Get Your Finances in Order

Like many people at the start of the new year, I set my top 5 goals for the year.  Some were personal, others were with the family.  Some were narrow, some were broad.  Most had bullet points that I can use as a checklist.  You can read my entire blog post HERE.  

Goal #1: $$$$  Get your financial house in order  $$$

My first goal for 2014 of getting my financial house in order.  I had organized all the papers and done a 'month in review' budget for years, but decided that I needed a kick in the butt and accountability.  Enter Dave Ramsey.  I had come across his free podcast of his daily radio show that spoke of finances.  Dave has a very 'in your face' personality.  He tells it like it is... even if it's not what you want to hear.  And that's refreshing.  He had spoken about his method of getting out of debt and accumulating wealth.  It was different than the other information I had read about (mostly investing in real estate, that was out of my reach now, and in year's past).  He principals included a checklist - I LOVE CHECKLISTS! - that seemed like an easy road map to the goal I was trying to achieve.  

So, as a birthday gift to myself, I enrolled in his Financial Peace University that was being held at a nearby church.  Though I hadn't been a student in a class in a while, this was a bit of a commitment - 10 Saturday nights, plus homework - but I knew it was an investment in myself and my future!

Each week covers a particular area of this checklist, what Dave calls the 'Baby Steps'.  And the class has facilitators, but is actually a video presentation of Dave and his colleagues (so everyone essentially gets the same class).  It also had an online component, so if you missed class or wanted to recap the highlights, you could review the video at a later date at your convenience.  This worked out great when I missed class due to inclement weather!

The Baby Steps are no secret, Dave talks about them regularly on his radio show.  It's basically 'common sense' or what Grandma would have told you growing up!  They are as follows:

#1 $1000 Emergency Fund (available for EMERGENCIES)
#2 Pay off all debts (except the house)
#3 Fully Funded Emergency Fund (3-6 mo expenses in bank)
#4 15% into Retirement
#5 Kids' College
#6 Pay Off House Early
#7 Build Wealth and Give!

My journey began with Baby Step #1: $1000 Emergency Fund.  I have carried a 'savings account' that is linked to my checking, and always got nervous when it was below $1000, but never thought of it as something separate.  So a bit or reorganization, and that step is checked off the list.  It's there for EMERGENCIES, like the furnace breaks or you get a flat tire, not for a WANT.  That's something you plan for, in the BUDGET.
 So along with Baby Step #1, I also reorganized the budget and moved to an envelope system of money management.  The idea is to CASH FLOW your expenses, with cash, and not live on a Credit Card.  That was, and continues to be HARD!  But it's also changing behavior, and I certainly am a work in progress...

The budget changes month-to-month, and that's very different than how I had previously arranged my budget analysis.  Each month, you take your paycheck, before you get it, and tell you money where to go.  EVERY PENNY!  Of course, as a pseudo-perfectionist, doing this in pencil was a must, because it's a ZERO-BASED BUDGET.  No money is left over.  And I wasn't very good at that.  But once the basics were covered (Home, Utilities, Food, Transportation), and monies set aside for Sinking Funds (like auto insurance, home insurance, the dentist, Christmas/Vacation savings and those other bills that are planned, but not monthly), then the other bills (ie: DEBT, like credit cards) could be addressed.

So cross that one off the list!
#1 $1000 Emergency Fund (available for EMERGENCIES)

So on to the next step.  That's the step I'm on now, Baby Step #2: Pay off all debts (except the house).  It's taking care of all the debts I have (except the home mortgage).  This is daunting.  It was something that I was aware of, but since I used credit A LOT, and didn't pay down my balance, it was always there... never a zero balance.  And I didn't ever see one.  So now that the Envelope System is in place, the cards cut up (still working on this one... but most are and I'm not adding to them), and the budget has told every dollar where to go, what's remaining becomes the DEBT SNOWBALL.

The idea of the debt snowball list all debts and organize them from least to greatest balance.  Then, pay minimum balances on all your debts stack all extra money available (after that well organized budget) towards the lowest balance.  Once that debt is paid off, use that amount and put it towards the next lowest balance.  As the smaller debts are paid, the snowball gathers momentum and you FEEL like you are making progress towards tackling your debt.  And you are.  Slowly at first, but eventually, as the snowball gets bigger and bigger, the debt will literally melt away!  

So here is my debt.  YIPES!  $35,000 to start.  That's daunting.  And, sadly that doesn't include college loans, like most folks.  Those were actually the first that were paid off.  My debt is solely car and credit.  But the plan is in place, and I'm chipping away.  $4,200 paid off since February 1.  YAY!  

But the great thing, that I'm super proud of, is that I did purchase a used Truck and Plow in CASH!  A bit of planning, but that's the first major purchase since I started Financial Peace University.  It was due to savings as well as selling a ton of items with my friend Craig (Craigslist and Ebay are awesome for this).  Also hoping to add to the snowball this April with a Tag Sale.  Another thing is to change my tax witholdings to get more in my paycheck throughout the year, and a much smaller rebate next spring.  That extra cash will go towards the snowball, as well as funding sinking funds for budgeted expenses.


So the journey continues.  I hope to finish Baby Step #2 by the summer of 2016.  It's a big challenge, but with extra jobs, extra cash and lots of motivation (and some accountability here on the blog), I will tackle this!

Happy Budgeting!