Sunday, June 28, 2009

1st Budget Committee Meeting...and the 2nd One!

On the 24th of this month, Felicia and I sat together and had our first Budget Committee Meeting. We instituted Dave's rules and got through the meeting without an argument. The goal of the meeting was to produce a realistic budget for the month of July and we thought we did.

One of the rules for me was to shut up and give the budget to Felicia. That was hard to do. My hands were actually shaking when I handed her the budget and had to watch her make changes to it. In the middle of our meeting, the part where she looks it over and makes changes, I had to run to the store to get diapers for the kids and when I came back she explained the changes and how she made the changes balance to zero again. Her changes were reasonable and we agreed to the budget. I am pretty sure we both felt good about the budget and were looking forward to putting into effect.

The next morning while I was getting ready for work I realized we forgot to budget for some very important items. We actually both agreed on a budget that did not have any money for diapers and formula. What were we thinking?!

When I realized this, I started to panic a little and did not know what to do. Normally, the thing for me to do is to throw my hands up and say it won't work this month, we will just try again next month. But this time I remembered what Dave said, that we were going to have Emergency Budget Meetings, especially in the beginning. So of course, we had another meeting, but this one took place 20 miles apart. Felicia figured out what we spend each week on both items and we came up with a total of $304.00 a month. The first step was for me to figure out what we need to cut out so we can add $304.00 to the budget and still have a zero based budget. After reducing the transportation, personal, and clothing categories, our budget was back to zero.

The next step was to allocate which paycheck each item was coming from and this was the hardest part. A lot of the things we have are due at the beginning of the month and so the first two paychecks are going to be really tight. It is going to be real important for us to stick to the plan to make it work. When I was done with the revised budget and the Allocated Spending Plan, I had to show it to Felicia, but since I was at work and so was she, I faxed it to her. She looked it over at work and she agreed to the changes. We now have a budget that we think is a realistic budget.

You would think that I would be relaxed, knowing that we have a plan in place, but I am not. I am so worried that we are going to mess up. From now until July 10th, we have no eating out money. This is our biggest problem, we can derail our budget if we give in to temptation. We have to spend every dollar carefully. Friday was Felicia's payday and we went and withdrew all the cash we need for the envelopes and put it in there: Gas, Groceries, Diapers, Formula, and Entertainment. Maybe this nervousness and anxiety I am feeling is the gazelle intensity Dave talks about. Hopefully, I can channel this feeling into the energy we need to get this done. The first test is if we can meet our goal of having the $1000.00 emergency fund done by July 31st.

Wednesday, June 24, 2009

FPU Week 3---Dreaded B-Word

Last Sunday was our 3rd class in Financial Peace University, and we talked about the the dreaded B-word, Budget. Since I read Total Money Makeover months ago, we have been doing the budget and have posted several times about it. Therefore, I am not going to go over every detail of this past Sunday's class, but will discuss some of the issues I have with budgeting so far.

I believe if I keep honestly critiquing us and our money management, it will help us in the long run to win with money. Having a lot of money is not the desired result of this process, the results we are looking for are Financial Peace, retire with dignity, and pursue some of our dreams later in life. Below are just some of the things and habits that gets in our way of achieving our goals.

One of the things that I do that absolutely does not work is create the budget and never look at it again. I work hard to make a zero based budget and making sure every dollar has a name, but never pull out the game plan to make sure that I am following it. Of course, when something is out of sight, it is out of mind. So needless to say, the budget is no good unless you are committed to following it.

The other big No-No for me is instead of using the food budget for all our food, in practice we differentiate between Groceries and Eating Out, but not in the budget. I budget a certain amount for all of our food and spend it at the grocery store and keep spending on Eating Out even though that envelope is empty. I stick strictly to grocery shopping funds, but if I don't want to cook, I grab the debit card to eat out and it throws off the budget. Felicia and I need to stick to it but also allow for some Eating Out. For example, we eat out after Anthony's class on Monday, since we do not get home until late, but we never budget for it. The solution here may be to add another envelope for eating out.

A realistic budget is important. I make this budget and try to make it perfect, but not realistic. For example, I never budget for my energy drinks or Felicia's Starbucks, but we buy them and it throws off the budget. This time around it will be in the budget, and we will see how this works.

Recently, I have been making the budget and Felicia agrees to it. Basically, I make this perfect budget and Felicia looks over it quickly and we agree on it. But since we never looked at it line for line, we approve this budget that does not fit our lifestyle. I think she knows how hard I work on it, and does not want to change or get into an argument over it. So this time around, we will be following Dave's Ramsey budget committee rules. Dave has made rules for the nerd (me) and the free spirit (Felicia) and below are the rules we will be following.

The rules for me at this meeting are:
  1. Write up the budget before the meeting, then bring it to the meeting, have my say, and SHUT UP!!!
  2. To remember this is a meeting, "not a weekend summit."
  3. I have to let Felicia "mess up" my budget
Felicia has some rules to follow also:
  1. She has to come to the meeting
  2. She has to talk in the meeting
  3. She has to change something in the budget
  4. She can never say, "Whatever you want to do, Babe!"
The rules for me seem a little harsh, but I am willing to give it try because our way has not been working.

***A few post back, I wrote about how we kept putting off the budget and we never did it and we tapped into our savings. I just wanted to update that we had $600.00 in our savings before that but as a result of poor money management, we dropped that to $313.00. Thankfully due to getting back on track and a garage sale this past weekend, we are back to $583.00 and on Friday we will be at $683.00.

Tuesday, June 16, 2009

The Most Expensive Water Jug

This past Sunday was our 2nd class in FPU and it was about money and relationships. During the class, I could not help but look back at how Felicia and I have handled money and our relationship. We have always gotten along real well but when it came to money fights, we were seasoned fighters. Looking back, we had a lot of unnecessary fights.

In a nutshell, it was her job to pay the bills and my job to complain about what happened to all the money. Honestly, that is how it was. I let her pay all the bills, then I would ask how much we had left and when I did not like the answer, I would launch an investigation into the matter. Understandably, she would take offense to the Spanish Inquistion and then the gloves would go on and 12 rounds later nothing would be solved. In hindsight, we both played a part in our financial mess. I chose to turn a blind eye to it and not deal with it; and she would deal with the financial stress with Ebay therapy. We have both gotten a lot better. I do my part with the bills now and she does not need an Ebay fix anymore. (I know she is waiting for me to do my part with the laundry.) Even though it is embarrassing, I admit my attitude so people can see how ridiculous I was being by leaving the burden of the bills on Felicia and then have the audacity to question her decisions. Dave said that both spouses need a vote in how the money is handled and now, the way I see it, if you don't vote then you can't complain.

Marital relationships were not the only relationships Dave talked about. He also talked about kids and money. He challenged parents to teach their kids about money before they graduate from high school so that they don't have to defend themselves from the credit card companies. On of one my first days of college, I remember the credit card guys signing up people at the their table full of "prizes." I saw a water jug that I wanted and signed up for a credit card. The plan was to get the water jug and never charge anything to the card. Then, life happened. My dad and his girlfriend broke up and we were living at his girlfriend's house, so we had to find a place to live. My dad found an apartment for us and I used the credit card to buy things for the apartment. Long story short: that had to be the most expensive water jug ever! By the way, the jug broke before the first bill ever came in.

I want to make sure when my children get older that they know how to handle their money. I sure as hell didn't! I would get paid on Friday and be broke by breakfast Saturday. That, right there, is exactly the same habit I brought into our marriage. We would get paid and go out to a fancy dinner on Friday night, Saturday night, and Sunday night. And Monday night would be Fight Night! Saving money at that age was out of the question, Savings was for OLD people! I know every kid is going to make mistakes, but I want to do everything I can to limit my children's mistakes. Some of my mistakes still follow me today. I know they are definitely too little now to learn about my money, but hopefully I can get my money in order, so I can teach by example.

Friday, June 12, 2009

It's the Budget, Stupid!

A budget is not something you put off. When we do our budget, it helps us stay on track. In the past, I have written about getting off track but even during those times a budget kept us from going overboard. This time around we kept putting it off and putting it off and just kept spending without a plan. This laziness has hurt us and it pushes us further away from our goals. When we got paid on the15th, we did pretty good and had some extra cash in our envelopes at the end of the two weeks. This paycheck, I know we have spent more than we brought in and had to go tap into savings for non-emergencies. When this happens, it feels like I have let my family down.

I am the one who is going to set the example for my children and their money. I could always just spin it and tell them that this is an example of what not to do. I know the habits that we are supposed to have that will make this work. It starts with making the budget. Duh! It needs to be done in order to make the money behave. When I write down $100.00 a week for food, it doesn't mean $100.00 if I go grocery shopping and just use the debit card for restaurants and fast food until I get a chance to go. After the budget is done, we need to go and withdraw the cash for our envelopes and spend that money accordingly. Grocery shopping needs to be done early too, because I can't tell you how many times we are at home and say there is nothing here, let's go get something.

Felicia and I were talking about grocery shopping the other day. We used to go to the Farmer's Market early in the morning on the weekends and then go grocery shopping later in the day and eat at home during the week. Not sure how it happened, but we stopped going to the Farmer's Market and started just going to the grocery store. The fruits and vegetables from the Farmer's Market were our snacks during the day, especially on the weekends. And when we stopped going, we started making quick runs to the store to get a snack and you know when you go to the store it is never a quick or cheap snack trip. This past paycheck with no Farmer's Market and no grocery shopping, All Hell Broke Loose!!!

I am glad that I keep track of what happens here, because it allows me to see what I did wrong and how to fix it. Not only that, but it gives me a reality check. It lets me know who or what the problem is...I am learning it is not the economy, the government, or my job. It is me!!! I have control of my financial future and if I want it to be a bright one for me and my family then I need to take control of it.

Wednesday, June 10, 2009

Financial Peace University Week 1

Yesterday, Felicia and I started our first class of Financial Peace University. FPU is a 13 week course made up of a hour of Video Tutorial by Dave Ramsey and an hour of discussion in small groups. We have been looking for months for a class to fit our schedule and due to my work schedule the best time was Sunday evenings.

Originally, we found a small church that had 3 participants in the class in Cedar Hill. We were going to join that class but we felt we wanted to be part of a class that was little bigger. Yesterday, the class was at a Duncanville church and had at least 75 participants in the class and during the discussion period, the class had to be broken into at least 5 small groups. We both enjoyed our first class and our looking forward to the rest of them.

This first class was about saving money and accomplishing Step 1. Step 1 is saving $1,000 for an emergency fund. I know it is not a huge emergency fund but it is a good starting point. The idea is to set small goals and accomplish them so you stay encouraged to keep going. Dave does a good job of explaining why we need an emergency fund and where to keep it so we can get to it if we need it...and only if we need it. After Step 1, you attack your debt and when that is gone, you work on a fully funded emergency fund. We have achieved Step 1 before and now we are needing to do it again.

Dave also covered compound interest, and paying cash for things that you want. Great examples were given on how you can make compound interest work for you. Dave showed what a $1000.00 can turn into in a six percent interest account for 40 years. The example he gave was 25 year old putting in $1,000.00 and taking it out at age 65 and it turned into $10,957.14.

One reason Dave gave for the importance of saving was retiring with dignity. This resonated with me because I see some loved ones that are close to me that are a little closer to retirement age than I am and I worry about how they are going to make it if something happens to them. What if they get hurt and can't work? Or what if they get fired? Or forced into early retirement? Are they going to have to keep working forever or retire and live from one pension check to the other? I worry for them and I do not want to be facing the same questions when I am their age. How wonderful would it be to know that Felicia and I can retire and not have to change our lifestyle one bit! It would be great to know that we can work on Felicia's dream business and not have to worry about turning a profit right away, or travel, or just sit on our porch and watch the sunset and not have any worries about money?

On the way home from class, Felicia and I were talking about how we want to win with money. We talked about how nice it would be if one of us could quit our job and stay home if we wanted to. We are trying to make a commitment to the process but to be honest it is hard. It is easier to do what makes us feel good now. I look at all the figures and say we can do this and that, but turning it into action is hard. Hopefully, we can make progress by going through the classes and being held accountable through our discussion group.