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April Get Out of Debt - Page 2

post #21 of 37

I would like to live debt free and have read the total money makeover.

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I am having trouble with baby step number one. If you're totally overextended how do you come up with a thousand dollar emergency fund? I mean if we all had an extra thousand, would we need a money makeover? It's been a few weeks and I have managed to put $117 towards the $1000. It would have been $494 but I had to give $377 to the IRS.

 

My other question is, how do you make a budget? In his book he says make a budget but doesn't tell you how to do that. I asked my DH for help with that but he's just as clueless as me. I feel like our success in becoming debt free depends on a solid budget but I just don't even know where to start.

 

Help!  help.gif


Edited by trekkingirl - 4/18/11 at 6:09pm
post #22 of 37

double post


Edited by trekkingirl - 4/18/11 at 6:06pm
post #23 of 37

I would like help with this, too.  I'm still waiting to get a copy of TMM.  I've looked everywhere locally and can't get it.  I don't want to buy it new+shipping online, but when I tried to buy it at half.com, the three I tried to order were actually not available.  Dh just got paid, so I should look again.  But, I'm really disappointed to hear it doesn't help with the budgeting.  I thought it would.  Should we create a new thread?  I wonder if more people would see and comment?

 

Last year when I started working on our debt, I was able to use our tax refund to get going.  Sounds like you don't have that advantage.  If you would have had almost $500 for your savings this month, will you be able to accumulate that again next month?  That will go a significant way toward it.  So much of this process comes down to patience and persistence.

post #24 of 37

 

If I recall correctly, there are budget forms in the back of My TMMO - which should help give you a framework for what goes on your budget.  There are also a lot of free resources on daveramsey.com - here are some links to get you started:

 

Here's a copy of his Gazelle Budget Lite - Gazelle Budget Lite

 

Read through the New to Dave? and Budgeting sections on this link: http://www.daveramsey.com/category/tools/

 

trekkingirl - for many, BS1 is more difficult than BS2.  The idea is to sell anything you can, cut your budget down to the bare minimums etc and just build it as quickly as you can.  To answer your question yes if we all had an extra thousand we'd need a money makeover - the idea is to have an extra several thousand in sinking funds, in a fully funded emergency fund, etc.  

 

After reading through the links, please ask if you still have budget questions.  The main idea is that you tell your money to go before the month begins, by writing everything down, instead of looking back and seeing where it went.  So for May you'd budget $400 for food and groceries instead of looking at your account on May 31st and realizing you spent $450.  You give every dollar of your income a name and follow it.  It takes several months to nail it down but once you do, things get so much easier!  

post #25 of 37

thanks for the links mytwoas

 

I guess I'm still lost about making the budget. I can write a list of all my bills and the totals fine. But what about everything else? How do I know how much to budget for gas, food, little things that come up like holidays, and everything inbetween? For example if I budget $400 for food but run out of meals and have to shop again? Do all these variable categories have their own checking account? If not, wouldn't they dip into eachother? Also I get paid every other thurs and DH gets paid every thurs so in the beginning of the month we don't even have the funds yet. Does that matter?

 

I did see the budget form in the back of the book but it didn't make any sense to me or DH.

 

if you budget x amount for fuel how do you know if you've met that number? Since I haven't been able to work out a budget I have really only bought gas and food and paid my bills. Anything left in the bank when the next check comes I dumped into emergency fund. Is that a bad idea?

post #26 of 37
Quote:
Originally Posted by trekkingirl View Post

thanks for the links mytwoas

 

I guess I'm still lost about making the budget. I can write a list of all my bills and the totals fine. But what about everything else? How do I know how much to budget for gas, food, little things that come up like holidays, and everything inbetween? For example if I budget $400 for food but run out of meals and have to shop again? Do all these variable categories have their own checking account? If not, wouldn't they dip into eachother? Also I get paid every other thurs and DH gets paid every thurs so in the beginning of the month we don't even have the funds yet. Does that matter?

 

I did see the budget form in the back of the book but it didn't make any sense to me or DH.

 

if you budget x amount for fuel how do you know if you've met that number? Since I haven't been able to work out a budget I have really only bought gas and food and paid my bills. Anything left in the bank when the next check comes I dumped into emergency fund. Is that a bad idea?


The first step to budgeting is actually just tracking. Some people, who don't have an urgent need to restrain their spending, merely go about their lives for a month and just track every dime they spend. Then they can examine it and say "wow, I can't believe how much we spend on ____, we can definitely improve that."

 

But if you have an urgent need to restrain spending immediately, you can also draw up a budget the best you can, and adjust it from there. If you find that you simply can't keep your groceries within $400, then you will just have to adjust it - but you would want to at least try to keep spending down. After a month or two you can get a pretty good feel for your usual needs for gas, food, etc., and see where your holes are. Obviously gasoline to commute to work, for example, is not really negotiable; but by virtue of tracking and budgeting your fuel you may start combining shopping trips or thinking twice before driving 30 minutes to a restaurant, etc. Awareness goes a long way all by itself.

 

Categories - you have some options. I'm sure some people have separate checking accounts, but that seems excessive to me. Another option is the cash envelope method - take out the amount you need for a category for a month (or week, or pay period, whatever) and put it in an envelope. Depending on your lifestyle and needs, you can put the envelopes in your wallet or purse, or you can keep them at home and just pull them out as needed. You will know exactly what you have at all times. Another option is to record your spending in some manner - the old "keeping the books" method. So all the money is in one account but you write down that $400 is allocated to food. You spend $75, write it down, and note that you have $325 remaining.

 

A very convenient method is www.mint.com. It's a free budget application, and it's a godsend for me because I don't have to go crazy recording everything, and my husband can spend money without reporting it to me. If you set up your accounts (checking, savings, credit cards, mortgage, whatever) then the system will record all your transactions. You cannot MAKE any transactions whatsoever from mint (so nobody can hack your accoutn and move money around) - you can only SEE them. So when DH goes to the grocery store and spends $41.02 with the debit card, as soon as it posts (within hours in most cases, sometimes within minutes) I see the transaction. I have a Groceries budget category and this transaction will automatically go into it. I'll see a bar graph showing how much I have allocated for the month vs how much I've spent. So I know exactly where we are every single day. There's even a line showing how much money would be spent as a percentage of how far into the month we are (so if we're halfway through the month, we should be about halfway through the budget for the groceries category).

 

As for your method of how to save (at the end of the month, save whatever is left over), a lot of people say you should pay yourself first. And there is real merit to that advice, but it assumes you have a decent amount of disposable income. So if you're blowing $200 on lattes (this is the standard example for things people throw their money away on) then you should really just save that and forget the latte habit. Some people indeed look at a bank account and think "hey, we have enough, let's just go out to dinner tonight." It's better to just save the amount right off the bat so that it's not tempting you. For me, this isn't the case; we don't spend our money on any extras. So I do indeed just get through the month and whatever is left over gets put into our sinking funds and emergency fund.

 

post #27 of 37

Budgeting really is trial and error (for me anyways). Track, draw up a plan, and hold on to your socks. Somewhere in TMM Dave states that having a budget is like having a path to follow. Even if you stray from the path, you're still typically heading in the right direction instead of wandering aimlessly.

 

Even if you blow your budget, knowing that you're straying gets you WAY further than paying no attention to where it's all going.

 

I get paid monthly and DH gets paid bi-weekly. This was a pain in the butt until we pulled up our socks and got a month ahead. It wasn't easy, but now we take out everything for the month coming up, while whatever comes in sits in the acct until needed next month.

post #28 of 37

thanks guys your replies were really helpful to me. DH has expressed to me that he's not ready to do a budget yet. I really like mint but he is afraid of fraud. So I guess as of now, we are just living a rough budget that's not on paper. I hope were successful in our efforts. I need him on board and I am really proud of the way he has totally halted his spending. He even brought a lunch to work last week. That is HUGE for him. I'm hopeful that we'll be able to do this.

post #29 of 37

I haven't checked in for awhile.  Things were going along pretty well and we paid off one cc and  a good chunk of the other one.  And then this week happened...cat got sick, so $200 vet bill (and that's just the first visit), husband lost his work gloves (again), so $20 unexpected bill, well pump won't stop running (and we didn't know until the power bill showed up $80 more than last month),  bought a $25 part for it, but that didn't work, so had to call a professional today - looks like that bill will be $500-$1200.  Crap!  When it rains, it pours.  Thankful for the emergency fund, but we may run that dry before this is done.

 

 

Trekkingirl- If you don't want to use Mint, you can do it manually.  I set up my budget, monthly, in an Excel sheet.  I have a section for Expenses, with columns labeled 'bill', 'amount', 'actual' and 'balance'.  I also have a section for Income, with columns labeled 'payee', 'amount', 'actual' and 'balance'.

When I set up the sheet for the month (using the prior month's, but making any adjustments necessary), I fill in the bills and the budgeted amount; the payee and the expected amount.  I have a 'total' at the end of the Expenses and a 'total' at the end of the Income so I can make sure they are equal to each other.  Then as I reconcile my bank account (I do this every couple of days, online), I can keep a running balance in the 'actual' columns and set up an equation to figure the 'balance' column automatically.  If you're interested, I could email you a blank copy.

post #30 of 37

Thank you, MyTwoAs!  That link to the budget tool was perfect to get me kick started on my own budget.  We have a tool from Quicken through our Credit Union that I have been using to track finances for the last few months, so I had rough averages ready at my fingertips.  Of course, with our newly arrived twins, our averages are not exactly "average" in a few of the columns, so I guesstimated at an appropriate figure.  Dh looked it over and thought it looked workable to him.  We also have an added complication of a slightly variable income.  We'll put it into practice starting next paycheck and see how it goes. thumb.gif

post #31 of 37

mylilmonkeys - Yay - glad that helped you!

 

Sustainable Investing - Turquesa I think it was you that mentioned sustainable investing.  I had the opportunity to interview author R. Paul Hermann last year and I'd recommend his book, website, etc as a good place to start.

 

HIP Investor Website - http://www.hipinvestor.com/

 

HIP Investor - Human Impact + Profit: Making Bigger Profits by Building a Better World

post #32 of 37
Quote:
Originally Posted by MyTwoAs View Post

mylilmonkeys - Yay - glad that helped you!

 

Sustainable Investing - Turquesa I think it was you that mentioned sustainable investing.  I had the opportunity to interview author R. Paul Hermann last year and I'd recommend his book, website, etc as a good place to start.

 

HIP Investor Website - http://www.hipinvestor.com/

 

HIP Investor - Human Impact + Profit: Making Bigger Profits by Building a Better World

Great link!!  Thanks!

 

post #33 of 37

It's getting close to the end of the month, I thought I should check in!

 

I didn't really meet my goals this month, but that is ok - I was hoping to have a larger buffer in my checking account. I still have one more 'payday' this month, but my bills are all paid and I've started on next months budget

 

BS O: All caught up!

BS 1: 1000 EF Complete!

BS 2: I've had no response about settling two collections debts. As long as they are unwilling to settle, I'll likely not pay them anything. BUT since my father is remodeling a house for my sister (top to bottom, for free) he is going to forgive the 5,500 I owed him! Yay!!! That is a huge weight of my shoulders. I asked him about starting a payment plan and he said "You don't owe me a dime kid."

 

I've been paying $250 a month on one of my student loans (usually $60) in an attempt to pay it off this year. Funny how you set a goal, then realize how much it will cost to meet that goal. I did the math, including interest, and determined that if I roll the $250 from Loan 1 onto Loan 2 when it's paid, I will be out of student loan debt in January 2013!!! Yay!!! That is much, much sooner than I expected!

 

In more exciting news....DP and I are buying a house! Hopefully we close before Memorial Day - and don't worry, we are following Dave Ramsey advice! We are putting 25-45% down (depending on closing costs etc) and taking out a 20 year mortgage that is roughly 25% of our take home pay each month. If everything works out and a rental property sells (the home buying is not contingent on the sale, we are just tired of being landlords and want to unload the property) we will have the new home paid off in 3 years!!!!!

post #34 of 37

We.. didn't make much progress this month.  My computer died a painful death and we had to replace it (not having one is not an option) and we are moving in a week and a half.  We should be fine to move and by the time DH gets home from deployment we should have our baby EF in place and everything from the move paid off.

post #35 of 37

Sorry to hear that it wasn't the best month for goal-reaching in April, perhaps May will be a better month.  We've had a good month here and have stayed focused while we continue to build BS3.  My husband's supervisor called him this morning to let him know he's received a promotion and about a 6% raise.  This was totally unexpected as it is mid-year and we weren't expecting a performance review/pay bump until the end of the company's fiscal year in August.  

post #36 of 37

April is turning out to be the usual for us - over budget on food, over budget on gasoline (had two trips this month, and gasoline is obviously skyrocketing), filled up the heating oil tanks and had two dentist visits. So all I can say for April is that we didn't go further into debt, lol.

 

We did make our usual very small (but anything helps, right?) overpayments on our two remaining loans (student and mortgage). I was happy to note the other day that each month, the mortgage principal payment increases by about 80 cents from the previous month (due to having paid down the balance a little each month and thus less interest). Oh, it's tiny, I know, but I'll take any sign of progress :)

 

Regarding gasoline, DH took out his bicycle and trailer today, for the first time in a couple of years. He's out right now with DD, running errands and visiting the park. In 2008, we found $4/gallon was also the point where we really worried about gas and used the bicycle frequently, as well as planning errands better.

 

I had been trying to keep the same grocery budget that we had a couple years ago, but I think I'm going to have to give up. DD is getting older, so she is eating more food, plus inflation on food is huge, and as I eat higher quality foods I find I just can't go back. So food costs are going straight up for us, though we haven't had a raise in years. I stress about this every month when we go over budget; maybe I will feel better just increasing the budget - but I just don't know how to deal with it eating into our sinking funds. We desperately need a raise but I'm just lucky I have a job - seriously lucky. My two bosses, the owners, have been taking HALF pay since January. Obviously I'm not going to ask them for a raise.

 

I am grateful that we continue to have the money to pay our bills, and we don't have to play games to do it (like trading bills to pay late on or putting anything on a cc). I am grateful that we eat decent food, even if sometimes I go a little hungry. I'm grateful DH and I are totally on the same page and never fight about money. And even if it's painfully slow, we always make progress each month - even if our net worth increases by only $40 (I don't count sinking funds as net worth since they WILL be spent, otherwise there would definitely be months that we go the other way).

post #37 of 37
Quote:
Originally Posted by eirual View Post

I'm loving small-apartment living!! It's so simple in so many ways (financially, materialistically, and it's nice to be busy doing your own thing, but still be together). We've cut our living expenses in half. Once I start working full time permanently in the fall (with DH going to school) we'll be spending 25% of our income on housing (which is the best ratio we've ever had- we've always stretched ourselves thin)

 

Way to go Eirual. you live my dream, lol!
 

 

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