Lesson 3 in Dave Ramsey’s Financial Peace University is all about creating budgets. (This follows Chapter 3 in his Complete Guide to Money book – which I saw at Costco this week for 12.99 – just sayin’)
I thought I was pretty good at making a budget (in my head) but when I sat down and put it on paper I realized that I had a little work to do. Dave tells us that the first month, your budget will not work.
Huh! I was going to prove him wrong. I was going to be an A+ student in this class. I took my anticipated monthly income and *before* it was deposited in the bank I sat down and allocated funds to bills and expenses. I even set aside $100 during the month for “Mad Money.” My goal was to have about $500 extra at the end of the month to put toward our debt.
- But I had forgotten about the trip to bring a kid back to college (and the obligatory meal on the road we always get and the additional obligatory quick side trip to King Arthur.)
- And I forgot about a secret sister program I’m in where I need to buy someone a gift each month. (It’s fun and worth it.)
- My earbuds broke and I needed to get new ones for the gym. Half of the incentive for going to the gym is being able to watch TV while I’m on the treadmill.
- My daughter needed money for her sports team (again.)
- And then the washing machine broke.
You get the picture. I had forgotten to include life in my budget The expenses were absorbed by my “mad money” and that extra bit I had planned for our debt. It looks like, if I’m lucky, I’ll only have about $100 left over at the end of the month.
Not the best of news and definitely not getting an A+ grade this month.
But here’s where my budget did actually help me. I’ve thought twice before making any kind of purchase. For me this is huge because I tend to be an impulse buyer. I find myself actually asking if I need or want it. Who knows, if I hadn’t paused before a purchase, I might have had only $10 leftover at the end of the month.
I keep a $20 in my pocket. I can go several days without touching it, but just knowing that I can spend it *if* I want to, makes a big difference for me. My budget is not about deprivation. I can still spend money, it’s just that I want to be in charge of the spending.
And remember that $1000 in emergency cash that I had set aside? Guess what we’re buying a new washer with? Yup, no credit for that baby, we’re paying cash. (of course, now I need to scramble to rebuild that fund.)
Although I only have $100 instead of $500 left over at the end of the month to contribute to our debt, it means that I had *extra* money. All my writing checks, eBay money, and teaching checks (which are extra income) can go directly to debt and rebuilding the emergency fund. And remember, I’m doing this only using my small income, although I’m making some progress, I don’t have the rest of the family on board yet. I’m hoping that if I lead, they will follow (or at least walk by my side) and think of the difference we could make then!
The benefits of Financial Peace University, even at Lesson 3 are enormous. Now, every time I look at money or take it out of my pocket to spend, I hear Dave saying “You’ve got to tell your money where to go and make it work for you.” I had no idea of how many tiny leaks I had with regard to money. Take this example – “Oh I’ll just stop off at Starbucks and get an iced tea for $3.24” Now I actually ask myself, is it worth it to pay that kind of money just because I have an urge for a drink or can I wait until I get home?
As it turned out, I was never “dying” for iced tea, I was only thirsty. I waited the extra 10 minutes until I got home and then drank a nice, cool glass of water.
Am I an ace at this budgeting thing? Not on your life. I’m still learning how to be realistic with a budget, how to budget for the inevitable “gotchas”, and to be honest, I’m still working on how to say “no” (especially in a book store.)
But have I gotten better? You bet. And I know that next month’s budget will incorporate some lessons from this month’s budget and it will be ever better.
Wendy Thomas writes about the lessons learned while raising children and chickens in New Hampshire. Contact her at Wendy@SimpleThrift.com
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