Wednesday, March 30, 2016

Dave Ramsey Week 3 & 4



Sorry you guys, I am a week behind due to our trip to GA so this is going to probably be a lengthy post with a lot of information so I apologize.


Week 3 was all about cash flow planning, or making your budget.  In week 2 we did our “quick start budget” but for week 3 we took it a step further and did the “monthly cash flow budget”.  For this budget your objection is to assign a job to every dollar that you have coming in.  Each category of your budget should add up & equal the same as your take home pay so when you subtract your spending from your earning, it equals 0.  I had never done a budget like this before so it was hard and I was definitely making it harder than it needed to be.  Do you have things that you only pay for annually like life insurance?  We do.  Do you save for it each month so that when the time comes to pay it you’ve got the money?  We weren’t.  Starting this month we will have what is called a “sinking fund” for those items so that we are saving for them each month.  This is a totally new thing for us and we’re doing it for a couple different things we don’t pay for regularly.


For our situation we don’t earn the same amount each week, my check is pretty regular, but Joe’s is not.  If your situation is similar, what Dave suggests is taking your lowest month of income from last year and using that as your base salary.  What we decided to do was use what Joe would earn for unemployment as our base.  He also gets paid weekly and I get paid bi-weekly.  There are some additional budgets that you can also incorporate if you’ve got irregular income.  One is called the “irregular income budget” and the other is called the “allocated budget” both of which can be done if you don’t receive the exact same pay each week.


In my mind before, as long as our bills were paid then we were doing fine.  Anything extra I’d either put into one of our other savings accounts or just spend as I felt necessary on things like clothes, eating out, shopping of any kind, getting nails/hair etc. done, I never had a plan for our extra income.  Everything was paid for on my debit card and I never carried any cash in my wallet.  With Dave, you have a plan for EVERY SINGLE DOLLAR that comes in.  He also really stresses using CASH rather than plastic because it’s harder to let go of actual money.  You have more of an emotional connection to cash than you do to plastic.  I can tell you I 100% agree. 


For me, what I’ve started doing to ease myself into using more cash is Dave’s Envelope System.  You can use envelopes for whatever you’d like.  I decided to start with one, an envelope for gas.  I get gas about once a week roughly and it costs between $20-30 to fill up.  Now that gas is back up to $1.99 it’s roughly about $30 to fill my tank.  I also use the Hyvee Fuel Saver program so I typically have some extra savings on what I pay at the pump because of that so I averaged it out to $25 a week for gas.  We received Dave’s envelopes in our class kit so I took one of them and put $100 in it for gas for the month of April.  I will definitely keep you posted on how this goes.  Does this lose the convenience of paying at the pump?  Absolutely it does, but, taking a couple extra steps to go inside the gas station is not the end of the world.  I did it for years before I got my debit card in college, I can certainly do it now.


Week 4 of Dave was Dumping Debt.  In this lesson Dave talked a lot about debt myths.  He talked at length about car loans, credit scores, and how by using his plan, you can quickly get yourself out of debt.  Depending on the amount of debt you have, you may need to go to some extreme lengths to do that, but it is possible.  He suggests starting with something like a garage sale to sell all of the unused “stuff” that you own.  It may also benefit you to sell your car and buy something significantly cheaper with CASH.  This all depends on what your situation is. 


The Debt Snowball, which is baby step 2 was also a large focus of the class.  This was also our homework for the week which we will bring in on Friday.  The Debt Snowball is a simple concept.  You write your debts down, smallest to largest in one column and then your minimum payment in the second column.  Once your first debt is paid off you take that minimum amount you were paying on that debt and you put it towards your next debt.  So you’d be paying the minimum amount on your second debt PLUS the minimum from the first (once that 1st one is paid off) which is creating the snowball effect.  Interest rates do not matter in Dave’s plan.  I will tell you too, by paying off those smaller debts which can be easy to knock out quickly, you start feeling a sense of accomplishment and confidence in yourself that really inspires you to keep working at it.  Some people may feel as though the debt with the highest interest rate should be paid first but I can tell you, my biggest debt (minus my car) has the highest interest rate that is my credit card.  It would take a while to pay that off by making just the minimum payment but because I’ll be paying the minimum payment plus the minimum from the 2 smaller debts that come before it, I’ll be paying it off so much quicker!  I know that sounds confusing, but it really is a simple concept.


For class 4 we were also allowed to bring a guest.  You guys might remember my friend Jessica and I are doing this class together.  Well, I was able to convince Joe to come with me and although he was very reluctant at first, he was impressed with the class & really liked how well Dave spoke.  He has really been participating and asking questions more about our budget for the month & is trying to be supportive because he knows that I am doing this and I want to take it seriously.  He said he might even try to come with me again to a future class.  I was a happy wife, that’s for sure!


I know this is a lot of information, but I have been getting great feedback on these posts so I’m going to continue to update you guys.  This Friday I am planning on cutting up my Kohl’s & my Pier 1 credit cards.  My biggest challenge with this class will be cutting up and closing my Chase credit card account.  I have a very strong emotional attachment to that card and feel like it may be needed for our upcoming DEIVF cycle for bills that we are paying out of pocket that we didn’t prepare for.  Our situation is kind of unique because Dave does say that once you’re expecting a baby that you should stop paying on your debts and save that money towards the baby.  In our situation we are actually paying to conceive that baby so we have to tweak Dave’s system a bit to work for us, but our leader is aware & has been great in helping us make those adjustments. 


I am highly recommending this class so far.  It has been a real eye opener for me and has really started making me question and think twice about my spending habits.  4 down, 5 more to go!

6 comments:

  1. I'm interested in how your leader has approached paying for fertility treatments. Obviously cash is ideal but what if that isn't accessible?

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    1. Hey girl, I think you might be a no-reply blogger because I'm not getting your comments in my email, you can change that in your blogger settings. They would definitely say that cash is the best thing to do. They'd say that you'd save for it until you had the funds available. For us we are trying to save as much as we can do we don't have to take out a loan, but I'm not sure we will get to that point or not. We may be taking a 401k loan out to finance what we haven't been able to save. We have been really lucky that all of our treatment is covered by insurance which helped us from having to spend thousands on our cycles. I wish that was an option for more couples.

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  2. Awesome job girl! We got our vehicles paid off almost 2 years early because of the snowball concept. Since having babies the pace has slowed because so much is deducted from my check for my maternity leave. Come this fall my check will be normal again and we can get back on track. Keep it up!

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  3. loving all this info. i am reluctant to use cash for everything because i like using credit cards to build miles lol. we pay our credit cards off every month (well, except for the ones i've told you about lol) and KC never lets us put something on credit that we can't pay off immediately. so i don't think it's that bad... lol. it would definitely stop the little random trips to the grocery and such though!

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  4. Interesting! We budget a little differently, but I was always curious how Dave's method would work for us because my husband has small streams of income coming from a million different places irregularly at weird times. (grad student, not a drug dealer)

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Thank you for commenting on my blog! I read & try to reply to every comment via e-mail so if you don't get a reply from me you might be a no-reply blogger!

 
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