Darby Financial Advice 101

I had three people email me about our financial goals in the last two days or ask about Dave Ramsey.  While not an expert, I will profess the greatness of him until the end of time from our experience with money.  Really-it is that life changing.

 There are really two avenues to take if you want to learn more.  One is to go to Financial Peace University at a local church.  This is a 13 week course on Dave Ramsey's philosophies of money.  We have not been, but I have heard amazing things about it.  The second is to read the book, The Total Money Makeover by Dave Ramsey.  This is what I did, plus a whole lot of looking around on the web to see what I could find to help our uninformed little money spending rear ends;-)

http://www.people.com/people/article/0,,20608003,00.html

One of the most important changes we made was a budget.  I know, I know.  People hate budgeting!  Our problem was if there was money in the account, I would go buy stuff.  Or better yet, we used it as a permission slip to go buy stuff;-)  There was lots of guilt on my part when it came to buying things for myself.  I would always use the excuse, "But we really could use _________."  A budget changed our thinking, and it helped me get over my guilt of buying things for myself.

Here's how it works.  First you list out all of our liabilities that you pay every month on the left-hand side of a spreadsheet.  In our world, these are things like our mortgage, daycare, church, preschool, electric, water, student loans, life insurance (you should have some-especially if you are a one-income household,) savings, etc.  Then you place your paychecks across the top.  Now comes the number crunching.  You must determine which bills come out of which paychecks.  Of course, due dates are kind of important here.  You cannot take out more bills than the paycheck, though, either;-)  If you plan to use the money to pay bills, you must account for it on the spreadsheet.  If you have extra income, for example dependent care reimbursement, you must decide if you are going to use it as budget income or not.  If you need to use the money to pay bills, by all means, put it on the spreadsheet as an income.  We don't include that money in our budget, so for us, we simply put it in savings. 


Once you have paid ALL of the bills, then you must have money left over.  If you don't, well, I'm not sure how you are going to eat;-)  We do a cash system for our discretionary spending.  In short, we made categories for what we spend money on outside of "bills."  Our categories include: groceries, household, Alex (fun money), Jolie (fun money), Rowan, Isla, Dixie, gifts, eating out, medical, and gas.  We take out cash at our paychecks, and that is what we have to spend for the pay period.  At the end of a pay period, if we have any extra cash, we throw it in a jar for Christmas spending!

Here is an example of our budget with some fictitious numbers.  (There have to be some secrets!)  The only difference in ours is the fact that I only get paid monthly.  Therefore, we only have 3 paychecks, while some households would have 4.

 

	Pay 1	Pay 2	Pay 3	Pay 4
	100	100	100	100
Church	-1		-1
House		-1
Preschool		-1
IRA		-1
CJ Online		-1
Jolie Student Loan 1		-1
Alex Student Loan 1			-1
Allstate	-1
Home Phone	-1
Cell Phones	-1
Westar	-1
Kansas Gas	-1
Topeka Water			-1
Netfix			-1
Life Insurance	-1
Daycare		-1	-1	-1
Savings	-1	-1	-1	-1
Total Expense	-8	-7	-6	-2
Total Left	92	93	94	98
Disposable Income
Gas (Non-cash)	0	1	1	1
Groceries	1	0	1	0
Household	1	0	1	0
Target	1	1	1	1
Rowan	1	0	1	0
Alex	1	0	1	0
Jolie	1	0	1	0
Isla	0	1	0	0
Gifts	1	0	1	0
Dining Out	1	0	1	0
Medical	1	1	1	1

 Dave Ramsey professes a 0 budget.  That means that every single penny of your hard earned money is accounted for, and you have 0 money left at the end of the month! 

It works, but it does require some self control!  You can't just go buy what you want if you don't have the cash.  It just doesn't work.  A budget will help you realize where your money is going and how much you actually spend in a month!

There you have it, the Darby financial advice 101;-)