This may be more boring than my past posts, but instead of just talking to hear myself think, this time I actually want to chronicle something that we’re doing so I can look back after we’ve finished and see what the $*@% I was thinking. And since we started this little epic about 3 weeks ago, this post is a shade late. Sorry.
About three weeks ago, our Bible study decided to host a 13-week course on finances called Dave Ramsey’s Financial Peace University. Clayton and I have been familiar with Dave Ramsey for a while–as I’m sure most people would be at least a little interested in a guy who first became a millionaire at age 26, lost it all so bad he filed for bankruptcy (when the bank called in his debts all at once), and then made it all back again.
So we’ve been doing the video coursework for FPU, but it wasn’t until Week 3 that Clayton and I finally tried the Envelope System Dave recommends using. Basically, the idea is that you make a balanced budget (you start with your income that month as a starter number, then subtract your expenses–including tithing/giving, savings, etc.–until your end number is back to zero), and then pay with cash for certain items, like most retail purchases. The idea is, when the money runs out, you stop spending in that category. Boom. Instant way to keep to your budget.
I was REALLY doubtful about this. Like, pick-a-fight-every-time-we-try-to-do-the-budget kind of doubtful. It wasn’t that I wasn’t fully committed to doing it–it’s that I was more “committed to doing it until it got hard.” Which is kinda the story of my life. And since it involves numbers, budgeting is automatically on my It’s Too Hard List. I wanted to do it, I knew we needed to do it, but I also wanted it to be fairly easy reasonable.
But these didn’t/did wants didn’t really add up. Our situation for all of our married life, up until a week ago, had more or less been to buy the stuff we wanted when we wanted to, without much regard for where our bank account was. Sure, we’d look at it once a month or so, to make sure we knew the general ballpark figure. But we didn’t really save up for purchases. We’d say we were going to save up, and then a month later we’d go buy it. Pretty haphazard, really. We weren’t completely ignorant of our money, but we were ignorant of where all of it was going.
Prime example: we discovered, when we’d sit down to make up a budget we never ended up following, that we had $1,200 left over that was essentially unaccounted for after we knocked off all the necessities. Then we’d look at each other quizzically and go “Why wasn’t that put in savings? Where did that much money go?” and then we’d look at our purchase history and see “Chilis,” “Akasaka Hibachi Grill,” “Logan’s,” “[whatever the name is of the little Mexican restaurant up the street].” Then we’d go “WOW. We LITERALLY ate $1,200 this month. That’s ridiculous!” Then we’d vow to eat at home more, follow that for a week, and then forget the resolution for another month.
On and off for the first two weeks, we fought about money a lot. For a couple that rarely has major fights in general, fighting almost daily about the same damn thing got old by about the second argument. He’d be like, “I thought we both agreed to do this,” and I’d be like, “Well sure. As long as we do it tomorrow.” And then we’d fight like two wet cats thrown in a box, because he thought I was dodging it and I was just trying to set an alternate date. Then I’d complain about a headache because I’m allergic to numbers. We’ve been together for 11 years, and I think we actually had all 11 years’ worth of financial arguments in those first few weeks trying to get the budget in order and both of us on board. It wasn’t pretty. We were great, until Clayton mentioned the need to sit down and look over the b-word. And then I’d turn into a massive other b-word and we’d have a colossal fight complete with hand grenades and mustard gas. Like I said…not pretty. And for about 2 weeks, I was convinced that Dave Ramsey was an idiot. I finally told Clayton, “He said this would PREVENT fights about money. We never used to fight about it before.” And my oh-so-very-astute husband answered, “Well…yeah, of course not. It’s hard to fight about something you never pay attention to.”
Ouch. Good point.
So, recap of Week 1:
Week 1 was about understanding the basics. Dave’s system is largely focused on you getting rid of your consumer debt and staying that way to amass wealth. One of his videos quotes a statistic first published in a Forbes 400 survey: 75% of those rich folks polled said that #1 way to get rich was to stay out of debt (as a side note, remember that the Forbes 400 consists of millionaires and richer). And since this advice is coming from not just one wealthy guy, but 300 of them? Yeah, I’ll listen to that.
Dave Ramsey’s system follows these Baby Steps:
- Put away $1,000 to start an emergency fund.
- Pay off all your debt using his Debt Snowball approach.
- Save 3-6 months worth of expenses.
- Invest for retirement (15% of household income in Roth IRAs and pre-tax retirement).
- Start a college fund for your kid(s).
- Pay off your mortgage early.
- Build wealth and give.
During Week 2, we took the first stab at a “quickie” budget to get an idea of what our necessities are. Then, in Week 3, we made a full budget that encompassed all the necessities, plus the other things we spend money on. We followed his guidance on what to include (for example, not just what you spend money on but also when these things are due), and Clayton took several hours over the course of a weekend and went through the tedious process of setting up a concrete budget–if anybody’s interested, I can make another post on all the work that went into it b/c it actually was a serious effort. But the ground work he put down to get the numbers in order have really paid off when we go to mess with it now.
And, honestly, I still wasn’t on board–or, I thought I was but, looking back, was still on board as long as Clayton did most of the work. But I finally agreed to shut up and do it, since I had, after all, originally agreed to do it…back when I was excited about it and didn’t know what I was getting into.
Then we started the Envelope System, and I got a massive reality check at the end of week 1 when I saw how much we’d saved. I’ll detail that moment I went from being an interested video watcher into a 100% ON-BOARD advocate in my next post or so. Right now I’ve written this at a time that is WAY past my bedtime and I’m tired of my Sorcha-kitty drooling on my wrist from where she’s curled up next to me. (Yeah, she’s a drooler and it is massively icky.)
What’s your take on finances, Most Highly Respected Anonymous Readers? Are you even interested in hearing about the fascinating world of my finances? Have you been in a situation before where you thought your financial system needed to change, but weren’t sure where to begin?