I wrote about Dave Ramsey a while back and thought I would give a little update. I see so many people complain about not having money for things, yet they drive through Starbucks everyday or pick up dinner on the way home most nights. I’m not sure whether they don’t care or if they just don’t realize how detrimental those seemingly small transactions can be.
So, what do Eric and I do to avoid throwing out half our income on fast food and delicious iced coffees? We budget. It’s simple in philosophy but not always so easy in practice. Here is what we have found works best for us:
- About a week before a new month begins, we write out all of our expenses for the following month (disclaimer: I usually write the budget and show it to Eric for his okay. This is fine, we are still both part of the budgeting process as I need to ask him if anything is coming up that he will need money for and then we don’t make it official until we both agree.) Once you get in a groove, getting the budget on paper doesn’t usually take very long. Rent is always the same for us, along with most of our utilities. To make it even easier I signed us up for a budget billing program through our electric company which means our bill is roughly the same all year versus high spikes during the summer and winter months. They readjust it every so often but we always have a month’s notice so I can plan for it.
- Dave is a big fan of using cash, and we have found it to be helpful, but we still use our debit cards for certain transactions. To keep track of everything, I set up our monthly budget on Mint.com and include a “transfer for spending” category. Once that cash is in our hands we separate it out into envelopes. (i.e. personal spending, groceries, etc.) If you don’t know anything about Mint, go check it out. It is 100% free and while there are sometimes issues here and there, it’s been a great tool for us.
- Once our money runs dry in an envelope that’s it until next month. We had a few things come up this month and I have realized we under budgeted so I’ve been swapping money from one envelope to the other to cover some things. I think in the end we will end up close to our total budgeted spending amount which Eric and I are both okay with. The one category that we are pretty strict on is personal spending money, if something comes up that we want to do or purchase but we are out of money, we wait till the next month.
- Before the month begins I have a very close idea of how much money will be coming in, and how much money we have budgeted to go out. The leftover is put into a “transfer to savings” category. A really nice feature on Mint is a section that shows exactly how much came in, minus how much has gone out. At month end that “left over amount” is exactly how much we transfer to savings (to give us a little cushion, since rent is due on the 1st and we pull our cash for spending right at the beginning of the month, we wait until after our first paycheck comes into the account the following month to transfer the excess cash for the month before).
That’s it! Once we have the budget set and pull our cash for our envelopes we really don’t have to think about it anymore. I’m a little nerdy and like to check on things every once and a while and make sure Mint has any debit transactions categorized correctly, but otherwise we have found this method to work incredibly well. In fact, the last few months we have been under budget which meant a larger transfer to our savings account than we had anticipated.
Are we always perfect?
Most definitely not! We have been trying this budgeting thing for almost a year now and we have just found a good system for us. That still doesn’t mean we are perfect, we might end up over our total budget at some point but we are still spending far less than we were before the budget came into our lives.
What do we use our debit card for?
If it’s a normal month, meaning no vacations or visitors, we use our debit cards for gas, utilities, and a miscellaneous category.
What is the miscellaneous category for?
I budget for things we might forget about to give us a little cushion. This month we used our “miscellaneous” cash for a birthday gift, heart worm medication for the dog (I under budgeted for the pets this month so the overage fell into miscellaneous), and a medication I was prescribed. This helps keep us on budget while allowing us a little wiggle room for the unexpected.
Which Dave Ramsey step are we on?
We are so close to being finished with step three. However, in anticipation of losing Eric’s income while he transitions into civilian life and goes to school, we are trying to save more than the recommended amount as we will likely need to pull from savings a little bit until Eric receives his GI Bill income in the fall. We will probably not complete step four until Eric graduates in about two years but we will also try to begin saving up for the next few steps in life: a down payment for a house, a new car for Eric, another baby one day (a long, long time from now), and a vacation.
How do we budget for baby expenses each month?
Getting ready for a baby’s arrival is expensive. Really, really expensive. So we would be free to purchase what we need as time went on without having to worry if the “baby envelope” ran dry, we used an old checking account and called it our “baby account”. I did a one-time transfer of a chunk of money from our savings account and we use the debit card for that account for anything baby related. We will likely be doing one more transfer from our savings to carry us through to Cayden’s arrival. Babies need so much stuff! At least it’s all so stinkin’ cute.
Dave Ramsey has literally changed our lives. If we weren’t debt free and working our budget every month, all thanks to Dave, we would be in serious financial trouble beginning the same month the baby is set to arrive because that’s the first full month we will be a single-income household. Great timing, right? I am so thankful we are able to have everything we want (and I don’t mean a trip to Chipotle every weekend) and not be stressed about finances. Sure, we have made a few sacrifices along the way but they will pay off big time in the long run.
If you have any questions about budgeting or Dave Ramsey please leave me a message in the comments!