Last week I started my third Financial Peace University class. I really enjoy walking people through the steps, and watching their eyes light up when they “get it.” There are many who transform their finances through this 13-week class. There are others who listen, agree, and still don’t quite get their behavior to act in alignment with their new “values.”
You have to do more than just want change, you have to make steps toward that goal and act each step of the way. With money this can take willpower, boundaries, a paradigm shift, and sometimes a cultural one as well. Everyone wants financial freedom, but it is unrealistic to desire your money do the right thing, when your body and mind do not have the discipline to do that.
A crucial first step is making a budget, or a cash flow plan. I like how Dave Ramsey describes a budget as “an on paper, on purpose plan for your money before you get paid.” I can always tell who has done their cash flow plan. They are the ones who are excited because they took control and created wiggle room in their finances. They are seeing progress now and have more progress projected into the future. They feel empowered because they have a plan and are winning their life back.
It all starts with the budget. Forget what you think a budget is, or all the times you tried and it didn’t work. Start with a piece of paper or an excel sheet. Click here for a budgeting tool
- Put your monthly income at the top. If your income is irregular click here.
- Start listing all your known monthly bills.
- Check the calendar for holidays, events, and out of the ordinary expenses coming up. List those.
- Then calculate any non-monthly bills, those that come quarterly, bi-annually, annually. Divide the total by the number of months to figure out the monthly amount, and set it aside for when the bill comes due (6 months of car insurance for $600 would be $600/6mo = $100 month).
- Subtract the expenses from the income as you proceed down the list.
Don’t forget to include what step or goal you are working on (saving for emergencies paying off bills, or investing for retirement etc). Stop when you hit ZERO. This is called a zero based budget.
If you hit zero before you are finished, go back and reevaluate some of the categories. We will discuss more ways to shave down the expenses. I would love to hear from you! What strategies have you used to balance your cash flow plan?
When we began our gazelle intensity as a New Year's Resolution in 2011 we definitely were made to feel silly by some family members. Even being told that credit cards were NECESSARY and cash only was unrealistic in our day and age. Two months later my sister and brother-in-law paid off their house, their only debt. He is self-employed, with 8 kids, a stay-at-home wife, two new cars and has always been cash carrying except for the house which he paid off in 5 years! He is my role model and I love him for it.
ReplyDeleteThe first couple of months were VERY hard as we cut up the cards and learned how we were truly spending our money. The weeks of $40 grocery budget for a family of 5 with 2 pets felt like well earned "repentance for our past sins".
Now, 15 months later, we've paid off our van (only car payment) credit cards, long-standing medical bills and healthcare, have done all holidays and gift giving in cash. We eat better than we ever have because of not relying on fast or over processed food. And best of all? I'm headed to Europe for two weeks paid for all in cash! My mom wanted to book with her credit card for travel points and I said, YES!
Is this the sort of comment you were looking for? Just excited as I wrote out my accommodations check last night.
Dave's "an on paper, on purpose plan for your money before you get paid" has saved our lives, and has gifted us back even better lives.
Thanks for sharing your story Amy, and Congrats to you on your hard work! I love hearing from people who have worked the steps. It is great encouragement for others. When we trimmed some extras out of our food budget, my husband's cholesterol went down and we both lost a little weight. The benefits are many. Have fun in Europe!!
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