Sorry
you guys, I am a week behind due to our trip to GA so this is going to probably
be a lengthy post with a lot of information so I apologize.
Week
3 was all about cash flow planning, or making your budget. In week 2 we did our “quick start budget” but
for week 3 we took it a step further and did the “monthly cash flow budget”. For this budget your objection is to assign a
job to every dollar that you have coming in.
Each category of your budget should add up & equal the same as your
take home pay so when you subtract your spending from your earning, it equals
0. I had never done a budget like this
before so it was hard and I was definitely making it harder than it needed to
be. Do you have things that you only pay
for annually like life insurance? We
do. Do you save for it each month so
that when the time comes to pay it you’ve got the money? We weren’t.
Starting this month we will have what is called a “sinking fund” for those
items so that we are saving for them each month. This is a totally new thing for us and we’re
doing it for a couple different things we don’t pay for regularly.
For
our situation we don’t earn the same amount each week, my check is pretty
regular, but Joe’s is not. If your
situation is similar, what Dave suggests is taking your lowest month of income
from last year and using that as your base salary. What we decided to do was use what Joe would
earn for unemployment as our base. He
also gets paid weekly and I get paid bi-weekly.
There are some additional budgets that you can also incorporate if you’ve
got irregular income. One is called the “irregular
income budget” and the other is called the “allocated budget” both of which can
be done if you don’t receive the exact same pay each week.
In
my mind before, as long as our bills were paid then we were doing fine. Anything extra I’d either put into one of our
other savings accounts or just spend as I felt necessary on things like
clothes, eating out, shopping of any kind, getting nails/hair etc. done, I
never had a plan for our extra income. Everything
was paid for on my debit card and I never carried any cash in my wallet. With Dave, you have a plan for EVERY SINGLE
DOLLAR that comes in. He also really
stresses using CASH rather than plastic because it’s harder to let go of actual
money. You have more of an emotional
connection to cash than you do to plastic.
I can tell you I 100% agree.
For
me, what I’ve started doing to ease myself into using more cash is Dave’s
Envelope System. You can use envelopes
for whatever you’d like. I decided to
start with one, an envelope for gas. I
get gas about once a week roughly and it costs between $20-30 to fill up. Now that gas is back up to $1.99 it’s roughly
about $30 to fill my tank. I also use
the Hyvee Fuel Saver program so I typically have some extra savings on what I
pay at the pump because of that so I averaged it out to $25 a week for
gas. We received Dave’s envelopes in our
class kit so I took one of them and put $100 in it for gas for the month of
April. I will definitely keep you posted
on how this goes. Does this lose the
convenience of paying at the pump?
Absolutely it does, but, taking a couple extra steps to go inside the
gas station is not the end of the world.
I did it for years before I got my debit card in college, I can
certainly do it now.
Week
4 of Dave was Dumping Debt. In this
lesson Dave talked a lot about debt myths.
He talked at length about car loans, credit scores, and how by using his
plan, you can quickly get yourself out of debt.
Depending on the amount of debt you have, you may need to go to some
extreme lengths to do that, but it is possible.
He suggests starting with something like a garage sale to sell all of
the unused “stuff” that you own. It may
also benefit you to sell your car and buy something significantly cheaper with
CASH. This all depends on what your
situation is.
The
Debt Snowball, which is baby step 2 was also a large focus of the class. This was also our homework for the week which
we will bring in on Friday. The Debt
Snowball is a simple concept. You write
your debts down, smallest to largest in one column and then your minimum
payment in the second column. Once your
first debt is paid off you take that minimum amount you were paying on that
debt and you put it towards your next debt.
So you’d be paying the minimum amount on your second debt PLUS the
minimum from the first (once that 1st one is paid off) which is
creating the snowball effect. Interest
rates do not matter in Dave’s plan. I
will tell you too, by paying off those smaller debts which can be easy to knock
out quickly, you start feeling a sense of accomplishment and confidence in
yourself that really inspires you to keep working at it. Some people may feel as though the debt with
the highest interest rate should be paid first but I can tell you, my biggest
debt (minus my car) has the highest interest rate that is my credit card. It would take a while to pay that off by
making just the minimum payment but because I’ll be paying the minimum payment
plus the minimum from the 2 smaller debts that come before it, I’ll be paying
it off so much quicker! I know that
sounds confusing, but it really is a simple concept.
For
class 4 we were also allowed to bring a guest.
You guys might remember my friend Jessica and I are doing this class
together. Well, I was able to convince
Joe to come with me and although he was very reluctant at first, he was
impressed with the class & really liked how well Dave spoke. He has really been participating and asking
questions more about our budget for the month & is trying to be supportive
because he knows that I am doing this and I want to take it seriously. He said he might even try to come with me
again to a future class. I was a happy
wife, that’s for sure!
I
know this is a lot of information, but I have been getting great feedback on
these posts so I’m going to continue to update you guys. This Friday I am planning on cutting up my
Kohl’s & my Pier 1 credit cards. My
biggest challenge with this class will be cutting up and closing my Chase
credit card account. I have a very
strong emotional attachment to that card and feel like it may be needed for our
upcoming DEIVF cycle for bills that we are paying out of pocket that we didn’t
prepare for. Our situation is kind of
unique because Dave does say that once you’re expecting a baby that you should
stop paying on your debts and save that money towards the baby. In our situation we are actually paying to
conceive that baby so we have to tweak Dave’s system a bit to work for us, but
our leader is aware & has been great in helping us make those
adjustments.
I
am highly recommending this class so far.
It has been a real eye opener for me and has really started making me
question and think twice about my spending habits. 4 down, 5 more to go!