If I ever make working toward financial freedom look easy or sound magical, please let me know, because it isn't always puppy dogs and rainbows. I get really frustrated sometimes with living this way. Every time a friend boasts about buying their first home, getting a new car, going on a fancy vacation, or just living the life I envisioned for myself, I get pretty depressed. I try to remind myself that they may be living in a completely different financial situation than I am. Maybe they don't have the student debt, maybe they are bringing in two full-time incomes rather than one, maybe they are in debt up to their eyeballs and just hide it really well, or maybe they sell their organs on the black market...who knows. But I want it!!! I want it like a 3-year-old wants a Popsicle!! I can feel my inner little kid come out and I stomp my little feet and I scrunch up my little face, and I pout. Luckily, John and I rarely go through these moments at the same time so we have each other to bring the other one down off of the proverbial ledge.
Most of the time, the frustration and disappointment of living this way encourages me even more to try harder and push forward so we can move out of this stage in our lives, but sometimes I just want to take the easy way out and just do whatever I want. I wrestle with tough decisions like whether to stay home with my son and sacrifice financially, or to work and save up for our house. I struggle whether to ride out the economic downturn and hold out for my dream teaching position, or to put all of it aside and just take any job that will pay me. I wrestle with whether I should take $100 out of savings and go buy myself some clothes that actually fit me and look halfway decent, or keep living in my too big or too small pants and the unflattering shirts I already have from Old Navy. Every decision I make has its price and I worry that I am making the right ones. My optimistic side begs me to look around and take into consideration all of the positives in my life: my amazing husband, my healthy and happy baby boy, the nice warm home we live in, the food we are able to afford to eat, our supportive friends and family, our jobs, the list goes on and on. I do have a lot to be thankful for, but I still feel like we have been busting our butts for so long and I should be able to see some form of tangible pay-off by now!
I think that the reason I like Dave Ramsey's program so much is because he is just so straight forward and blunt. He is like the financial world's Dr. Phil. He just tells it like it is. And I can always imagine his voice in my head when I am about to make a stupid decision or make an impulsive purchase. I equate going through his program like visiting a meat packing plant. Once you see the carnage inside, you wont ever want to go back to that life. After learning all that he has taught, you would have to be pretty dumb to make the same mistakes again, but I have to admit, living above your means is a lot more fun and a lot less work. I guess the tangible pay-off is having the ability to turn down a sub job whenever I want, and to not have to worry about a bill not getting paid. Of course the downside is spending one more day in our rental with my too small compact car, but at least I have the choice.
Well, I have been having some really fabulous and inspiring days lately, and I guess today was just a valley between peaks. I have our monthly cash budget all set up for the month of April and I am looking forward to how much we will be able to save up!! Our goal is to have a $20,000 down payment saved up for a house by this time next year...wish us luck and for a smooth ride!
Sarah
Friday, March 30, 2012
Thursday, March 29, 2012
Couponing and finding deals!!
So here is my long anticipated couponing post!! If you are wanting to make a commitment to putting more money away and paying off debt, a great way to trim the budget without sacrificing much is to adopt a few money-saving strategies when shopping. The three main ways I trim my shopping budget is to use coupons, buy on sale, and buy used. I'll address my tips on couponing and buying on sale, as well as some of the misconceptions and a few warnings!
First, using coupons has become quite popular lately which is both good and bad for those trying to get into the "game" as I call it. The good news is that retailers are now more used to people using coupons, so it is less of a stigma and the sales people are usually a little more knowledgeable about their coupon policies than they used to be. Also, there are TONS of good couponing websites and resources that practically do all of the work for you! The bad news is that retailers are not savvy to our ways and are trimming back what they will allow and sometimes the coupon crazy people will clear the shelves of the really good deals and coupons before us average people get a chance. But even though it can be a little tricky sometimes and it does take a little more time to plan your shopping, it can pay off BIG TIME! Here are some strategies I use when couponing:
1) Shop for whats on sale. When you go to the grocery store with a particular need in mind or a recipe or menu already picked out, you will often end up paying full price. Instead of creating your shopping list based on your menu, create your menu based on your shopping list (or what is on sale). In the tips below you will find some great strategies for planning out your shopping trip before you go so that when you get to the store you will only be buying things that are on sale that day and save yourself a lot of money. That doesn't necessarily mean you can't buy ANYTHING that is full price or fresh, but if you are able to save on everything else, than you can splurge on the things that you like to buy that isn't super cheap :)
2) Use a couponing website. I use http://www.thekrazycouponlady.com/. This site is awesome because you can choose which store you shop at, and she will match up all of the sales happening that week with what coupons to bring. Many of the coupons are ones you can print right off of your computer, while others are ones that you have to have the newspaper for. These sites take all of the work out of couponing because they match up the deals for you!! For example, she might list that Crest toothpaste is on sale at Fred Meyer for $2.19 each, and that there is a $1 off coupon available in the newspaper which brings it down to $1.19. Simple as pie!!
3) Subscribe to the Sunday paper. You will need to subscribe to your weekend paper to get many of the coupons. Hardcore couponers usually subscribe to multiple copies so that they can get more coupons, but that depends on how far you want to take this. I promise that the savings you get every week will outweigh the cost of the subscription. Other ways you can get these coupons is to ask neighbors for the coupon inserts that they aren't using, joining a coupon-swapping site or group where people give or trade coupons they aren't using with others, browsing recycling areas where people might discard their newspapers, or even purchasing coupons from other people (I have never done the last two, but I have done the first two). The benefit of having more than one copy of specific coupons is that you can stock up on things if you find an awesome deal, or you can purchase enough of an item to qualify for even more savings (I'll talk about that later).
4) Combine sales, coupons, catalinas, and buying in bulk to increase savings. One of the common misconceptions about coupons is that you are only saving pennies at a time and that it is not worth it. First of all, that is not true, if you know how to COMBINE coupons (which is where the couponing websites come in handy) and you stock up at great prices, you can save a ton!! Let me give you an example: The other day at Safeway, I ran across a great deal on California Pizza Kitchen frozen pizzas. They normally sell for $3.99 each, but were on sale for $3.49. On the outside of the door, there were coupons (they are referred to as "peelies" for $1.00 off of one pizza. I grabbed 3 of the coupons. I bought 3 pizzas and used 3 coupons (where it says "limit one per item" that means you can only apply one coupon PER item, but if you buy 3 items, you can use 3 coupons!) Safeway was also running a promotion where if you spent $10 on frozen food, they would give you a coupon for $5 off your next frozen food purchase. Most of the promotions are BEFORE coupons, so if you but $10 worth of products, and then use coupons to bring the cost under $10, you will still get the coupon. So here I am with $12 worth of pizzas marked down to $10.50 on sale, and then $7.50 after the $1 off coupons. When I pay, they print me out the coupon for $5 off which now brings my 3 pizzas to $2.50. THEN, I get another coupon (they are called Catalinas) printed out from California Pizza Kitchen thanking me for my purchase for another $2 off my next purchase. Now I just got 3 frozen pizzas for $0.50. That's like 17 cents per pizza. I have done this kind of deal on cereal, cleaning supplies, soup, and pasta. You are also able to combine a MANUFACTURERS coupon with a STORE coupon. A great place to do this is at Target. Often Target will print their own coupons for items that the store pays for, versus sending the coupon to the manufacturer. For example, the other day I used a $2 off Pampers Target coupon AND a $2 off Pampers coupon! I saved $4 off of one pack of pampers by combining them!! If this sounds really complicated, remember, the couponing websites do all of these "match-ups" for you, and, I did this crazy pizza couponing without bringing any coupons with me! I used the sale and the coupons that were already at the store! When you combine these strategies, your coupons go a lot farther!
5) Stock Up! When you find an amazing deal on something you use a lot of, stock up! (This is where having multiple copies of coupons comes in handy) I know that we use a lot of chicken, cheese, tortillas, canned soup, and bottled water in our house, so when I find a great deal, I buy lots! The coupon and sale experts will say that retailers have a 3-month cycle, meaning that certain items usually go on sale roughly every three months, so if we are talking about foods with a decent shelf life or can be frozen, a 3-month supply would be a good goal to stock-up on, otherwise just buy as much as you will be able to use before it goes bad. I at one point had 11 boxes of cereal, 6 bottles of salad dressing, and 4 bottles of household cleaner that I was able to get for FREE using coupons! And when you are talking about dirt-cheap groceries and household supplies, feel free to let your inner philanthropist free and donate whatever you will not use to a local charity, church, or food bank. I enjoy doing that with some of the stuff I get for free but will not eat. When you are able to stock up on necessities when they are cheap, then you are less likely to have to buy them when they are full price!! Another thing to stock up on, is coupons! Often times I will see "peelies" or seasonal coupon booklets at my grocery store, and I will often grab a few. Many times manufacturers will put out coupons for an item (like canned tomatoes, soda, frozen pizzas) that are not necessarily on sale at that store or at that time, but may come in handy at a later date. For example, on my same great shopping day at Safeway I noticed that many of the 24-packs of Pepsi had peelies attached that were $2 off of 2 24-packs. That day, the 24 packs were $7.99 each, which even with the coupon was too high for what I like to pay. But I knew that occasionally on Fridays, Safeway will sell their 24 packs of Pepsi for $5, so with those coupons (that were good until July) I could snag them for $4 a piece!! My hubby loves his Diet Pepsi, and at $4 for a 24-pack, I'll stock up! I think I grabbed 8 or 10 of the coupons. Also, many of the manufacturer and store coupons can be used at other stores so just because you found a coupon at Safeway but that product is not on sale, doesn't mean you can't take that coupon to Albertsons and use it on sale there!
Some major misconceptions about couponing are that it takes too much time and effort, the savings are minimal, and that only processed and "bad for you" foods are on sale. Let me address these here. First of all, yes, it does take a little more time and effort to use coupons, I usually spend about 30 minutes on Sunday mornings looking through the coupons in the paper and cutting out the ones I may use. I also have a small coupon organizer I keep in my purse divided into categories that make sense to me. It takes me another few minutes to sort through the old ones to throw them out and categorize the new ones. When it comes to shopping day, I might spend another 30 minutes browsing the couponing website planning my trip that day to make sure I am taking advantage of the good sales that week. So on average, if I were to make a weekly shopping trip, it takes me a little over an hour to prepare. But I usually save a minimum of $30-$50 on each trip using these strategies, so that hour of time was definitely worth it!! Second, like I said previously, if you know how to use the coupons correctly, the savings add up a lot faster than just pennies at a time. And once you get used to buying things super cheap, you will realize just how far you can make that $1 you saved go. For example, I don't like to pay more than $1 each for boxes of pasta, and more preferably, 50 cents. So if a $1 that I save on something else in my budget can buy me 2 boxes of pasta, that can serve 8 people in my family, or 4 dinners!! It really adds up! And third, yes, often times the things that are on sale the most and can be bought for the cheapest are usually boxed, canned, or frozen. However, if you remember that saving on some of those essentials that you are able to can free up grocery money to spend on some of the fresh produce and higher end items that you prefer, than it is still worth it. Also, remember that many times you are able to get things for free that you can donate to food banks that could use those non-perishables, and lastly, the savings that I get on diapers, bath tissue, cleaning supplies, and make-up are incredible. If at the very least you are able to use these strategies and stock-up on household supplies while they are cheap or free, imagine what that could save you per year!!
A few warnings about couponing:
1) Don't buy things on sale or with a coupon unless you plan on using it or donating it. It is not saving you any money if it wasn't something that you NEEDED, or even worse, ended up throwing away.
2) Know what is too high, a good price, and a stock-up price. It took me a little bit to know when I was looking at a good price. I often use the unit price or price per ounce when shopping now. I remember seeing black beans at Safeway on sale for $1 a can on sale and thought I had found a good deal, then I realized that they went on sale for half that every once in a while, so now I have the rule that 0-50 cents is a stock up price, 50-79 cents is a good price, 80 cents-$1 is something I'll buy if I really need it, and anything over $1 and I am just not buying it!! Pick your top 5 items that you buy and do the research to figure out what is the best price for it and try to use discipline to only buy it for that great price!
3) Use coupons and catalinas before they expire!! I have made this mistake too many times :(
4) And of course, go to the grocery store with cash! This will keep you on budget and force you to only buy the best deals and make the best choices!! You will try a lot harder to stretch your grocery budget if that is all the cash you brought with you :)
Here is a print-out that I put together for a little "couponing class" I led: Couponing 101
Happy Couponing!
Sarah
First, using coupons has become quite popular lately which is both good and bad for those trying to get into the "game" as I call it. The good news is that retailers are now more used to people using coupons, so it is less of a stigma and the sales people are usually a little more knowledgeable about their coupon policies than they used to be. Also, there are TONS of good couponing websites and resources that practically do all of the work for you! The bad news is that retailers are not savvy to our ways and are trimming back what they will allow and sometimes the coupon crazy people will clear the shelves of the really good deals and coupons before us average people get a chance. But even though it can be a little tricky sometimes and it does take a little more time to plan your shopping, it can pay off BIG TIME! Here are some strategies I use when couponing:
1) Shop for whats on sale. When you go to the grocery store with a particular need in mind or a recipe or menu already picked out, you will often end up paying full price. Instead of creating your shopping list based on your menu, create your menu based on your shopping list (or what is on sale). In the tips below you will find some great strategies for planning out your shopping trip before you go so that when you get to the store you will only be buying things that are on sale that day and save yourself a lot of money. That doesn't necessarily mean you can't buy ANYTHING that is full price or fresh, but if you are able to save on everything else, than you can splurge on the things that you like to buy that isn't super cheap :)
2) Use a couponing website. I use http://www.thekrazycouponlady.com/. This site is awesome because you can choose which store you shop at, and she will match up all of the sales happening that week with what coupons to bring. Many of the coupons are ones you can print right off of your computer, while others are ones that you have to have the newspaper for. These sites take all of the work out of couponing because they match up the deals for you!! For example, she might list that Crest toothpaste is on sale at Fred Meyer for $2.19 each, and that there is a $1 off coupon available in the newspaper which brings it down to $1.19. Simple as pie!!
3) Subscribe to the Sunday paper. You will need to subscribe to your weekend paper to get many of the coupons. Hardcore couponers usually subscribe to multiple copies so that they can get more coupons, but that depends on how far you want to take this. I promise that the savings you get every week will outweigh the cost of the subscription. Other ways you can get these coupons is to ask neighbors for the coupon inserts that they aren't using, joining a coupon-swapping site or group where people give or trade coupons they aren't using with others, browsing recycling areas where people might discard their newspapers, or even purchasing coupons from other people (I have never done the last two, but I have done the first two). The benefit of having more than one copy of specific coupons is that you can stock up on things if you find an awesome deal, or you can purchase enough of an item to qualify for even more savings (I'll talk about that later).
4) Combine sales, coupons, catalinas, and buying in bulk to increase savings. One of the common misconceptions about coupons is that you are only saving pennies at a time and that it is not worth it. First of all, that is not true, if you know how to COMBINE coupons (which is where the couponing websites come in handy) and you stock up at great prices, you can save a ton!! Let me give you an example: The other day at Safeway, I ran across a great deal on California Pizza Kitchen frozen pizzas. They normally sell for $3.99 each, but were on sale for $3.49. On the outside of the door, there were coupons (they are referred to as "peelies" for $1.00 off of one pizza. I grabbed 3 of the coupons. I bought 3 pizzas and used 3 coupons (where it says "limit one per item" that means you can only apply one coupon PER item, but if you buy 3 items, you can use 3 coupons!) Safeway was also running a promotion where if you spent $10 on frozen food, they would give you a coupon for $5 off your next frozen food purchase. Most of the promotions are BEFORE coupons, so if you but $10 worth of products, and then use coupons to bring the cost under $10, you will still get the coupon. So here I am with $12 worth of pizzas marked down to $10.50 on sale, and then $7.50 after the $1 off coupons. When I pay, they print me out the coupon for $5 off which now brings my 3 pizzas to $2.50. THEN, I get another coupon (they are called Catalinas) printed out from California Pizza Kitchen thanking me for my purchase for another $2 off my next purchase. Now I just got 3 frozen pizzas for $0.50. That's like 17 cents per pizza. I have done this kind of deal on cereal, cleaning supplies, soup, and pasta. You are also able to combine a MANUFACTURERS coupon with a STORE coupon. A great place to do this is at Target. Often Target will print their own coupons for items that the store pays for, versus sending the coupon to the manufacturer. For example, the other day I used a $2 off Pampers Target coupon AND a $2 off Pampers coupon! I saved $4 off of one pack of pampers by combining them!! If this sounds really complicated, remember, the couponing websites do all of these "match-ups" for you, and, I did this crazy pizza couponing without bringing any coupons with me! I used the sale and the coupons that were already at the store! When you combine these strategies, your coupons go a lot farther!
5) Stock Up! When you find an amazing deal on something you use a lot of, stock up! (This is where having multiple copies of coupons comes in handy) I know that we use a lot of chicken, cheese, tortillas, canned soup, and bottled water in our house, so when I find a great deal, I buy lots! The coupon and sale experts will say that retailers have a 3-month cycle, meaning that certain items usually go on sale roughly every three months, so if we are talking about foods with a decent shelf life or can be frozen, a 3-month supply would be a good goal to stock-up on, otherwise just buy as much as you will be able to use before it goes bad. I at one point had 11 boxes of cereal, 6 bottles of salad dressing, and 4 bottles of household cleaner that I was able to get for FREE using coupons! And when you are talking about dirt-cheap groceries and household supplies, feel free to let your inner philanthropist free and donate whatever you will not use to a local charity, church, or food bank. I enjoy doing that with some of the stuff I get for free but will not eat. When you are able to stock up on necessities when they are cheap, then you are less likely to have to buy them when they are full price!! Another thing to stock up on, is coupons! Often times I will see "peelies" or seasonal coupon booklets at my grocery store, and I will often grab a few. Many times manufacturers will put out coupons for an item (like canned tomatoes, soda, frozen pizzas) that are not necessarily on sale at that store or at that time, but may come in handy at a later date. For example, on my same great shopping day at Safeway I noticed that many of the 24-packs of Pepsi had peelies attached that were $2 off of 2 24-packs. That day, the 24 packs were $7.99 each, which even with the coupon was too high for what I like to pay. But I knew that occasionally on Fridays, Safeway will sell their 24 packs of Pepsi for $5, so with those coupons (that were good until July) I could snag them for $4 a piece!! My hubby loves his Diet Pepsi, and at $4 for a 24-pack, I'll stock up! I think I grabbed 8 or 10 of the coupons. Also, many of the manufacturer and store coupons can be used at other stores so just because you found a coupon at Safeway but that product is not on sale, doesn't mean you can't take that coupon to Albertsons and use it on sale there!
Some major misconceptions about couponing are that it takes too much time and effort, the savings are minimal, and that only processed and "bad for you" foods are on sale. Let me address these here. First of all, yes, it does take a little more time and effort to use coupons, I usually spend about 30 minutes on Sunday mornings looking through the coupons in the paper and cutting out the ones I may use. I also have a small coupon organizer I keep in my purse divided into categories that make sense to me. It takes me another few minutes to sort through the old ones to throw them out and categorize the new ones. When it comes to shopping day, I might spend another 30 minutes browsing the couponing website planning my trip that day to make sure I am taking advantage of the good sales that week. So on average, if I were to make a weekly shopping trip, it takes me a little over an hour to prepare. But I usually save a minimum of $30-$50 on each trip using these strategies, so that hour of time was definitely worth it!! Second, like I said previously, if you know how to use the coupons correctly, the savings add up a lot faster than just pennies at a time. And once you get used to buying things super cheap, you will realize just how far you can make that $1 you saved go. For example, I don't like to pay more than $1 each for boxes of pasta, and more preferably, 50 cents. So if a $1 that I save on something else in my budget can buy me 2 boxes of pasta, that can serve 8 people in my family, or 4 dinners!! It really adds up! And third, yes, often times the things that are on sale the most and can be bought for the cheapest are usually boxed, canned, or frozen. However, if you remember that saving on some of those essentials that you are able to can free up grocery money to spend on some of the fresh produce and higher end items that you prefer, than it is still worth it. Also, remember that many times you are able to get things for free that you can donate to food banks that could use those non-perishables, and lastly, the savings that I get on diapers, bath tissue, cleaning supplies, and make-up are incredible. If at the very least you are able to use these strategies and stock-up on household supplies while they are cheap or free, imagine what that could save you per year!!
A few warnings about couponing:
1) Don't buy things on sale or with a coupon unless you plan on using it or donating it. It is not saving you any money if it wasn't something that you NEEDED, or even worse, ended up throwing away.
2) Know what is too high, a good price, and a stock-up price. It took me a little bit to know when I was looking at a good price. I often use the unit price or price per ounce when shopping now. I remember seeing black beans at Safeway on sale for $1 a can on sale and thought I had found a good deal, then I realized that they went on sale for half that every once in a while, so now I have the rule that 0-50 cents is a stock up price, 50-79 cents is a good price, 80 cents-$1 is something I'll buy if I really need it, and anything over $1 and I am just not buying it!! Pick your top 5 items that you buy and do the research to figure out what is the best price for it and try to use discipline to only buy it for that great price!
3) Use coupons and catalinas before they expire!! I have made this mistake too many times :(
4) And of course, go to the grocery store with cash! This will keep you on budget and force you to only buy the best deals and make the best choices!! You will try a lot harder to stretch your grocery budget if that is all the cash you brought with you :)
Here is a print-out that I put together for a little "couponing class" I led: Couponing 101
Happy Couponing!
Sarah
Monday, March 26, 2012
Creating a budget on a variable income
At the height of our crazy debt repayment and savings journey I had taken on four part-time jobs to bring in as much income as I could. I was substitute teaching in two different districts, waiting tables at a local restaurant and sometimes working the front desk, as well as working as a camp counselor type job for the parks and recreation district nearby. There were many challenges juggling so many different schedules and still finding time to relax and spend time with my husband. If you are in a similar situation where you are not only trying to balance work and life, but as well trying to figure out how to make a monthly budget when you have no idea how much money you will make in any given month, then this post is for you!
I created a system that not only helped me balance my work and free time, but also allowed for me to create a monthly budget that would work. Here are a few reasons why I NEEDED to do this!
1) As you have read before, I have a really hard time saying no to people. When you are substitute teaching in two districts, waiting tables and working the front desk at a restaurant with over 100 front of the house staff members, and working on-call as a youth supervisor, you literally have hundreds of people calling you on a regular basis offering to let you work. To someone who is working hard to get out of debt, this can seem like a Godsend, an unlimited ability to work and make money!! But on the flip side, there were times when I was working 7 days per week and running myself into the ground. When someone would call and offer me a job, I didn't want to turn it down because I could only imagine the money I was losing by saying no. Let alone, I felt bad for allowing myself to take a day off when my husband was gone at work.
2) I never knew how much money I was going to make and when I was going to get it. As a sub, I got paid once a month, from two districts, as a waitress I was paid every other week and daily in tips, and as the youth leader, I was also paid every other week. But each job also came with different rates of pay, and tips were always inconsistent. So how could I plan a budget with all of this uncertainty and instability?
3) As a server making daily tips, it gets really easy to just live day-by-day and not plan ahead to pay bills. Because if you get a bill in the mail, all you have to do is pick up a shift that night and you have it paid. It's hard to get out of that habit and to start looking ahead and creating a plan for your money.
So, these issues led me to creating a plan with my husband that took all of the stress off of me and led me to a little more freedom and the ability to make a stable contribution to our monthly budget and savings. John and I sat down, and after looking at our monthly expenses and our goals for debt repayment and savings, we came to the mutual agreement that I would bring in a bare minimum of $1,800 a month (after taxes). That wasn't a lot of money in comparison to what John was bringing in, but again, that was the absolute bare minimum to make our budget work. The next thing I did was to go through my pay stubs and figure out what I was bringing home after taxes per hour for each position I was working. I laid each position out in a spreadsheet with the hourly take home rate, and used the equation software to set it up so that when I entered the number of hours I worked, it would show how much I had brought in. I am not good with excel, but I figured it out after a lot of trial and error! Here is what it looked like:
Sarah's Income:
Sub Full Day-$140:
Sub Half Day-$70:
Server-$7:
Front Desk-$9:
Park & Rec-$11:
Tips-:
Total:
Then all I had to do was to plug in any hours I worked that day, or any tips I made, and it magically told me my running balance for the month and added it up at the bottom. Another thing I had to do to make this work was to get a small calendar and keep track of my paydays. If I knew that any hours I put in on March 26th wouldn't be paid until April 11th, I would put those hours on the April spreadsheet instead of March. ( I had a basic sheet that I just made a copy of for each month) So you need to keep track of when you will actually receive the money you are earning. If all of this computer stuff sounds way too complicated, then you for sure could do this on paper with a pencil and a calculator. Whichever way works best for you, as long as you keep up on it! What this spreadsheet did for me was for me to keep track of what I was bringing in for any given month, and allow me to evaluate each day whether I NEEDED to work that day, or whether I could afford to take the day off. For example, if I woke up one morning and just felt the need to stay in my pajamas and read a good book, and I was able to see in my spreadsheet that it was only the middle of the month, but I had already brought in $1,500, I would allow myself to take the day off. This made me feel less guilty for sitting at home...because in reality, John was able to take his weekends off every week and didn't feel guilty, so why was I feeling that way just because I had the opportunity to work, but didn't?
The other thing that using this spreadsheet did for me, was it finally made me accountable for my tips!!! I had to make the mental shift that my tips were now part of my FAMILY income, and that each penny needed to be accounted for. In the past, whenever I took a break at work, or maybe aftrer my shift was over, I would order some food off the menu at half price (what a deal, right?) and eat! It usually cost about $5, but when I made $100 that night, it was no big deal. But when you add that up, that is $5 a day, 5 days per week...that's $100 a month!! That is a whole day's work!! I justified it to myself because it was only a few dollars, but if John were to spend $5 a day on lunch everyday we would probably nip that in the bud. So it wasn't okay for me to do either. After doing this I started taking advantage of the free soup and bread my restaurant offered the employees, and I would often bring a sandwich and some fruit and other snacks with me to make my own lunch. I needed to make sure that any tips I made that day were going toward our household budget, and if I decided to treat myself on my break or after my shift, that it was deducted from my "blow" money or somewhere else in our budget.
This type of system and mentality can work for any person working a job that has a variable income or works for comission. Just find the bare bones minimum amount of money you need to make that month and aim toward that number. Anything extra (and I always made more than $1,800 a month) would be put toward savings!! I loved those shifts where I was able to tell myself while I was serving some horribly obnoxious guest that I was doing it for ME and not to pay someone else!!! I would chuckle to myslef and say, "you are giving me money for just brining you food, what an idiot!" LOL. It was a whole new mentality when I had clear goals and I was no longer a slave to my lender.
Here is one last tidbit to encourage you to change your ways, especially if you hate your job, like I did: Imagine that you go and buy yourself a brand new TV (because you work hard and deserve it) and you take them up on the offer of 0% financing for 90 days. Even if you pay it off within the 90 days, you are still forking over several hundred dollars a month to pay off that TV. You are going to work, and busting your butt, to pay some cheeseball in a suit at Best Buy headquarters...no fun! Whereas, you instead decide to save up for a TV, and instead of going to work everyday to pay back some cheeseball, you now bring home that several hundred dollars a month and watch it collect on your dresser in cash until you can walk into that same store and pay for it in cash!! In the second scenario, you are working for YOU, not for someone else...its a liberating feeling!!!
Till next time,
Sarah
I created a system that not only helped me balance my work and free time, but also allowed for me to create a monthly budget that would work. Here are a few reasons why I NEEDED to do this!
1) As you have read before, I have a really hard time saying no to people. When you are substitute teaching in two districts, waiting tables and working the front desk at a restaurant with over 100 front of the house staff members, and working on-call as a youth supervisor, you literally have hundreds of people calling you on a regular basis offering to let you work. To someone who is working hard to get out of debt, this can seem like a Godsend, an unlimited ability to work and make money!! But on the flip side, there were times when I was working 7 days per week and running myself into the ground. When someone would call and offer me a job, I didn't want to turn it down because I could only imagine the money I was losing by saying no. Let alone, I felt bad for allowing myself to take a day off when my husband was gone at work.
2) I never knew how much money I was going to make and when I was going to get it. As a sub, I got paid once a month, from two districts, as a waitress I was paid every other week and daily in tips, and as the youth leader, I was also paid every other week. But each job also came with different rates of pay, and tips were always inconsistent. So how could I plan a budget with all of this uncertainty and instability?
3) As a server making daily tips, it gets really easy to just live day-by-day and not plan ahead to pay bills. Because if you get a bill in the mail, all you have to do is pick up a shift that night and you have it paid. It's hard to get out of that habit and to start looking ahead and creating a plan for your money.
So, these issues led me to creating a plan with my husband that took all of the stress off of me and led me to a little more freedom and the ability to make a stable contribution to our monthly budget and savings. John and I sat down, and after looking at our monthly expenses and our goals for debt repayment and savings, we came to the mutual agreement that I would bring in a bare minimum of $1,800 a month (after taxes). That wasn't a lot of money in comparison to what John was bringing in, but again, that was the absolute bare minimum to make our budget work. The next thing I did was to go through my pay stubs and figure out what I was bringing home after taxes per hour for each position I was working. I laid each position out in a spreadsheet with the hourly take home rate, and used the equation software to set it up so that when I entered the number of hours I worked, it would show how much I had brought in. I am not good with excel, but I figured it out after a lot of trial and error! Here is what it looked like:
Sarah's Income:
Sub Full Day-$140:
Sub Half Day-$70:
Server-$7:
Front Desk-$9:
Park & Rec-$11:
Tips-:
Total:
Then all I had to do was to plug in any hours I worked that day, or any tips I made, and it magically told me my running balance for the month and added it up at the bottom. Another thing I had to do to make this work was to get a small calendar and keep track of my paydays. If I knew that any hours I put in on March 26th wouldn't be paid until April 11th, I would put those hours on the April spreadsheet instead of March. ( I had a basic sheet that I just made a copy of for each month) So you need to keep track of when you will actually receive the money you are earning. If all of this computer stuff sounds way too complicated, then you for sure could do this on paper with a pencil and a calculator. Whichever way works best for you, as long as you keep up on it! What this spreadsheet did for me was for me to keep track of what I was bringing in for any given month, and allow me to evaluate each day whether I NEEDED to work that day, or whether I could afford to take the day off. For example, if I woke up one morning and just felt the need to stay in my pajamas and read a good book, and I was able to see in my spreadsheet that it was only the middle of the month, but I had already brought in $1,500, I would allow myself to take the day off. This made me feel less guilty for sitting at home...because in reality, John was able to take his weekends off every week and didn't feel guilty, so why was I feeling that way just because I had the opportunity to work, but didn't?
The other thing that using this spreadsheet did for me, was it finally made me accountable for my tips!!! I had to make the mental shift that my tips were now part of my FAMILY income, and that each penny needed to be accounted for. In the past, whenever I took a break at work, or maybe aftrer my shift was over, I would order some food off the menu at half price (what a deal, right?) and eat! It usually cost about $5, but when I made $100 that night, it was no big deal. But when you add that up, that is $5 a day, 5 days per week...that's $100 a month!! That is a whole day's work!! I justified it to myself because it was only a few dollars, but if John were to spend $5 a day on lunch everyday we would probably nip that in the bud. So it wasn't okay for me to do either. After doing this I started taking advantage of the free soup and bread my restaurant offered the employees, and I would often bring a sandwich and some fruit and other snacks with me to make my own lunch. I needed to make sure that any tips I made that day were going toward our household budget, and if I decided to treat myself on my break or after my shift, that it was deducted from my "blow" money or somewhere else in our budget.
This type of system and mentality can work for any person working a job that has a variable income or works for comission. Just find the bare bones minimum amount of money you need to make that month and aim toward that number. Anything extra (and I always made more than $1,800 a month) would be put toward savings!! I loved those shifts where I was able to tell myself while I was serving some horribly obnoxious guest that I was doing it for ME and not to pay someone else!!! I would chuckle to myslef and say, "you are giving me money for just brining you food, what an idiot!" LOL. It was a whole new mentality when I had clear goals and I was no longer a slave to my lender.
Here is one last tidbit to encourage you to change your ways, especially if you hate your job, like I did: Imagine that you go and buy yourself a brand new TV (because you work hard and deserve it) and you take them up on the offer of 0% financing for 90 days. Even if you pay it off within the 90 days, you are still forking over several hundred dollars a month to pay off that TV. You are going to work, and busting your butt, to pay some cheeseball in a suit at Best Buy headquarters...no fun! Whereas, you instead decide to save up for a TV, and instead of going to work everyday to pay back some cheeseball, you now bring home that several hundred dollars a month and watch it collect on your dresser in cash until you can walk into that same store and pay for it in cash!! In the second scenario, you are working for YOU, not for someone else...its a liberating feeling!!!
Till next time,
Sarah
Sunday, March 25, 2012
Setting up a household budget
Once the crazy whirlwind of the emergency fund month is over, and you and your spouse are starting to get excited about the reality of becoming debt free and financially secure, the next step to take is setting up a household budget. This step was extremely difficult for me to get started on for so many reasons. First, I really did not want to face how much my daily and monthly expenses were costing me because it was only going to make me feel depressed about how much debt I was really in, and guilty about how much money I blow without realizing it. Second, I am horrible at saying no to people, especially myself. I was looking at the budget as a kind of diet that I would never stick to. I really did not want to give up the things I enjoyed doing, and I was afraid once I got real with myself, I would have to make some hard choices. And third, it just seemed really complicated and a lot of work. But honestly, once John and I got started, it turned out to be a lot of fun and very surprising about how much money we were actually saving!! By the end of the first month on our budget, John and I both looked at each other stunned as if a magician had placed money in our bank account...we had no idea how we were able to come up with that much surplus cash with very little extra effort. Keep reading if you want to know how we did it!
First of all, the way we did our budget is an interpretation of what Dave teaches, so it might work for you, or you might want to set it up more like how he explains it. Here is a link to his budgeting advice: http://www.daveramsey.com/articles/article/articleId/the-truth-about-budgeting/category/lifeandmoney_investing/
The basic principles of budgeting that Dave teaches are to:
1) Make a plan on paper for every dollar before you get it. That way you are in control of your money and none of those handsome dollar bills are running away before you have a chance to tell them what to do!
2) Budget your daily, weekly, monthly, and even inconsistent expenses every month. That means, not only should your rent/mortgage, electricity, and debt payments be budgeted, but birthday gifts, groceries, school supplies, even Christmas!! Yes, budget for Christmas every month! That way, when your car needs its oil changed in any given month, you have been putting aside $10 every month so that after three months, you have your $30 to go get it done...no need to stress about having that expense pop up!
3) Adjust your budget as needed and have regular meetings with your spouse about how it is working and what needs to be changed. In some households where one spouse may be in charge of allocating the funds, and the other spouse is in charge of spending them, it may not always match up. I know that if John only budgeted $10 a month for diapers, there would be a problem!! But having the month planned out ahead of time is great because there are no arguments later when one spouse goes and spends money on something that was not agreed upon.
4) This one is my favorite...budget for "blow" money. Give each member in the household a fixed amount every month that they are not accountable for, just to spend on whatever they want. I know that when John and I were doing this, he spent his blow money on a video game subscription and Rockstar energy drinks, and I preferred to spend mine on lunches with friends and pedicures. I loved having this money because I no longer had to feel guilty for or justify my indulgent spending!
5) Use cash. The only thing that should be coming out of your bank account electronically is direct payments to your utilities and bills. Make as many of your daily and monthly expenses in cash, so that your account is easier to monitor, you are less likely to spend as much, and you are better able to stay on budget. I know that I am much less likely to go over my grocery budget if I take $50 in cash rather than just shop and use my debit card.
Now here is where Dave and I differ:
Because I had a variable income (working FOUR part-time jobs) it was practically impossible for us to plan out our month before we knew our income, so we did our budget a little backward. At the beginning of the month I would go to the bank and pull out enough cash to satisfy our months worth of groceries, fuel, blow money, entertainment money, and we had an "other" category for such incidentals that changed every month. Then I would look at our payment schedule, and anything that was going to be due before the next payday, I would leave that amount in the account, as well as a $200 buffer. We always had a minimum of $200 in our account so that we would never overdraw. If you need to use your emergency fund to get this process started, it would be worth it. I always liked working a month ahead because then we never had any surprises! So here is what our budget looked like:
Bank balance: $2,400
-$250 cash for groceries
-$250 cash for fuel
-$100 cash for blow money
-$50 cash for entertainment
-$100 cash for other expenses
So after withdrawing all of my cash monthly expenses, I still have $1650 left in my account. Now I have to look ahead to what is coming due before the next payday. John got paid every Friday, so I only had to account for the next week's worth of electronic payments.
Bank balance $1,650
-$850 rent
-$125 car insurance
-$35 pet insurance
-$16 for newspaper subscription
Later in the month (after John gets his next paycheck) there will be more bills due, but his deposit will more than cover them. I only do this process at the beginning of every month because I take whatever is leftover and deposit it into SAVINGS!!!
Bank balance of $624
-$200 buffer
I deposit $424 into our savings account!! Now each paycheck this month will pay that week's bills and then have some leftover, and at the beginning of the next month, I do this all over again. I said at the beginning that John and I were shocked by how much was leftover that first month!!
You could do this same process if you got paid once a month or bi-weekly. The key is to NOT use your debit card so that you never have to wonder how much you have in your account. You planned at the beginning of the month what your electronic payments were going to be, and everything else was pulled out in cash!
Here is another area that I branched out on my own and did not Follow Dave's plan to the letter. Instead of keeping my whole monthly budget in cash with me, I used a jar system in some super secret location. I would put all of the month's cash budget in here at the beginning of the month and pull out what I needed when I needed it. Since I didn't carry it with me, I had an "oops" jar too, just in case I needed to stop for something on my way home and didn't have the cash on me. I normally didn't let that happen, but sometimes I would put something on my debit card and then pull it out of the corresponding jar at home and put it in the "oops" jar to be put back in the next month.
Our growing savings account ended up just being the catch-all for any expense that popped up. Getting tires replaced, taking Chewy to the vet, getting some new glasses, whatever. As I said, Dave advises that you plan for these things and make a separate collection, but I knew that wouldn't work for us, and I felt that we had enough self discipline to only use it for necessities. I DID however make separate collections for our trip to Disneyland that fall though! We paid cash for our plane ticket, hotel, Disneyland passes, and spending money. That was the first time in my whole life that I saved up for a vacation!!
I loved this new cash budget!! It kept me on track because I had a visual to see just how much I was spending, and I had a lot of fun seeing how far I could make our money go! It also gave me the opportunity to start using the idea of "opportunity cost" that my lovely high school economics teacher taught me. Since John and I only allotted ourselves $50 every month for entertainment, if we wanted to go out to a movie or bowling or drinks with friends, we either had to use that money or our blow money, or once we even took from our grocery budget!! It made us start really evaluating just how much sacrifice we were making to go out. If we blew our whole budget in one night, then we wouldn't be able to go out again until next month. I honestly never felt like I was depriving myself using this system, I just remember asking myself, is going bowling tonight with these friends worth blowing my whole entertainment budget, or would I rather wait and do something else later on? I would have never asked myself that question before making a budget. And I never had to say no because I was "broke". I loved having that freedom!! I just said, "nah, I don't think I want to do that." I loved not being broke all the time!!!
There is a lot more to this whole budgeting thing, and honestly, Dave Ramsey makes it sound a lot more fun than I do. I would highly advise that if you need more guidance in this area, to really commit to following his program and seeing how much it can change your life. If you have any specific questions on what we did, let me know and I would LOVE to share!! My next blog will be specifically setting up a budget with a variable income, because that posed quite the challenge for me, but I came up with a great idea that made it work!!
Sarah
First of all, the way we did our budget is an interpretation of what Dave teaches, so it might work for you, or you might want to set it up more like how he explains it. Here is a link to his budgeting advice: http://www.daveramsey.com/articles/article/articleId/the-truth-about-budgeting/category/lifeandmoney_investing/
The basic principles of budgeting that Dave teaches are to:
1) Make a plan on paper for every dollar before you get it. That way you are in control of your money and none of those handsome dollar bills are running away before you have a chance to tell them what to do!
2) Budget your daily, weekly, monthly, and even inconsistent expenses every month. That means, not only should your rent/mortgage, electricity, and debt payments be budgeted, but birthday gifts, groceries, school supplies, even Christmas!! Yes, budget for Christmas every month! That way, when your car needs its oil changed in any given month, you have been putting aside $10 every month so that after three months, you have your $30 to go get it done...no need to stress about having that expense pop up!
3) Adjust your budget as needed and have regular meetings with your spouse about how it is working and what needs to be changed. In some households where one spouse may be in charge of allocating the funds, and the other spouse is in charge of spending them, it may not always match up. I know that if John only budgeted $10 a month for diapers, there would be a problem!! But having the month planned out ahead of time is great because there are no arguments later when one spouse goes and spends money on something that was not agreed upon.
4) This one is my favorite...budget for "blow" money. Give each member in the household a fixed amount every month that they are not accountable for, just to spend on whatever they want. I know that when John and I were doing this, he spent his blow money on a video game subscription and Rockstar energy drinks, and I preferred to spend mine on lunches with friends and pedicures. I loved having this money because I no longer had to feel guilty for or justify my indulgent spending!
5) Use cash. The only thing that should be coming out of your bank account electronically is direct payments to your utilities and bills. Make as many of your daily and monthly expenses in cash, so that your account is easier to monitor, you are less likely to spend as much, and you are better able to stay on budget. I know that I am much less likely to go over my grocery budget if I take $50 in cash rather than just shop and use my debit card.
Now here is where Dave and I differ:
Because I had a variable income (working FOUR part-time jobs) it was practically impossible for us to plan out our month before we knew our income, so we did our budget a little backward. At the beginning of the month I would go to the bank and pull out enough cash to satisfy our months worth of groceries, fuel, blow money, entertainment money, and we had an "other" category for such incidentals that changed every month. Then I would look at our payment schedule, and anything that was going to be due before the next payday, I would leave that amount in the account, as well as a $200 buffer. We always had a minimum of $200 in our account so that we would never overdraw. If you need to use your emergency fund to get this process started, it would be worth it. I always liked working a month ahead because then we never had any surprises! So here is what our budget looked like:
Bank balance: $2,400
-$250 cash for groceries
-$250 cash for fuel
-$100 cash for blow money
-$50 cash for entertainment
-$100 cash for other expenses
So after withdrawing all of my cash monthly expenses, I still have $1650 left in my account. Now I have to look ahead to what is coming due before the next payday. John got paid every Friday, so I only had to account for the next week's worth of electronic payments.
Bank balance $1,650
-$850 rent
-$125 car insurance
-$35 pet insurance
-$16 for newspaper subscription
Later in the month (after John gets his next paycheck) there will be more bills due, but his deposit will more than cover them. I only do this process at the beginning of every month because I take whatever is leftover and deposit it into SAVINGS!!!
Bank balance of $624
-$200 buffer
I deposit $424 into our savings account!! Now each paycheck this month will pay that week's bills and then have some leftover, and at the beginning of the next month, I do this all over again. I said at the beginning that John and I were shocked by how much was leftover that first month!!
You could do this same process if you got paid once a month or bi-weekly. The key is to NOT use your debit card so that you never have to wonder how much you have in your account. You planned at the beginning of the month what your electronic payments were going to be, and everything else was pulled out in cash!
Here is another area that I branched out on my own and did not Follow Dave's plan to the letter. Instead of keeping my whole monthly budget in cash with me, I used a jar system in some super secret location. I would put all of the month's cash budget in here at the beginning of the month and pull out what I needed when I needed it. Since I didn't carry it with me, I had an "oops" jar too, just in case I needed to stop for something on my way home and didn't have the cash on me. I normally didn't let that happen, but sometimes I would put something on my debit card and then pull it out of the corresponding jar at home and put it in the "oops" jar to be put back in the next month.
Our growing savings account ended up just being the catch-all for any expense that popped up. Getting tires replaced, taking Chewy to the vet, getting some new glasses, whatever. As I said, Dave advises that you plan for these things and make a separate collection, but I knew that wouldn't work for us, and I felt that we had enough self discipline to only use it for necessities. I DID however make separate collections for our trip to Disneyland that fall though! We paid cash for our plane ticket, hotel, Disneyland passes, and spending money. That was the first time in my whole life that I saved up for a vacation!!
I loved this new cash budget!! It kept me on track because I had a visual to see just how much I was spending, and I had a lot of fun seeing how far I could make our money go! It also gave me the opportunity to start using the idea of "opportunity cost" that my lovely high school economics teacher taught me. Since John and I only allotted ourselves $50 every month for entertainment, if we wanted to go out to a movie or bowling or drinks with friends, we either had to use that money or our blow money, or once we even took from our grocery budget!! It made us start really evaluating just how much sacrifice we were making to go out. If we blew our whole budget in one night, then we wouldn't be able to go out again until next month. I honestly never felt like I was depriving myself using this system, I just remember asking myself, is going bowling tonight with these friends worth blowing my whole entertainment budget, or would I rather wait and do something else later on? I would have never asked myself that question before making a budget. And I never had to say no because I was "broke". I loved having that freedom!! I just said, "nah, I don't think I want to do that." I loved not being broke all the time!!!
There is a lot more to this whole budgeting thing, and honestly, Dave Ramsey makes it sound a lot more fun than I do. I would highly advise that if you need more guidance in this area, to really commit to following his program and seeing how much it can change your life. If you have any specific questions on what we did, let me know and I would LOVE to share!! My next blog will be specifically setting up a budget with a variable income, because that posed quite the challenge for me, but I came up with a great idea that made it work!!
Sarah
Saturday, March 24, 2012
Setting up the emergency fund...
When you are making a plan to start getting out of debt and making better choices with your money, it is hard to know where to start. I remember when John and I were at our lowest point we were taking back bottles and cans, selling used books, putting things on Craigslist, and taking whatever odd jobs we could get to make ends meet. Luckily, we weren't using much credit during our relationship, but the overwhelming burden of our past debt, my student loan payments, and just day-to-day expenses was just too much to handle. I didn't want to keep living like we were, but I didn't see any way to get ahead. If we were barely able to make our minimum payments and survive, how would we ever get out of debt, let alone move ahead and buy a home and be financially secure?!?
Dave Ramsey calls each step in his plan, "Baby Steps", and his first baby step is to establish a $1000 emergency fund. Immediately. Like within a month. While that may seem overwhelming to some people (i9t was for me!) it is totally doable. Let me start by explaining why this first step is crucial to beginning the process...
1) By establishing an emergency fund that is substantial enough to cover most emergencies, you are eliminating your need to use your credit cards to bail you out. Most people have at least one credit card for an "emergency" like car repairs, medical expenses, dealing with an unforeseen event, or whatever "Murphy" throws at you. Dave has a simple solution to that: prepare for something to happen!! Have the money in a savings account just waiting for that emergency! I explained in a previous post that John and i were able to use our emergency fund to take care of replacing my car when it died, and what would have been a HUGE financial crisis for us turned into an inconvenience when we had to drain our account that we worked so hard to build. But the important thing is that the money was there.
2) By building the emergency fund quickly, you are forced to work overtime (literally and figuratively) to get the money together. You will figure out where you can scrape together a few dollars here, where you can save a few dollars there, and how you can earn some extra money at work or by getting a part-time job. At the end of the month, you will stand back and look at all that you accomplished financially and say, "hey, that wasn't so hard after all!" It's forcing you to dive headfirst into the financial peace journey. This new mentality and focus will help you get started on the second baby step...your debt snowball!
3) The process of building this safety net, and the peace it brings you and your spouse, pays off exponentially in your marriage. All of the sudden you are both focused on the same clear goal, and you begin to talk openly about what may have been a touchy subject to discuss. No longer are you arguing (or not talking about) which bill to pay first, what to spend the bonus on, when to save and when to splurge; finally you are both on the same page and aiming toward something positive that is proven to work! Let Dave be the mediator :) Once John and I started this baby step, our great relationship got even greater, and the stress that we were both feeling about our finances started to slip away. This is when we knew that we were on the right path, and things were looking up...we could do this!
So there are three very important reasons why this is the right first step in the journey. So how did John and I do it on a very limited income?
1) Well, the first step was to look in our cupboards and realize that we had enough food in there to eat on for quite some time. We are total foodies so we were really kidding ourselves by how much we were spending on groceries! (I will have a great post about how to save on groceries in the future, I promise!) We got creative and were able to make do on what we had, which was a lot of pasta, chicken, and sandwiches! Remember, it's only a month!
2) Second, we only paid the minimum on our debts that month, because the priority this month is to build that emergency fund.
3) Gulp, we also toned down some of our spending. The cable TV? Gotta go...Entertainment subscriptions...also gotta go. Turn off or cancel whatever you can to eliminate or reduce your monthly payments. Again, remember its only for a month. These things can be revisited after the month is over during the budgeting step!
4) Figure out a way to make some extra cash...that might mean getting a part-time job, having a garage sale, selling a few things on Craigslist, or just doing some odd jobs for a neighbor or working overtime at work. Anything to bring in a few extra dollars. Dave says, "Sell so much that the kids think they are next!!" You would be surprised about how much money is lying around in unused stuff that could be sold or how much your time is worth making money from a hobby or with some extra hours at work.
5) I'm not sure if Dave addressed this, but I liked having all of that money I was saving that first month in cash on my dresser! It was a visual of how much we were saving and how hard we were working. It motivated me to go to work a little early and stay a little late. I was suddenly seeing every piece of furniture and every article of clothing with a dollar sign on it!! I wanted to sell everything because it was so freeing emotionally and so rewarding to see the cold hard cash piling up.
So if the first step has been holding you back, I dare you to try this. Even if this is the only step you take toward financial freedom. But I can give you my guarantee, that after this month, after you will have seen just how disciplined you can be, you will be motivated to take the next step. So join me in my next post about setting up a household budget!!
Sarah
Dave Ramsey calls each step in his plan, "Baby Steps", and his first baby step is to establish a $1000 emergency fund. Immediately. Like within a month. While that may seem overwhelming to some people (i9t was for me!) it is totally doable. Let me start by explaining why this first step is crucial to beginning the process...
1) By establishing an emergency fund that is substantial enough to cover most emergencies, you are eliminating your need to use your credit cards to bail you out. Most people have at least one credit card for an "emergency" like car repairs, medical expenses, dealing with an unforeseen event, or whatever "Murphy" throws at you. Dave has a simple solution to that: prepare for something to happen!! Have the money in a savings account just waiting for that emergency! I explained in a previous post that John and i were able to use our emergency fund to take care of replacing my car when it died, and what would have been a HUGE financial crisis for us turned into an inconvenience when we had to drain our account that we worked so hard to build. But the important thing is that the money was there.
2) By building the emergency fund quickly, you are forced to work overtime (literally and figuratively) to get the money together. You will figure out where you can scrape together a few dollars here, where you can save a few dollars there, and how you can earn some extra money at work or by getting a part-time job. At the end of the month, you will stand back and look at all that you accomplished financially and say, "hey, that wasn't so hard after all!" It's forcing you to dive headfirst into the financial peace journey. This new mentality and focus will help you get started on the second baby step...your debt snowball!
3) The process of building this safety net, and the peace it brings you and your spouse, pays off exponentially in your marriage. All of the sudden you are both focused on the same clear goal, and you begin to talk openly about what may have been a touchy subject to discuss. No longer are you arguing (or not talking about) which bill to pay first, what to spend the bonus on, when to save and when to splurge; finally you are both on the same page and aiming toward something positive that is proven to work! Let Dave be the mediator :) Once John and I started this baby step, our great relationship got even greater, and the stress that we were both feeling about our finances started to slip away. This is when we knew that we were on the right path, and things were looking up...we could do this!
So there are three very important reasons why this is the right first step in the journey. So how did John and I do it on a very limited income?
1) Well, the first step was to look in our cupboards and realize that we had enough food in there to eat on for quite some time. We are total foodies so we were really kidding ourselves by how much we were spending on groceries! (I will have a great post about how to save on groceries in the future, I promise!) We got creative and were able to make do on what we had, which was a lot of pasta, chicken, and sandwiches! Remember, it's only a month!
2) Second, we only paid the minimum on our debts that month, because the priority this month is to build that emergency fund.
3) Gulp, we also toned down some of our spending. The cable TV? Gotta go...Entertainment subscriptions...also gotta go. Turn off or cancel whatever you can to eliminate or reduce your monthly payments. Again, remember its only for a month. These things can be revisited after the month is over during the budgeting step!
4) Figure out a way to make some extra cash...that might mean getting a part-time job, having a garage sale, selling a few things on Craigslist, or just doing some odd jobs for a neighbor or working overtime at work. Anything to bring in a few extra dollars. Dave says, "Sell so much that the kids think they are next!!" You would be surprised about how much money is lying around in unused stuff that could be sold or how much your time is worth making money from a hobby or with some extra hours at work.
5) I'm not sure if Dave addressed this, but I liked having all of that money I was saving that first month in cash on my dresser! It was a visual of how much we were saving and how hard we were working. It motivated me to go to work a little early and stay a little late. I was suddenly seeing every piece of furniture and every article of clothing with a dollar sign on it!! I wanted to sell everything because it was so freeing emotionally and so rewarding to see the cold hard cash piling up.
So if the first step has been holding you back, I dare you to try this. Even if this is the only step you take toward financial freedom. But I can give you my guarantee, that after this month, after you will have seen just how disciplined you can be, you will be motivated to take the next step. So join me in my next post about setting up a household budget!!
Sarah
Thursday, March 22, 2012
How I got to know Dave...
Since Robbie at FPU decided to share my link (how cool!!) I decided I better give a little background into my story and how I was led to Dave...
My name is Sarah and I live in Oregon with my husband of 2 years, John and our 9-month-old son Hudson. I am a part-time substitute teacher and full-time mom! I am an eternal optimist and I enjoy looking at the bright side of things and trying to remain positive through all of the trials God has put me through in my life. I enjoy learning new things and constantly challenging myself too. I was raised in an amazingly loving middle-class family with two working parents out on some acreage in the country. I was never given formal financial training or guidance, and I was a first generation college graduate. That is where my journey to Dave begins.
Going off to college at the ripe old age of 18 and 1 month, I thought I was pretty savvy and had it ALLLLLL figured out! I had maintained some form of employment all through my tens and had a checking account and a savings account already set up and knew how to use them properly. My first year in school I was living in the dorms, on the college meal plan, and had grants and loans set up to help pay for school. The next year, I had a roommate in our own apartment, was eating out and meeting new friends, and had a few less grants and a few more loans. The next year I was living in my OWN apartment (how cool was I??) paying my own bills, and had even fewer grants and more loans...this goes on for a total of 7 years. During these 7 years I also found out that my school would even let me borrow more money than I needed for tuition to pay for such incidentals as a new couch, some fancy new make-up from the department store, or even a trip to Chicago!! These were all necessities of course, and I would obviously pay them back when I got my grown-up job after graduation!! In my defense, I was working a good amount all through college as well, but that never stopped me from taking out the maximum amount of loans offered to me and making sure I enjoyed my youth to the fullest! Fast forward to my graduation from graduate school in 2009 with a fancy teaching degree into the worst economy my generation has ever seen. Not only are there no jobs, the are even less teaching jobs. Once my deferments and forbearance ended, i was paying almost $1000 a month with no salary. Luckily for me, by this time I had met and married my amazingly supportive husband, and we were making do with his income. And on October 29, 2009 which was 19 days after we got married, we attended an event that changed our lives!!
I had seen Dave live once before when I was in school, but with me barely scraping by and not having the opportunity to change my habits much, a lot of what he said went right over my head...but I was still hooked. I convinced my new husband that he should come with me for the next one, and after all of the dirty looks and sighs I endured for dragging him to a 6-hour financial presentation, he actually enjoyed himself! As a matter of fact, during the intermission, we dug into my purse and grabbed out half of the $200 I had saved up for a new iPhone to go purchase the FPU membership. For the next few months until we officially got registered for his course, John and I took bottles and cans in for redemption, I sold almost my entire library to a used book store, and we lived on macaroni and cheese while I tried to build up my network of teachers to substitute for. We then signed up for his course at a local church starting in January of 2010. We began the program with an embarrassingly high amount of student loans (this is the only amount I'm not wiling to share...yet...but its over $50k) and a little under $16 in consumer debt. The only thing we had done right up to this point was to save up and paid for our entire wedding with cash, so we had no debt from that! We really needed help at this point because John had been off work for an injury for almost a year and was collecting temporary disability on top of me trying to find work. Yet we managed to pay off every single penny of that consumer debt that year being gazelle intense and working our butts off! At one point I was holding down four--yes FOUR--jobs and we were experiencing so much happiness in our marriage, the communication was better on all fronts , not just our finances, and we were having fun!!!
I will explain more about our journey step-by-step throughout this blog, and even note some of the stumbles we have had along the way. We are still working on the journey and I hope I can inspire myself to keep going too!!
My name is Sarah and I live in Oregon with my husband of 2 years, John and our 9-month-old son Hudson. I am a part-time substitute teacher and full-time mom! I am an eternal optimist and I enjoy looking at the bright side of things and trying to remain positive through all of the trials God has put me through in my life. I enjoy learning new things and constantly challenging myself too. I was raised in an amazingly loving middle-class family with two working parents out on some acreage in the country. I was never given formal financial training or guidance, and I was a first generation college graduate. That is where my journey to Dave begins.
Going off to college at the ripe old age of 18 and 1 month, I thought I was pretty savvy and had it ALLLLLL figured out! I had maintained some form of employment all through my tens and had a checking account and a savings account already set up and knew how to use them properly. My first year in school I was living in the dorms, on the college meal plan, and had grants and loans set up to help pay for school. The next year, I had a roommate in our own apartment, was eating out and meeting new friends, and had a few less grants and a few more loans. The next year I was living in my OWN apartment (how cool was I??) paying my own bills, and had even fewer grants and more loans...this goes on for a total of 7 years. During these 7 years I also found out that my school would even let me borrow more money than I needed for tuition to pay for such incidentals as a new couch, some fancy new make-up from the department store, or even a trip to Chicago!! These were all necessities of course, and I would obviously pay them back when I got my grown-up job after graduation!! In my defense, I was working a good amount all through college as well, but that never stopped me from taking out the maximum amount of loans offered to me and making sure I enjoyed my youth to the fullest! Fast forward to my graduation from graduate school in 2009 with a fancy teaching degree into the worst economy my generation has ever seen. Not only are there no jobs, the are even less teaching jobs. Once my deferments and forbearance ended, i was paying almost $1000 a month with no salary. Luckily for me, by this time I had met and married my amazingly supportive husband, and we were making do with his income. And on October 29, 2009 which was 19 days after we got married, we attended an event that changed our lives!!
I had seen Dave live once before when I was in school, but with me barely scraping by and not having the opportunity to change my habits much, a lot of what he said went right over my head...but I was still hooked. I convinced my new husband that he should come with me for the next one, and after all of the dirty looks and sighs I endured for dragging him to a 6-hour financial presentation, he actually enjoyed himself! As a matter of fact, during the intermission, we dug into my purse and grabbed out half of the $200 I had saved up for a new iPhone to go purchase the FPU membership. For the next few months until we officially got registered for his course, John and I took bottles and cans in for redemption, I sold almost my entire library to a used book store, and we lived on macaroni and cheese while I tried to build up my network of teachers to substitute for. We then signed up for his course at a local church starting in January of 2010. We began the program with an embarrassingly high amount of student loans (this is the only amount I'm not wiling to share...yet...but its over $50k) and a little under $16 in consumer debt. The only thing we had done right up to this point was to save up and paid for our entire wedding with cash, so we had no debt from that! We really needed help at this point because John had been off work for an injury for almost a year and was collecting temporary disability on top of me trying to find work. Yet we managed to pay off every single penny of that consumer debt that year being gazelle intense and working our butts off! At one point I was holding down four--yes FOUR--jobs and we were experiencing so much happiness in our marriage, the communication was better on all fronts , not just our finances, and we were having fun!!!
I will explain more about our journey step-by-step throughout this blog, and even note some of the stumbles we have had along the way. We are still working on the journey and I hope I can inspire myself to keep going too!!
Living like no one else!!!
Dave Ramsey (okay, I refer to him a lot!!) has a motto to, "live like no one else, so that you can live like no one else!" Basically he is saying to buck the norm financially NOW (which is to spend and buy all of the fancy things) so that LATER you can live the life you always want instead of facing the reality of losing your home and living on social security like so many are doing now. I can tell you, that this is the hardest to follow of all his teachings! It is a daily struggle to wake up in my rental home, hand wash my dishes because I have no dishwasher, sit on my old tattered couches, wear clothes that aren't in style anymore or were bought on major clearance, and sit at home when my friends are out on vacations and other social events. So much of our self-worth is tied in with how we present ourselves to others, and many of us succumb to the pressures of trying to impress people and putting ourselves in financial ruin to do that.
Luckily, for us, my daily experiences, while very difficult to endure sometimes, are by CHOICE and not by necessity. We have been approved for a home loan, we could go buy a dishwasher today, we could pay for a new set of couches with cash, and I could go on a shopping spree or plan a vacation anytime I want. I just choose not to. John and I have talked about our priorities in life, and living paycheck to paycheck or paying credit card or loan payments are not priorities right now. We are choosing to pay off student loans, save up for a sizable down payment on a house, and live on one income so I can spend these irreplaceable first years with our son. Dave says that our values are expressed by where our money goes; clothes, cars, houses, vacations, and fancy luxuries like that are not where we want to put our values right now. We are determined to start our marriage and our family based on the values of independence, patience, community, and God. We have made many sacrifices to live that lifestyle, and while it is not always easy, I am already seeing it pay off. Let me tell you a few instances where our choice to save and maintain our priorities has saved our marriage and our family...
First example was when we first began Dave Ramsey's program, he said to always prepare for "Murphy" as in, don't let life sneak up on you, and plan ahead for emergencies. So when we received a sizable tax return that year, we put it away in savings for when my old jalopy of a car decided to kick the bucket. Sure enough, a few months later, my 1994 Ford Probe died on the Markham Bridge during rush hour and was a total loss. On top of that, John's SUV needed repairs that very same day after it began malfunctioning while he was driving around looking for a new car for me! Luckily, with the savings we had, and the money we got from scrapping the Probe, we were able to purchase a new(er) car and fix John's car with cash! Was it an inconvenience, sure was!! Did it devastate us financially to fork over $4,000 in cash that day? NOPE! What could have been a major strain on our new marriage turned into an opportunity to high-five each other and remind ourselves that we are doing the right thing.
Second example was the year John was out of work on an injury. While we were both working, we were able to make our payments on all of our bills with no sweat! Many people rely on their incomes to stay the same in order to pay their rent/mortgage, car payments, insurance, cable, phone, credit cards, and daily necessities. Some people, who are half-way thinking ahead, might even have a back-up for if an income is lost (most people don't though). But what happens when one spouse is in a graduate program full-time and can't work, and the other hurts themselves and is collecting disability for almost an entire year?!? Well, that could be disastrous!! John and i definitely struggled that year. We were still trying to pay off some old debts, on top of paying for our upcoming wedding. But luckily, we had paid off the major consumer debt by then, and were able to cut back in other areas to make do. It is a lot easier to cut back to necessities (lose the cable, eat out less, stay home more, maybe sell some stuff) when you don't have creditors looming over your back! Think about all of those pesky credit card and retail store and car loans you have...they are very hard to cut back, especially if you are upside down on that car! But it was nice for us, because we didn't have the consumer debt to drain us, and we just budgeted our way out of the problem!
The third example is where I feel like God really intervened. John was offered a position at his work with a sizable pay increase and room for advancement, which was a huge goal for him. The downside? It involved us moving almost all the way across the country and putting in more hours per week. At first it seemed like a no brainer...more money!?! Yes please!!! But the more we talked about it and consulted with the people that we loved and trusted, the more we realized that it wasn't the right timing. We had a newborn who was the first grandchild in my family and I really wanted to stay close and raise him with their support. I felt bad because I knew that I was holding John back from his dream, but I remember saying, "What if something happened to one of our parents while we were gone, Hudson would never know them." How prophetic that statement was. About a month or two later, when we would have been all moved and settled had we gone, my healthy, vibrant, and amazingly wonderful mother passed away totally unexpectedly. This rocked my world, and I couldn't help but imagine the resentment I would have felt toward my husband had he asked me to move away and miss those last few weeks with her, and the loneliness I would have felt having to head back "home" after her service to the void of family and friends. I really think God helped us decide to stay, and that our last memory of my mother, which was picking out pumpkins at Hudson's first visit to the pumpkin patch, was a product of his intervention. And God provided for John as well, he found out afterward that his company would pay for him to return to school and finish his business degree so that he would be able to move up in the company more locally. Our choice to put family ahead of money and "stuff" in this scenario literally saved our marriage and quite possibly my sanity!
This will be my longest and most preach-y post, I promise...In the future I hope to write about more tips and tricks I have learned, and possibly confess some stupid mistakes I have made along the way too...thanks for joining me in my journey!!
Sarah
Luckily, for us, my daily experiences, while very difficult to endure sometimes, are by CHOICE and not by necessity. We have been approved for a home loan, we could go buy a dishwasher today, we could pay for a new set of couches with cash, and I could go on a shopping spree or plan a vacation anytime I want. I just choose not to. John and I have talked about our priorities in life, and living paycheck to paycheck or paying credit card or loan payments are not priorities right now. We are choosing to pay off student loans, save up for a sizable down payment on a house, and live on one income so I can spend these irreplaceable first years with our son. Dave says that our values are expressed by where our money goes; clothes, cars, houses, vacations, and fancy luxuries like that are not where we want to put our values right now. We are determined to start our marriage and our family based on the values of independence, patience, community, and God. We have made many sacrifices to live that lifestyle, and while it is not always easy, I am already seeing it pay off. Let me tell you a few instances where our choice to save and maintain our priorities has saved our marriage and our family...
First example was when we first began Dave Ramsey's program, he said to always prepare for "Murphy" as in, don't let life sneak up on you, and plan ahead for emergencies. So when we received a sizable tax return that year, we put it away in savings for when my old jalopy of a car decided to kick the bucket. Sure enough, a few months later, my 1994 Ford Probe died on the Markham Bridge during rush hour and was a total loss. On top of that, John's SUV needed repairs that very same day after it began malfunctioning while he was driving around looking for a new car for me! Luckily, with the savings we had, and the money we got from scrapping the Probe, we were able to purchase a new(er) car and fix John's car with cash! Was it an inconvenience, sure was!! Did it devastate us financially to fork over $4,000 in cash that day? NOPE! What could have been a major strain on our new marriage turned into an opportunity to high-five each other and remind ourselves that we are doing the right thing.
Second example was the year John was out of work on an injury. While we were both working, we were able to make our payments on all of our bills with no sweat! Many people rely on their incomes to stay the same in order to pay their rent/mortgage, car payments, insurance, cable, phone, credit cards, and daily necessities. Some people, who are half-way thinking ahead, might even have a back-up for if an income is lost (most people don't though). But what happens when one spouse is in a graduate program full-time and can't work, and the other hurts themselves and is collecting disability for almost an entire year?!? Well, that could be disastrous!! John and i definitely struggled that year. We were still trying to pay off some old debts, on top of paying for our upcoming wedding. But luckily, we had paid off the major consumer debt by then, and were able to cut back in other areas to make do. It is a lot easier to cut back to necessities (lose the cable, eat out less, stay home more, maybe sell some stuff) when you don't have creditors looming over your back! Think about all of those pesky credit card and retail store and car loans you have...they are very hard to cut back, especially if you are upside down on that car! But it was nice for us, because we didn't have the consumer debt to drain us, and we just budgeted our way out of the problem!
The third example is where I feel like God really intervened. John was offered a position at his work with a sizable pay increase and room for advancement, which was a huge goal for him. The downside? It involved us moving almost all the way across the country and putting in more hours per week. At first it seemed like a no brainer...more money!?! Yes please!!! But the more we talked about it and consulted with the people that we loved and trusted, the more we realized that it wasn't the right timing. We had a newborn who was the first grandchild in my family and I really wanted to stay close and raise him with their support. I felt bad because I knew that I was holding John back from his dream, but I remember saying, "What if something happened to one of our parents while we were gone, Hudson would never know them." How prophetic that statement was. About a month or two later, when we would have been all moved and settled had we gone, my healthy, vibrant, and amazingly wonderful mother passed away totally unexpectedly. This rocked my world, and I couldn't help but imagine the resentment I would have felt toward my husband had he asked me to move away and miss those last few weeks with her, and the loneliness I would have felt having to head back "home" after her service to the void of family and friends. I really think God helped us decide to stay, and that our last memory of my mother, which was picking out pumpkins at Hudson's first visit to the pumpkin patch, was a product of his intervention. And God provided for John as well, he found out afterward that his company would pay for him to return to school and finish his business degree so that he would be able to move up in the company more locally. Our choice to put family ahead of money and "stuff" in this scenario literally saved our marriage and quite possibly my sanity!
This will be my longest and most preach-y post, I promise...In the future I hope to write about more tips and tricks I have learned, and possibly confess some stupid mistakes I have made along the way too...thanks for joining me in my journey!!
Sarah
I'm definately missing a few digits...
Dave Ramsey (my financial savior and possibly the smartest man in the world) says to his listeners that, "taking financial advice from a broke person is like taking shop class from a teacher with missing fingers." It's so true that we often listen to people around us (our friends, parents, co-workers, salespeople) who love to give advice about what we should be doing with our money, but often those are the people who are riddled with debt, no savings, no retirement, or living way above their means. And those people in our lives who really do exhibit great money managing skills, we are often embarrassed to admit that we might need a little guidance. I was turned onto listening to Dave and really paying attention to my money by my step-father in about 2005. At that time, I was a full-time college student and part-time waitress barely making ends meet putting myself through school. A lot of his teachings went way over my head and I had a hard time being able to apply anything because I was so focused on survival! Once I graduated, started working more regularly, and got married, I revisited his teachings with my husband in the fall of 2009 and we began our Financial Peace journey...
I titled this blog "I'm definitely missing a few digits" because I feel like I am in no way in the financial position to be giving anyone else advice, as I am the proverbial shop teacher with missing fingers, but what I would like to do is to share what I have learned along the way and open myself up to some of the stumbles we have had and the hard lessons I have learned. In this economy, a lot of people who once may have been doing just fine, are looking for new ways to save money, spend less, and create more financial freedom by cutting the puppet strings that creditors have on us. I hope this blog will help me stay on track, and inspire others to make small but very meaningful changes in their lives.
I titled this blog "I'm definitely missing a few digits" because I feel like I am in no way in the financial position to be giving anyone else advice, as I am the proverbial shop teacher with missing fingers, but what I would like to do is to share what I have learned along the way and open myself up to some of the stumbles we have had and the hard lessons I have learned. In this economy, a lot of people who once may have been doing just fine, are looking for new ways to save money, spend less, and create more financial freedom by cutting the puppet strings that creditors have on us. I hope this blog will help me stay on track, and inspire others to make small but very meaningful changes in their lives.
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