A few months ago I stumbled upon a Dave Ramsey budget. I've always been frugal; paying significantly more than the minimum on my car loans or student loans each month, building up a savings account, and trying to only buy things I need versus things I want. Still, I've always felt like I could do better. I had a retirement account set up via the two schools I worked at but I didn't know a thing about it. I remembered my high school economics teacher showing us how investing $10,000 at age 15 into a mutual fund earning 10% would turn into 1.2 MILLION by the time you retired at age 65, without adding another dollar to the account. Why wasn't I taking advantage of these things?
After coming across the Dave Ramsey inspired budget my interest in finances became an obsession. With all the time I spend lounging around the house now I devoted hours a day to reading financial forums, books on investing, and coming up with the most detailed budget I've ever had. I got Travis on board, and we have been living by the budget for two months now and have seen such a huge difference already. Even though neither of us are 'big spenders' I didn't realize how much extra trips to the grocery store each week or little purchases off Amazon were adding up.
Thankfully, neither of us have credit card debt so we are just working on paying off his car and my student loans by next year. That would mean paying his car off 2 years early, and my loans 6 years early! I know we can do it, and now that we aren't buying a car for me when we get to Alaska we can enjoy being 100% debt free for a little while.
So, here's the complete budget list.
BILLS mortgage/rent garbage cable/Netflix phone internet cell phone electric gas water alarm life insurance car insurance home insurance daycare/preschool
DEBT car student loan medical bills (add anything else you have here - credit cards, rent to own, whatever)
MONTHLY SPENDING auto: fuel charity groceries/toiletries eating out blow money (money each person has to spend each month on whatever they want.) entertainment college savings retirement savings newspaper/magazine/online subscription
SINKING FUNDS (Take the amount you expect to spend in a year, divide by 12 and set aside this amount each month in savings.) clothing & shoes haircuts pet care gifts, parties school expenses household/garden Christmas/birthdays home maintenance (1% of house value per year) car maintenance/tags ($75/car recommended) medical (rx, copays, contacts, dental) kids classes/activities adult classes/activities tuition property taxes (if not included in mortgage) adult classes travel AAA, etc. new car fund
If you aren't sure what you spend in each category Dave recommends going back over 6 months of bank/credit card statements to see where your money is going (don't even ask how often 'Target' shows up on my bank statement!)
Before coming across this budget I had never heard of sinking funds before, but it makes so much sense to plan for these 'unexpected' or annual expenses monthly instead of wondering how you are going to make ends meet during December or when your car breaks down.
Each month Travis and I contribute an equal amount to a shared savings account to cover our sinking funds. We've been contributing to a share savings account for emergencies for a while, but in the last month we've had to actually start using it for sinking funds. A $1200 deposit to hold our house in Alaska, $200 on cat crates and health certificates, ... it feels so great to have money set aside for 'random' expenses like these (and the point of having sinking funds is that nothing is 'random' anymore - everything is planned for!)
In my experiences talking with friends about their finances people who are struggling fall into two categories; they live outside their means and spend more than they make, or they are living paycheck to paycheck because they just aren't making enough money.
By living by this budget Travis and I both have more money left over at the end of the month then we ever had before (we keep our finances separate except for the joint savings, and each of us are responsible for certain bills/items on the budget listed above.) By limiting how much we spend on eating out, groceries, or 'blow' each month we are able to put even more onto our debts.
I haven't even scratched the surface on paying off debts, investing money to take advantage of compound interest, or how I'm planning to save $30k for our sons college fund in 18 years with 3k down and $50 a month. I'd love to start posting more often about finances so if you are interested please let me know in the comments, and tell me what you'd like to hear about!
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If you have debt you are trying to pay off definitely start with Total Money Makeover. (While I think Dave has some amazing philosophies I don't agree with all of them. He suggests paying off smallest debts first, I prefer paying off those with highest interest. He also advocates stopping all contributions to retirement while paying off debt, which I generally think is a bad idea. I'm obviously not a financial expert but if you ever have questions feel free to email me!)
My Mom gifted me this book in my mid 20's and it was the first money book I had ever read. I loved it. I love Suze's writing style, and this book is geared specifically toward women: Women & Money.
Living outside your means? Making good money but not saving for retirement or college funds? Millionaire Next Door is a great reality check. Every millionaire I've met lives in a modest house, drives old cars, and pays cash for everything.
Do you have a monthly budget? What is your #1 financial goal right now?