Monthly Budget Round-Up: July

It’s the last day of the month, so time to go through the budget I posted at the beginning of the month and see how I did! For this post, you’ll get to see the amount I budgeted in black and the final amount I spent in red or green (depending on whether it’s over or under budget).

Yucky Yucky Debt

  • Planned: $1400 + $2500 at the end of the month
  • Actual: $1293 + $5000 (!!)

Oh yeah. You read that right. $5000! I’m so freaking stoked. You’re probably all wondering, how did you get from $2500 to $5000? So, I sort of forgot that this was a three paycheck month for me (whoops!). Additionally, B.’s paycheck from the military has been sort of challenging to budget for, as it has been different every time. So I made my best guess, but my best guesses always tend toward the conservative side of things. I also underestimated with the original $2500, as I like to leave a little bit of a slush fund each month in case unexpected expenses occur (not Dave Ramsey approved…).

With that small victory dance out of the way, let’s see how I did this month:

Necessities

  • Rent: $1300                  $1300
  • Utilities: $260              $240
  • Cell Phone: $50           $47
  • Groceries: $500           $480
  • Gas: $200                      $166
  • Daycare: $980              $989
  • Maid: $206                    $174
  • Lawn care: $150          $148
  • Brian: $500                   $499

Other Expenses

  • Clothing: $200              $221
  • Gymnastics: $48           $48
  • Restaurants: $100        $87
  • Netflix: $10                    $11
  • Hair/Cosmetics: $100  $80
  • Fun money: $100         $70
  • Miscellaneous: $200    $138
  • Plane ticket: $0             $413
  • Doctor: $50                    $172

Hmmmm….I didn’t do too bad this month.  You can see, even after six years of budgeting, I still don’t remember everything that’s happening when I put together a budget. For example: doctor’s visit.  I knew that was happening (hell, it was on my calendar!) but I still forgot to properly budget for it. Also, our Netflix bill has never changed, but I apparently couldn’t be bothered to actually go look and see what the prior cost was. Finally,  I knew that daycare had some extra expenses due to a few events this month, but I also forgot about that when I was putting together my budget.

The plane ticket was unexpected, but I’m happy to have spent the money, as it will allow me to spend time with my sister, brother-in-law and their beyond sweet newborn baby.  I never ever feel guilty about money I use to spend quality time with my family! In this case, I had actually budgeted for a plane ticket, but not until August’s budget.  However, my nephew made his appearance a little early, hence the expense happening this month instead.

Overall, I’m pretty pleased with the way things turned out this month. A few things I forgot, one unexpected expense and (ahem) one category where ThredUp plus a glass or two of wine made an impact aren’t too bad. Goodness knows we’ve had much worse budgeting months than July. So, overall, I’m pretty pleased.

Final Spending Tally

  • Planned spending: $4704
  • Actual spending: $5283 

Not too bad, given that the difference between those two pretty much equals one plane ticket and one doctor’s visit that I didn’t plan for…

Tune back in tomorrow for an exclusive look at what August’s budget looks like! (Hint- not as good as this one!)

 

 

Our take on the Dave Ramsey Method

In this previous post, I went through the basics of the Dave Ramsey method for achieving financial independence.  In that post, I alluded to the fact that while we subscribe to the general plan, there are a few areas where we differ from Dave’s recommendations. I would say that we generally follow about 85% of what he lays out (which is, incidentally, my approach to almost anything- diet, exercise, sleep, etc.  As long as it is good/works 85% of the time, it doesn’t need adjusting).

The parts we do follow: 

  1. Save $1000 
  2. Not acquire any new bad debt– both our cars are paid off and we never use the credit card we have. Any further cars will be purchased with cash.
  3. The debt snowball– it’s REALLY motivating to pay off debt, so the structure of the debt snowball really works for us.  Also, at this point, the only debt we have is federal student loan debt, so the interest rates are all reasonably low.
  4. Budget meetings and zero-dollar budgeting– When B was stateside, we had budget meetings at a minimum of weekly. Usually one big meeting toward the end of the month and little weekly check-ins each week.  Also, at the end of each month, we zero-out our money for the month and put whatever excess we have left (from areas where we spent less than we budgeted) toward student loans.
  5. Dave’s philosophy: “Live like no one else so you can live like no one else”- We are very conscious of our spending and make decisions that are different from a lot of those around us, in order to gain the financial independence we want. We rarely go out to eat, my toddler and I get all our clothing from consignment or thrift stores (for some reason, good quality consignment men’s clothing is hard to find), our cars are 15 and 11 years old, we rarely eat red meat, our phones are refurbished, older models and all our furniture is the “Ikea/Craigslist” special.  We agree with Dave’s philosophy that being intentional with your money allows your money to work for you and those are items that we just aren’t interested in spending money on.

The parts we don’t follow: 

  1. The baby steps, in exact order–  When we started this journey, we knew that even if we were laser-focused on paying down debt, we’d be looking at a minimum of 4-5 years to pay off all the student loan debt. Paying down debt is important to us, but not so important that we’re willing to sacrifice all our family time trying to hustle and pay it down faster.  We’re content with a 5 year plan. BUT. That means that not planning for the future doesn’t make sense.  As such, we have a fully funded emergency account (baby step three) and we both fully contribute to our company 401k accounts up to the amount the company matches.  Since we’re going to be paying off debt for at least 5 years regardless of whether we do these things, it didn’t make sense to us to forfeit five years of essentially free money (in the 401k match) while we paid down debt.  It’s true that in five years we will be able to pay a lot more toward retirement, but for now, we’re at least not leaving money on the table.
  2. We have a credit card– Dave swears that it is possible to not have a credit card, but that hasn’t been our experience.  None of the car rental places around our metro area will accept a debit card (we’ve tried)! Also, right now, the international charge for using the credit card is lower than our debit card would be, so B has mostly been using the credit card instead.  However, we don’t use it for daily purchases, mostly because we aren’t fully in a financial place where we trust ourselves to use it responsibly. Hopefully we’ll be there one day, but for now, it mostly sits around. I use it for gas once every six months so they don’t cancel it!
  3.  We don’t pay cash for most things– We totally used cash for clothing, restaurants, car repairs and fun money in the beginning, but we’ve gotten to the point now where there aren’t any areas of our budget that we’re likely to overspend on. I think that years of paying with cash was very necessary for us, as it helped us think about how much we were spending and how much we had already spent. But the thing is- that ability didn’t go away when we stopped using cash. I update our budget daily, so I’m always very aware of how much money we’ve spent and what we have left. As the need to self-regulate by using cash has receded, so has our cash usage.
  4. We are not “gazelle-focused”– When you look at our budget, there are certainly areas where we could cut back.  We could move to no restaurant budget at all.  We could get rid of the maid and the lawn care.  We could decrease our grocery budget and buy more rice/beans, rather than meat. We could get rid of our fun money.  But realistically, we both know that we won’t be able to stick to a budget that restrictive (and are profoundly grateful that it isn’t a necessity at the moment- I am acutely aware of the privilege inherent in being able to choose to afford luxuries).  So we tried to put together a budget that allowed us to put a decent amount of money toward debt while still allowing us to live our lives for the next five years.

So there you have it. My philosophy toward life in general is that most situations aren’t all or nothing propositions and our approach to budgeting and finances is no different. We took a lot of Dave Ramsey’s principles, combined them with our knowledge of what would and wouldn’t work for our situation and personalities and managed to come up with something that works for us, and works well. Is it 100% Dave Ramsey? Not at all. But it’s helping us accomplish our goal of financial independence so I’m okay with not following the plan 100%.

Any other Dave Ramsey followers out there? What parts do you follow religiously? Where have you fudged the rules?

 

 

The Dave Ramsey Method

Image result for google image total money makeover

As I’ve mentioned before on the blog, we use the Dave Ramsey method of budgeting and finances. If you want to know more about Dave Ramsey, I recommend starting with his book- The Total Money Makeover. This is the book that really lays out the budget-specific parts of his financial plan.

We chose the Dave Ramsey plan for a couple of reasons.

  1. Someone my husband worked with recommended it – We weren’t really looking for a budget or financial plan, but someone recommended this book to my husband and after we both read it, we really felt inspired by the plan (note- not inspired enough to actually commit for another 2-3 years, but inspired to at elast start thinking about money)
  2. It’s a financial independence plan (not just a budget)- My husband and I are fiercely independent people, so neither of us really liked being financial beholden to others. But growing up, my experience was that was just a way of life. You had credit cards and debt and car payments and a mortgage and that was just normal. Dave Ramsey’s idea that you pay for things in cash and not buy them if you can’t pay cash was revolutionary to me (which sounds super sad in retrospect, but there you go). In any case, his plan is all about getting rid of debt, not just organizing your life and finances around paying for your debt.
  3. It’s behavior based- The principles that Dave outlines in his book (more on that in a minute) are based on behavior. His book uses behavioral principles, rather than solely financial best practices. His reasoning is that all the good finance in the world won’t help someone with a behavior problem, so you need to address the behavior problem to sort out the finance problem (I’m dramatically oversimplifying here, but that’s the basic gist). This principle is so true of pretty much anything that presents a challenge to someone and I’ve found myself applying this principle to other areas of my life beyond budgeting.

The Dave Ramsey Plan

I’m going to be concise and gloss over a lot here, but these are the basic tenets of the Dave Ramsey plan (with more attention given, by me, to the beginning of the plan). You are supposed to follow, in order, the baby steps that Dave lays out.

Step 1: Save $1000– Did you know that 60% of Americans wouldn’t be able to cover an unexpected $500 bill? This is the point of this baby step. Emergencies happen and the first thing you have to have in place is some easily accessible cash to cover that.

Step 2: Debt snowball– This is where the magic happens. In this step, you make a list of all your debt (not including your mortgage) and list it from smallest to largest. Then, any extra money you can cut from your current spending gets applied to the smallest debt first. The idea is to get something paid off quickly and get what Dave calls “quick wins.” Then, you take whatever you were paying on that debt and apply that amount to the next smallest. And so on. Hence the snowball- each paid off debt snowballs more money into the larger debts.  This step is controversial for a lot of people, because you pay off debts in order from smallest to largest and ignore all other details (like interest rate). So you could theoretically be paying a student loan with a low interest rate first over a credit card or car loan with a higher interest rate.  It seems counter-intuitive, but the psychological win of actually paying something off helps motivate you further. And it’s true! Paying off debt makes me want to pay off more debt.

Step 3: Build a true emergency fund that covers 4-6 months of basic expenses.  Basic expenses include housing, utilities, transportation and food.  The essentials. What you would need to get by until you found another steady source of income.

Step 4/5: Fund retirement and fund college savings accounts. These are the steps that happen only once your debt has been paid off. The idea here is that you put nothing  toward any of these accounts until the debt is gone (more on that tomorrow). Dave always says “pay yourself first,” hence the reason that funding retirement comes first.

Step 6: Pay off the house!

Step 7: Build wealth and give back

Ahem. We’re obviously a LONG way away from steps six and seven.  But hopefully one day I’ll be able to come back here and tell you all that we’re there. But not yet.

That’s it, my friends. The Dave Ramsey plan in a nutshell. Deceptively easy and simple. Check back in tomorrow- I’ll be talking about our take on the Dave Ramsey plan.