Tuesday, January 30, 2007

"Found Money"

Now that we know the 'steps', and we have a mostly workable budget. We have to come up with a plan for what Dave calls "found money". That means leftovers in the budget, cash gifts, overtime/extra income, refunds, prize money, income tax return. Blow Money is a separate category, not found money. I want to be seriously serious about debt reduction. I propose that that found money go to whatever step we are on, with the exception of money for birthdays. Birthday money is considered 'extra blow money'. But everything else goes to 'THE PLAN'. After we get past babystep 2, then we can revisit this.

Saturday, January 27, 2007

PreSteps---getting current and budgeting

Budget----Okay. Over the past week, I have worked our a 'doable' budget. "Dave says" that it takes about 3 months of doing a budget (well, he calls it money allocation or some neutral term) before you have your categories in the correct ranges. I think I am pretty close to our 'real' numbers for expenses. But I will be following every dollar and where it goes, so that we are in control of our finances instead of our finances controlling us. Not balancing the checkbook, and not sticking to budgeted expenses is where you get those sneaking "leaks" and before you know it...you have to your the Emergency Fund so you don't bounce the mortgage.

We are going to be debt free! I want to do this as fast as possible. Beholden to no man...blah, blah, something.

System----So, the envelope system. It works, I will have to pay attention a bit more in the grocery store. Thats all. Impulse buys --- nope. Gas (ONLY gas at the gas station!!!) on the debit card. Everything beyond bills is cash. We both spend waaayyyy too freely using the debit card. We just do not think before we swipe.

Get current ---- I do have a couple outstanding bills - $70 to the dentist (which I thought was covered 100% by insurance - big raspberry!), TruGreen ChemLawn - $30ish. These will have to wait until next Friday. I think that is it.

Blow Money ----this will be in cash. JASON!!! On Saturday you get $50. Spending money will include any of your bad habits (tomacco and/or 'new releases'). I do NOT want to see Isle 16 purchase on the debit card---or worse, the credit card!

Savings without a mission is garbage!
-Dave Ramsey


We still need to set up larger goals, longer term type stuff. But for right now, Baby step #2 is sufficient for our needs here. The goal to be consumer debt free is a huge motivator.

7 Baby Steps to Financial Peace

7 Baby Steps to Financial Peace

1. First level emergency fund $1,000. Pay minimums on everything else.

2. Kill off personal debt except for the house

3. Save the rest of the emergency fund. 3-6 months of *expenses*.

4. Fully fund all pretax retirement accounts. Also at this time, review all insurance coverage. With a large emergency savings, you can now afford $500-$1000 deductibles.

5. College savings accounts for children (optional).

6. Pay off house as early as possible.

7. Build wealth! Mutual funds, real estate…wait for the great deals & pay cash. This step is the ‘rich getting richer’.

Friday, January 26, 2007

January update

I am a huge Dave Ramsey fan, and following (mostly) his 7 babysteps to financial success. Babystep #1 is $1000 emergency fund. It was funded, but then we haven't been following a budget lately, Christmas happened (so NOT an emergency). So I had to move our EF over to checking to cover the mortgage and the Homestudy check this month. Shouldn't have happened, but it did. So time to build it up again. Blech.

This was in September:

So our financial planning goals are to be debt free. We are working on it, and I am going to try to keep a progress report. So, not including the house, we have outstanding debt of $56,055. This encompasses a van, student loans totaling almost $40K, and a $2K on a credit card. So there is the truth of our debt and hoping to get rid of it all asap.

So I am now posting a more detailed totals list.

Emergency fund: $130; Goal: $1000

Perkins Student loan: $270
Credit Card: $899
Rae's Sallie Mae Loan: $7915
Jason's Sallie Mae Loan:$31519
Van loan: $14312
Total debt :............$54915

So it is an improvement, at least. Heading in the right direction. Not 'gazelle intense', but babystepping.