Monday, November 12, 2007
Life After the Budget
| By Lynn Forgy I've written briefly about Budgeting. This is a basic first step and an absolute must! Keeping track of expenses and income is an accountability tool - if it's not written on the budget, then you shouldn't spend it. As Dave Ramsey says, you have to make every dollar scream. No one family's budget is the same, but there are basic categories and expenses - such as utilities, rent or mortgage, electric bill, etc. Crown.org has a free budget worksheet that is easy to use. You should adjust the budget and the budget categories to fit your family. There are percentages that you can use as guidelines for what a typical family should spend in each category. Again, Crown has a PDF listing of percentages for singles, families of 4, etc. Once you have established your family's budget, your written game plan for the month, you're ready to move on to the next step: the emergency fund. For a low income family, this is $500 according to Dave Ramsey, and $1,000 for other families. You can think of the emergency fund as a cushion - if your dryer conks out, rather than paying for it with plastic, you can pay cash from your emergency fund. This is for emergencies -- an emergency is NOT "I need a haircut", or "I HAVE to have that outfit".  The next step, and the one I'm still on, is to pay off your debt, excluding the house. Most people suggest paying off the lowest balance debts first, disregarding the interest rate. Others say you should pay off the highest interest rate debt first. The idea behind paying off the smallest balance first is that you build momentum, and once you see some progress you're more motivated to continue on the road you're on. If you are having trouble deciding whether you should start with the lowest balance or highest interest rate, there's a website that will calculate the benefits and show you which method will cost you the least amount of interest. Click on the link Whatsthecost.com to calculate.  Since I'm still stuck on the previous step, it's not as easy for me to speak about the following steps, which are: Save 3-6 months living expenses (and DON'T spend it), followed by 15% to your retirement fund and/or funding child's college fund, then paying off your mortgage. You can get more details on these steps by visiting Dave Ramsey's site. Becoming debt free, as I'm learning, is not an instant, overnight process. It takes time, commitment, and dedication. You do have to sacrifice in the short term, but the results are worth it. Imagine not having to go to a job that you hate, day after day - without debt, you could afford to take a lesser paying job doing something that you really love and that glorifies God.  Labels: budget, Crown.org, Dave Ramsey, debt free |
posted by Krista at 7:37 PM
