Monday, November 8, 2010

Day 25 - The Budget

I hope to share with you some of my favorite blog posts from the last ten months. This post about budgeting was my way of saying I had a real wake-up call happen. Sometimes you can trick yourself into thinking you are "going without" when you really aren't. Enjoy!

 The Total Money Makeover: A Proven Plan for Financial FitnessHow exactly do you figure out what you should and shouldn't budget for? Prior to starting the $60K Project, I was a cult-like follower of Dave Ramsey's Total Money Makeover. I created envelopes for my expenses and stuffed them with cash, canceled my credit cards and listened to Dave's three hour radio show almost every day. I religiously saved up for Christmas gifts, auto expenses and vet bills a little bit at a time each month and had my $1,000 emergency fund in place. But even though I consider myself to have made tremendous progress ($22,000 paid off in 18 months!), I still feel like I may have missed the mark somewhere in the process.

Also included in my budget each month was $120 for spending money, $200 for eating out/entertainment and $25 for gifts. Oh yeah, and did I mention that I thought saving up $1,000 for Christmas presents seemed reasonable? And might I mention that Mike and I were not doing the Ramsey Plan together - it was just me. So I was trying to balance paying off debt while maintaining a life with someone who didn't necessarily overspend (by any means) but also didn't feel any need to be especially frugal either.

In a way, I was fooling myself a little bit. I smugly thought that I "got" the Ramsey Plan and "lived like no one else so I could live like no one else." I realize now that I would pick and choose the elements of the plan that were convenient for me at the time. I was also over-saving and over-budgeting for certain items, resulting in considerably less money to put towards my debt snowball - and living a relatively comfortable way of life. Considering my income and comparing my payoff timeline to callers on Dave's show, my performance was below average.

So what have I learned so far? 

If I budget for it, I will spend it. Whether I saved $500 or $1,000 for Christmas, the total amount will be spent. Same with my "spending money", entertainment, gifts, etc. That Starbucks grande cinnamon dolce latte is a lot easier to buy when in my head it appears to be within the budget. Going forward I do not have a spending money, gift or Christmas envelope that I diligently throw money into. I carry very little cash in my wallet and I only budget for essentials. There is no play money anymore. Instead of stockpiling wads of money for "emergencies" or having a little too much spending money for frivolous purchases, I throw it all towards debt. 

Eating out is not essential. Dave Ramsey always talks about how the only way you should see the inside of a restaurant on his plan is if you're working there. I didn't really take that to heart until this past month. Trust me - it is not easy. I get a lot of enjoyment out of my nights out at great restaurants and this past weekend I was going through withdrawal while watching a 30 Rock marathon (thankful for Internet) and eating a homemade - yet fairly tasty - cheeseburger. But by cutting out the eating out part of our lifestyle we easily save $500 - most likely more when you account for lunch, coffee, dessert. That alone is $6,000 a year or 10% of our total debt payoff goal.

Your family needs to be on the same page. Being accountable to someone other than myself is a real motivator. It makes me think twice about grabbing a slice of pizza for lunch or a coffee and bagel in the morning because now I have someone to answer to other than myself who scrutinizes every transaction. On my own, I wouldn't have thought twice about it. I hate to say it but it's nice to know that Mike will give me a hard time and vice versa. It is a nice checks and balances system.

So I continue to thank Dave in all his infinite wisdom (and superior marketing ability) and have vowed to re-learn what his baby steps are REALLY all about. And some day in the near future I hope to yell "I'mmmmm debttttt freeeeeee" at the top of my lungs.

Stay tuned,
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