Ahhh! That is meant like a screaming "Ahhh" rather than a cool and collected sigh. *Just wanted to clarify.
We have completed our first lesson in Financial Peace University, and holy moly, all of the emotions. We are excited, nervous, encouraged, but also wanting to set realistic expectations, we are all over the place. But that’s okay, this is a learning experience.
*Just wanted to give a quick disclaimer, we are not going to go into details on what is specifically taught in each lesson of Financial Peace University, just how we apply these ideas to our journey. So if you are looking for a free breakdown of Financial Peace University, this is not the place.*
I was extremely anxious sitting down with my husband to watch the first video for Financial Peace University. Mainly because it was over an hour long, and the fact that he was doing this was already a stretch, so when he found out it was an hour long, I expected him to say, “Yeah, I’m out.”
But, he didn’t! He heavy sighed, but we made it! The first lesson was all about a budget. I had kept a family budget on my own basically since we had gotten married. I paid all of the bills, tracked the bank accounts, monitored spending, all of the fun stuff. Which, to me, yes, it was actually fun! I had them on my phone, on my computer, what started out as lists, turned into color coded spreadsheets over time, and I loved it. I had started using Mint, which is great. This is an app you can sync with your bank account to monitor your transactions as they hit, and apply them accordingly into your different budget categories. However, what I had planned was not very realistic, I set goals for my family as if I was the only one spending money. My husband would eat out for lunch and not matter how much I intended on him spending only $5 for lunch, it just wasn’t realistic! Now, he didn’t even spend that much money in the grand scheme of things, he just spent more than I had allotted in my mind, because my main goal was to pay off debt and save.
This led to a lot of frustration, pent up frustration really, because how can I be mad at my husband for doing something that he didn’t even know he did? Okay, well sometimes I had no issue doing that, but this situation was different. He needed to eat, and obviously $5 a day was not realistic for a grown man needing lunch, it just wasn’t going to happen. I realized we needed to be on the same page or the idea of paying off our debt and saving for our future in they capacity that I had planned would never work.
Whenever we would talk about a budget, my husband would get tense at the thought of being told he couldn’t spend his own money on something he wanted. I felt the same way, the difference was I was already in the mindset to make sacrifices because I could see the bigger picture.
This is where we were going into Lesson #1. We quickly found out that I was the nerd and he was the free spirit. Because, yes, I make detailed spreadsheets for any vacation we go on, plan out in advance our Christmas spending with, yes you guessed it, a spreadsheet. I love planning, it is what it is! He was a free spirit because he felt as long as there was money in our savings, our bills were paid each month, and we were in good shape, he should be able to spend what he wanted. If he wanted to spend money on his games, he could, if he wanted to go out to eat on the weekend, he could. Small things like this that I hounded about originally, were things that he wanted to just be able to do- Free Sprit vs. Nerd.
Lesson #1 mentioned the Emergency Fund of $1,000. We had already had that, based on our knowledge of Dave Ramsey before, we knew that was the first thing you needed to do. And once we did it, that fund never got below $1,000. In fact, we honestly didn’t feel comfortable with just having $1,000 in savings, so we actually set our number higher than that for a little more breathing room. So step one was already done!
We learned the ideas behind a zero based budget, and when we were understanding this concept, it gave us a different mindset as we went through the course. It was clear that a budget is not cutting out all spending, it is just telling your money where to go. Originally, when we both heard the word budget, it was more of a negative tone, or something that meant all work and no fun. However, this lesson gave us a new outlook on it. We could still allow for us to have some spending money, so my husband could spend some money on his game, or I could get a cute decoration for the house as long as it fit in the amount we had budgeted for that month. This opened up a whole new world for us, as well as a more encouraged feeling. It showed us that it is not bad to spend money, as long as it is in line with your budget. Our minds were blown that a budget didn’t mean you were restricted. Disciplined, yes, restricted, no.
We began to work on our budget, and by that, I mean I began to work on our budget. Here are the steps I used when creating our budget with Every Dollar Premium:
1. I looked at our expected income for February. This included, our 9-5’s, some work I do on the side for a couple of local businesses, our Rakuten account was set to dish a Big Fat Check in February, and we also set a higher goal for our Door Dash income. *If you are looking at other ways to receive additional income, I will be writing a post about it soon, so stay tuned!
2. Once I got that number, I went with all of our fixed expenses. That means our mortgage, utilities, childcare, tithes, insurance, basically anything you pay monthly that remains the same. Utilities got a little dicey because things like power and water are a little different each month. But, because I pay the bills, I knew the ballpark of what it would be. So I gave it my best educated guess and then added $10 to each one. That gave me a little wiggle room, if it was actually more than I thought. But if it ended up being less than what I originally budgeted, I would change that budget number to the lower amount, and take the extra amount of money and put it towards our debt. Did you follow that?
3. I went from our fixed expenses to our line items that were necessities, you know like… food and gas. And these are places that could be cut back a little bit as well. I have always ran a tight grocery budget. I know this because when I would go on a spree to tighten our budget, that was something that always got tighter. That was something I can control. I do the shopping, I do the cooking, I do the lunch packing, so the more corners I found to cut in this lane, the lower our grocery budget got. (I’ll spare you the details here, but I’ll dig deeper into my grocery budget later on) I got our grocery budget down to under $450, and our lunch money/eating out money to under $150. So that is under $600 for our family of 3 in a time where eggs are $4+ a dozen, so I'll consider that a win. Gas really is difficult to gauge, pun intended, so if anyone has any ideas on how to spend smarter and not harder, holla at ya girl!
4. After that, I looked at our additional spending. I started with what was most important to us. The main line items that were important to us were our dog’s bath (try putting a 100lb dog in a bathtub, no, PetSmart please take my money!), his dog food, spending money, miscellaneous line items for anything that popped up, our son’s activities, etc… We really had to look ahead at the month of February and our upcoming schedule. Birthday parties and Valentine's Day Parties were on tap for the month, so we made sure to budget for those accordingly rather than coming up surprised each week.
As far as our personal spending money, I assigned a number to each of us. Our spending number was very low, his was $40 and mine was $25. Nothing too crazy, but just enough to keep us from going crazy! We were also going to be going on a vacation that month, it was pre booked when we had no debt and couldn’t be canceled, so Dave, if you’re reading this don’t come for us! But we knew we didn’t want to put those vacation expenses - food, gas, light souvenirs- on our credit card, we wanted to pay cash for them. The only way to do that was to set aside money for the trip. This section got revised so many times! It was really just a playing with numbers game at this point to get something that worked out and I felt comfortable with.
5. Then we have the sinking funds. This was something I guess I had been doing here and there, but I never had a line item set aside before. I honestly, didn't know it was an actual thing! A sinking fund is something that is a large expense that comes up once, maybe twice a year. Things like Christmas, renewing your car tags, your children’s birthday parties just to name a few. You put aside some money each month, so that when it comes time to pay that big expense, you have a good fund to cover it in full or at least give you a strong head start. So here are the sinking fund categories I set money aside for: Doctor/Dentist/Hair, Auto Maintenance/Parts, Our Son’s Birthday Party, and Christmas. *I also went back and set up our trash pick up as a sinking fund, since it is only paid every quarter. This might have been a little too much for such a small utility bill, but time will tell if it is necessary.
6. The remaining money went to our smallest debt to start off our debt snowball. I want to make a huge impact and get these debts knocked out faster, so this number wasn’t great to me. So I went back and moved some things around until I felt like it was a strong number to actually make a dent in our debt.
7. I showed the budget to my husband. It was Dave Ramsey’s rule that the Free Spirit make one change to the budget. So he looked it over, asked me questions, and then he said, “I guess since I have to make one change I would take $5 from the eating out money and add it to my lunch money line item since they both end in 5’s, I would like to see them end in 0’s to make it even.” Really? But hey, I counted it as a win!
Now we are off on our first month with our first zero-based budget and I am so excited to see how it goes!
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