Posts filed under ‘Budgeting’
So you have heard me on my soap box about using credit sparingly and only paying with cash. Well, we have completely changed. We are now doing 90% of all our spending on credit. Nathan did a bunch of research on different cards and we can probably save about $500 on our Tahiti trip if we do our expenses this way. Right now anyway to get that trip less expensive sounds good.
So the rules for going credit?
1. We are still keeping track of everything we spend in excel. I save receipts and enter them in whenever I spend anything and we still won’t go over our limits
2. Must keep same spending habits and not make special purchases only to rack up points. For example: I can’t use credit at WinCo. I could just shop somewhere that takes credit instead but I save SO much money shopping at WinCo that I would be paying a lot more just to get points and that does not help us save money
3. Pay it off completely every month. There will be NO money paid in interest. None.
I LOVE it. I don’t have to fumble with a million envelopes. It’s fun to balance my excel spreadsheet and I don’t really feel the temptation of just swiping the card and getting whatever I want because I know I’m still accountable.
Also credit is being built. I know you can get by without credit but really life is a lot easier when you do have it.
I think this works for us because neither of us have ever had a credit card spending problem. I wouldn’t recommend it for anyone who has. It took us a while to trust ourselves to do it this way and really, who knows, we could still royally screw up. If we do I will tell you about it and go back to cash.
Dave Ramsey says you need to have gazelle intensity when you are getting out of debt.
So the first year of getting out of debt I was like super intense “let’s do this!”
Last year was more like “Weee… ok moving right along, not totally fun, but we can do this”
Now that it is the last stretch, the feeling is more like this
I’m SO done.
It feels like we are SO close but there is still a lot left to pay off. I keep wanting to get a part time job to make it go faster but childcare costs would make any job I could get worthless. Plus we are all so tired already that doing something like working in the evenings would put a lot of strain on the family. So I guess I just need to keep on plugging with not spending as much as we can and throwing the little bit of money I make with my Etsy shop at it.
The plan is to be done by May 2013. Under 10 months left!! But still…. 10 months left. I may or may not claim insanity to my husband and get a new van, wardrobe, and smart phone before then…
If you follow Dave Ramsey’s style of money management, than it is never ok to use a credit card. I think if you are a person who has a hard time keeping your spending under control this is the rule to follow. In fact I think it is the rule to follow most the time. I remember when I was in college as a graphic designer and I wanted to buy an apple lap top, my parents told me never buy anything you don’t already have the money for. I thought “well that’s no fun, then why do I have a credit card at all!” I bought the lap top anyway and only paid the minimum payments of $35 at 19% interest on an item that cost me $2700. I was taking my first steps to being in debt the rest of my life. That was not my only credit card purchase but thankfully I got a good paying job the following year and my husband and I both thought it important to get out of debt before we got married. Only then did I start to see the trap credit cards can create.
So now that I am all responsible with money – when do I use a credit card? Only if it is something I already have the money for. (It’s amazing this pool of knowledge you discover your parents have when you grow up.) Then why use a credit card? My most recent example is Christmas. I have a certain amount of money I have been putting aside each month the entire year to save up for Christmas. This way I know what I have to work with. No matter what, I can’t go over this amount of money. Period. Since we live in the middle of nowhere I have to do most my shopping online and I don’t want Nathan to see where I have been shopping or else he will know what I got him. So I chose to use my credit card. I have been keeping a little log of where I have spent Christmas money and I have not gone over. Important Note – Since I already have the money for everything I put on that card, it gets paid off on the first bill so there is NEVER an interest fee.
Another example was when Nathan took me on my birthday trip to Seattle. He had a set amount of money we could spend in his head already, knowing it was what we could afford, but most that money was coming from the paycheck he was going to get while we were on vacation, so we put all our expenses on the card and paid it off immediately when we got home.
One my mom use to do was use a Macy’s or JCPenny’s credit card just to get the extra discount the sale gives you by using it. (They give that extra discount because they expect to make more money off of you by collecting your interest payments on your card.) Then when we were done shopping she would go back to the area where you can make a payment on your card and pay it off before we left the store. So she pretty much paid cash but got the discount for using credit. That is working the system.
So that about sums it up. I think it is OK to use a credit card if you use it in a way where you never have to pay interest. That means you can afford what you buy.
This is where we are now. Getting out of debt – and this is where we will be for another oh, 2 YEARS. Oh let me tell you, it feels like FOREVER. We have been doing it for a year already and I was all excited and motivated for most of that year but now that we are in the middle of it, it feels like we have done so much work with SO much farther to go. There are a few things that keep me going. One of those thing is looking at a picture like this that I took almost a year ago.
and comparing it with this picture I took five minutes ago.
We got a bit of help this year that made the progress faster. The next two years are going to be slow and steady. So many times, over the months, either my husband or myself would say oh it would be so nice to have ” ____.” If we just skipped one payment it would be so easy to get “___” “___” and “___.” It takes both of us to stay on track because most of the time when one of us feels like spending, the other one is feeling a bit more level headed.
We are feeling the pinch right now, but after looking at all the numbers, we are saving SO much money by doing this quicker in interest. Here is the number break down.
We have a 30 year student loan at 6% interest. If we paid the minimum payment every month on time over thirty years we would pay 137,266 in interest ALONE. That is MORE than the principle. By paying off in three years we are only paying 10,352 in interest. That is $126,914 that we don’t have to give to the government and that makes me very happy.
If you are trying to get out if debt, I highly recommend Dave Ramsey’s Total Money Makeover. It uses common sense methods and it works. Getting out of debt is like trying to lose weight, no matter what everyone tries to sell you, it takes self control and hard work from you to get it done. So Dave’s book shows you the method, then you gotta do the work. I have heard mixed reviews about his methods of investing once you are debt free but honestly we are not to that point yet so I don’t really have an opinion there.
I must say first that all the values in sample below have been changed. It is only a sample and please change the categories to match your life on the Budget Template. For some reason the formulas in the template go away when I upload it to wordpress. I figure it is a good start anyway but just note that you will have to add in the formulas so it adds everything automatically.
I understand everyone gets paid differently but we get paid every two weeks so that is how this sheet is set up. I have everything divided into either a bill or an expense. Things that are an expense are taken out in cash and divided into envelopes. That is right I buy everything with cash. That way it is so easy to see how much money I have for what area. I was NOT a believer in this method for a long time. It use to be if I had cash on me I would spend it on whatever. I didn’t know that putting a name and a purpose to different wads of cash would curb my lack of control. Once again my motto with a budget is controlling my money and not letting it control me.
In the bills section you will see that we pay tithing in our church as well as a fast offering. This is actually our first priority before our goal of paying off student loans. There is help and blessings that we see in our life because we pay tithing and it is a priority over everything else. It does not matter what church you belong to I really encourage anyone to do it and see the benefits that come of it. Dave Ramsey also talks about the benefits of paying tithing sometimes on his show.
I made up a kind of a map of the spreadsheet below. Click on it for a larger view. Download the Budget Template to get started on your own! I actually found doing this a lot of fun. I love seeing the numbers flow and make sense of where all our money is going and I am not even a math person. Actually I am REALLY not a math person, it was always my worst subject.
The most effective way we have ever been able to stay on a budget is taking everything we are planning to spend out in cash. If it is not a bill that will be paid with a check or electronically, it is in cash. Then it is divided up into these cute envelopes I made to fit my unique purse just right.
Using cash makes payday fun. It is fun to count out and makes separate piles of real money in front of you. Sure I like organization, but it can’t just be me that likes to count money.
I didn’t realize until I started using cash how easy it is to keep track of how much money you have left in each category. I made another envelope that is labeled “next week.” This is for when I make an online purchase, or for some reason or another had to use my debit card. When I can’t use cash, the equivalent amount is still set aside in cash to use in the next pay periods budget. If you do this you have put the cash in the envelope right away so you don’t accidentally spend it and then go over budget.
Now it is important to try and keep the rule of when you are out of money in, for example, clothes, than you are out. No more buying clothes for that pay period. However, a bit of leniency is ok if you need to borrow from another category if absolutely necessary. As long as you are still using the cash you took out you are still within your budget. If you find you are constantly having to borrow money from another category to get, for example, food, than maybe you need to go in to your budget that is on paper and put a little more in the food category and subtract a bit from whatever other category the money is being taken from. Remember if the budget is going to stay balanced, and the amount increases in one area, it needs to decrease in another.
- In the print dialog box make sure the image is not scaled to fit in any way.
- Print labels and envelope on your favorite scrapbook paper or heavy card stock, or print one envelope template and trace onto your heavy paper.
- Write category names on labels, then cut out and glue labels BEFORE you cut out envelope to make the top cut of envelope match the label.
- Cut out envelope
- fold up bottom flap along line, then each side flap. Use a hard edge to crease the paper well.
- Glue bottom and sides together, careful not to spread glue to the inside of envelope so pocket will stay intact
The envelopes are a bit snug on the money. I got a technique for getting the cash in there quickly. I squeeze the sides of the envelope with one hand and then, using my index finger and thumb push the money down.
I was looking at my daily Zulily e-mail when I saw this vinyl quote that said “I’ll love you forever, I’ll like you for always, as long as I’m living, my baby you’ll be.” Have you read this children’s book? I think it is more of a mom book in children’s book form. If you haven’t read it, find a copy and read, I get choked up every time.
On Zulily the quote was on sale for $25 (from it’s regular $35) I thought I could do better and I found it for $10 on Amazon.com (woot!) WELL the quote I ordered was still in the brown packing tube (that apparently looked like trash) and someone else threw it away the same day the garbage man came. Oi….
So I got out my handy dandy cricut and made another one myself. Why didn’t I make one in the first place? When it is cheaper and easier to have someone else do it, I buy it. Luckily I still have vinyl my mom-in-law gave me over a year ago that I’ve been using on various little things, and I had enough to replace the quote that got thrown out. I’ll have you know that I just have the small Cricut that does 6″x12″ pages and 2 cartridges. I don’t have any of the little tools, just the basic basic stuff and I still do TONS of things with my Cricut.
I wanted a shelf but I wanted to use the wood scraps in my garage. The 5 Shelf plan is from ana-white.com but I had to change it up to be able to use what I already had on hand. The plans call for 1×6 boards. I only had 1×8 scraps – and I didn’t even have enough 1×8 scraps. I ended up cutting 2 1×12 scraps down to match the 1×8’s and it worked out perfect! The main part is actually 2 pieces, part 1×8 and part cut down 1×12. I was quite thrilled with how straight I got the cut.
I used a Kreg Jig jr. to make pocket holes, then I screwed the pieces together and the finished it off with hole plugs and wood filler along the seam. After some sanding, primer, and satin black spray paint I had my practically free shelf. I just had to buy some sawtooth picture hangers $0.98 and can of paint $2.50. I can’t even see the seam after the finish was applied. I can see the pocket holes but they are on the bottom anyway so no big deal.