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 |
Sunday, October 14, 2007
Taking the First Step
| By Lynn Forgy To work towards the goal of becoming debt free, I believe the most important thing to promise yourself is to not incur any new debt. I know how hard this is. Cutting up the credit card can seem so drastic. In the back of your mind, you may be thinking "What if I have an emergency? How will I be able to pay for it?".  As I mentioned in my first post, I first started following the steps in Crown and have also been a follower of Dave Ramsey for the past year. The two plans are similar, however, there are some differences. Each have steps that are followed that will, in the end, lead to a debt free, financially independent life. Whether you follow one or the other is not my point, rather my point is that if you choose to start down this path (and it is a choice) you will have to make some temporary sacrifices. You may have to do without, gasp, cable or some other modern convenience that we are convinced we cannot live without. Planning and writing out your monthly budget should be your first priority. Each and every dollar you have coming in must be accounted for. Nothing should be spent that is not in the budget. Following this, the first step is to save for your emergency fund. This is true in both plans mentioned above. My emergency fund (EF) is $1,000 and I accomplished this step some months ago. I do not use the EF for such things like a new outfit, birthday gifts, etc. These expenses can be planned and placed into my budget. Your EF could be placed in a savings account where it is handy in the event of an emergency, but not too convenient or where it can be a temptation.  I will be posting more in the coming week regarding the next steps, so stay tuned. Below are some links that I have found helpful in writing out my budget, working the steps, and general support. I also belong to several yahoo groups dealing with finances and becoming debt free. Crown Financial Tools Dave Ramsey and Budgeting Bankrate's Budgeting spreadsheet Our Nation's Debt - Totally disgusting My Technorati Profile: Technorati Profile Labels: budget, Crown, Dave Ramsey, emergency fund |
