Nope…this will not be commentary on The Rule of St. Benedict today.
I have been asked to share our story on how we manage our family finances (see post comments, here). This will be somewhat lengthy as I feel that I owe some background to tell the story properly.
Thus we begin:
I am blessed to have grown up in a family in which finances were managed well. We had little, if any debt beyond the house and my parents owned respectable businesses that continue to be successful. Because of this, and the generosity of my grandparents, I came out of college without any school debt.
When I met the wife, she brought some school debt, but we were able to knock that out in relatively short order. The only debt we had, beyond our home, was two cars and a few credit card accounts that were almost always paid in full.
What we lacked, however, was decent discipline regarding spending on more impulse items…I’d say 90% was (surprise, surprise for the sanguines reading….) FOOD related. Did not feel like making or did not know want to make for dinner??? HEY…no problem. O’Charley’s, Culver’s, Lee’s Fried Chicken, Little Cæsar’s, Chilli’s, White Castles, etc was on the way home. Credit cards made this real easy. We did not go totally crazy here. We were almost always able to pay it off in full each month, and HEY, I was getting airline miles baby. “How can I lose?” I thought.
What we did not have because of this was a whole lot saved for any kind of emergency…nor any real discipline.
A few years ago, I received an audio book copy of The Total Money Makeover by Dave Ramsey. I listened to it a few times and thought the message was very good, but I did not execute it for some reason. Maybe because it required discipline?? (NO NO…not thaaaat!)
A year or so later, after getting frustrated with surprises with credit card and bank statements, (where all these restaurant trips added up to several hundred dollars each month, because of a lack of discipline) I decided to listen to it again. At that time, I thought it would be good to try it so we did.
The book talks of the Seven Baby Steps:
1.) $1000 emergency fund
2.) All non-mortgage debt paid off
3.) 3-6 months of expenses emergency fund
4,) 15% Savings for retirement
5.) Kids college fund, if desired
6.) House paid off
7.) Save and give
We were good with 1-2 as I had just paid off my car. Time to work on #3. But before we could work on any of the steps required we establish the written monthly budget. WHA WHA WHAAAAATTT!? Oh! That is the hard part…That requires discipline (there’s that word again…). I don’t wanna! (Sanguine resists!!!)
Being the excel nerd that I am, I whipped up a worksheet and that was going to be the budgeting system. It’s undergone a few iterations but it was simply setup to have my monthly salary on top, and a formula that added up all of the expenses and subtracted the two numbers to show how much is left or how much is over.
The expense section includes the recurring expenses (i.e. utilities and mortgage), the sometimes-varying items like groceries (depending on how many Saturdays are in the month), haircuts, expected car maintenance, clothing purchases, etc. Finally, at the bottom of the list were things on the slush fund. If there was any leftover on the top parts, we would start itemizing things that needed to be done with the house, any new appliances, etc. If we can’t think of anything, then we would leave it as slush as something always comes up.
For the stuff that we do not use online baking, we decided to use the envelope system. This is where we allocated all of our discretionary costs a set amount of cash. Each envelope is for the things like groceries, beer, gas, beer, Bessy fund, vacation, clothing, date night, blow money, and beer. When the cash runs out, it’s out. That was VERY difficult the first couple of months. It still is difficult at times. We blew it big time the first month. But after the third month, or so, we got into the groove and it started to balance. In fact, is became more like a game. The Wife and I sit down on the couch with our Google Drive spreadsheet and go through the plan. We moved it from excel to Drive so we could look at the file if I was away at work. If something comes up mid-month, we reconvene and figure it out. That may mean we have to defer some other planned purchase or have simpler meals the rest of the month etc.
Each month has its challenges, so it needs to be re-looked at each month. You cannot apply the same budget each month. For instance, sometimes I get paid 2x a month, but twice a year, the timing works out where there are 3 paychecks, or we have the quarterly trash bill, etc.
This planning forces the husband and wife to talk about this and be as proactive as possible. You cannot do this in a vacuum. We did that for too long until about two years ago. Accountability is huge. You cannot cheat. If something comes up, call an “Emergency Budget Committee Meeting” and make it fit.
The budget process and discussions will shine a really high-wattage spotlight on waste and inefficiency. Once we realized that, it literally freed up several hundred dollars each month…almost like getting a raise!
Just recently, we realized the value of this process. We had budgeted $325 for this month for our van to get some service that I was putting off. I mis-calculated the expense and it came in closer to $425. Obviously, I had to pay that but I had also planned to purchase a new pair of boat shoes this month. Guess what came out…the shoes have been deferred. It was not something that was needed…What could have been a budget problem was easily solved by discussing and re-jiggering the plan. It was about a 30 second discussion.
A few other things we’ve done:
- Credit cards are gone. Cash or debit only. It was too easy to cheat. The airline miles go idle now. The inefficiencies and hundreds of dollars wasted each month using it was way over above the value of the miles I received.
- Our oldest four children get paid a commission (not an allowance)…no work=no pay….kinda like real life!
- Re-financed our house to a 15 year vs. 30 year mortgage. That move alone saved us $75 GRAND in interest over the course of the term of the loan for only about $100 more a month. DEAL.
- We took Financial Peace University’s online course. At the time we decided to do this, The Wife was pregnant with the Bruiser. I would have rather taken the course in person, but due to being kind of close to Bruiser’s due date and my business travels, we thought this would work better. The course was very informative and entertaining at the same time. In particular to The Wife, it was eye opening as much of it was never taught to her in school or when growing up.
I think you get the gist of this now.
I have rolled around in my head the possibility of starting a Financial Coaching business on the side. Perhaps if I have a volunteer or two to ‘practice’ upon, pro bono, I could determine if that would be a good fit for me. If you’re interested, please let me know via email or comment on this blogpost. (Pro Bono equates to F R E E for the Latin-challenged)
I think this is my longest post ever! Thank you for bearing with me.
Do you have any budgeting tips to share?
Do you have any questions of me?