasn’t very good at saving. He’s definitely the spender in our family. Shortly after we were engaged, he received letters from the IRS and the Idaho State Tax Commission letting him know that he owed back taxes. He had made an innocent but costly mistake of declaring “exempt” on his W-4s the year he worked before he started school. Anyway, his tax debt was upwards of $3000, but thanks to his dad’s CPA at HRBlock, my dh was able to get that down to about $700 to the IRS, and about $300 to Idaho. Fortunately, since we got married just before the new year, we were able to file as married the next year on our taxes. We got back enough to pay off the debt, and things were great.

The first debt we ever incurred was a loan for my ring. We couldn’t qualify for any loans at jewelers in the mall, and when we went to our bank, they basically told us we were SOL, but one of the loan officers mentioned a mom and pop jeweler up the street from our bank that offered in-house financing. We stayed cheap, bought a ring for under $1000, and paid it off in nine months. However, the banker offered to get us a credit card to help “build our credit.” That was the worst mistake we have ever made. The credit limit started at $500, but shortly after we were married, they increased the credit limit to $5000!!! That was more money than we had ever really seen, and suddenly, when we wanted something, we thought, “Well, we’ll just put it on the credit card and pay it off in the next few months.” BAD IDEA! Whoever came up with buying something now and paying for it later? Are you kidding me?!

Shortly after that, I totaled our paid-for car while my husband was at military training. And the spending just got worse.

We ended up with probably over $10,000 of credit card debt. After a bit of dumb luck, we knocked that number down to about $5,000. Unfortunately, when you get to knock out your debt really quickly, it doesn’t teach you a lesson. You just build back the debt unless you change your mode of thinking and behaviors.

So when my dh went to Basic Training last summer, August ‘08, we decided that since I was living with his parents, we would throw money at our debt like there was no tomorrow.

Well, then my brother in Arkansas got engaged, and we decided that we would fly to Arkansas for the wedding. Unfortunately, that was going to suck up all of the money that we had, and then some. There goes Christmas. So we went on an emotional spending spree, buying more gifts and more expensive gifts than we ever would have under normal circumstances. We rode that debt back up to about $9,000.

Well, so long story short, we finally decided (after this emotional craziness) that enough was enough.

We swore off our credit cards, and have been doing a really good job not using credit cards almost since the new year.

Then about a month ago, I read Dave Ramsey’s book again, The Total Money Makeover, and we decided to get gazelle intense. And that’s where our new story begins.

Wednesday, July 1, 2009

Our Total Money Makeover

I created this blog to chronicle our Total Money Makeover. We are die-hard Dave Ramsey fans and we have just begun our total money makeover. For those of you unfamiliar with a total money makeover, I suggest you check out Dave's website. The best part about Dave is that he makes most of his information free. I love that about him. I can find a lot of useful information on his website for FREE! He also has his website that you can pay a few bucks a month to join, but since we're in Baby Step 1 (BS1) with very little cash to speak of, we're trying to cut expenses and spend on only the necessities until we're at least most of the way through BS2. That or making more money.