The budget says YES!
From time to time I meet a person who really grabs my attention. To be fair, because I talk so much I meet a lot of these people! A conversation with them really gets me thinking and often I just want to learn more about them. I (virtually) met Veronica, known to me now as Ronnie when she reached out to me via email and we struck up a conversation about how she was struggling/drowning with debt but managed over just a few short years to get her finances under control. So, I interviewed her for my podcast where she shared her journey. If you have not listened to it yet, make sure you do because it gives context to her blog post below.
You can hear about her journey here: How come I’m not rich
But Ronnie still had more to say so I asked her if she would like to let her creative juices flow and write a blog post and share some of her wisdom here with you and I. Gladly she accepted and this is her first foray into writing. Here she shares exactly how she budgets, a topic that would make many of us quickly find something else we would rather be doing. But the fact remains that if you are trying to reduce debt or like me trying to save and invest as much as possible you can’t do it if you don’t know how much money you have, or just as importantly where that money is going. If I want to do something that involves money I always ask my budget and chances are, if you are doing things right, more often than not the budget will say YES. We all need to budget in some form or other and here is how Ronnie does hers...
The budget says YES!
Ugh, I’ll be the first to admit the word BUDGET used to conquer up images out of a horror film. I didn’t want to know about it and I tried to bury it under the “I’ll do that another time” excuse. That attitude has changed, and now I LOVE sorting out where we want our money to go. (I can now budget but I still can’t watch horror films).
Once my husband Kev and I realized that we were never going to get ahead with our finances if we kept wasting our hard earned money, we had to take a good hard look at where we did want our money to actually go. And the realization sunk in that budgeting was going to be a big part of our lives.
The first thing we did was to make a coffee and open a large block of chocolate, because we were going to need both! Then we began to make a plan. We went through our filing cabinet and pulled out all the bills we had paid in the last year which were recurring – rates, insurances, power, phones etc. Writing this out in a spreadsheet on our computer we began to see where some of our money was being spent.
We worked out what the yearly cost was for each expense and split that total into a weekly figure. That was our starting point of every $ having a place in our budget. For us it saved, and still saves, us a lot of headaches of trying to find money when the big bills come in as we have been putting away a little each week in readiness for them.
It took a good 6 months to get used to this system, and there were plenty of expenses that got missed and changes that weren’t working, however we eventually got it down pat.
This budget is now our roadmap to financial success.
These days we have simplified our budget down to a list of what bill is coming out of whose pay, which makes it really easy to transfer into different accounts for payment. Kev’s pay splits towards mortgage, insurances and car maintenance. My pay splits for groceries, spending money, phone, power and investments. Kev has a 2nd job and this get divided out among our sinking funds.
Sinking funds are for those unexpected (yet expected) costs such as visits to the doctor or dentist, or if our pets need to go to the vet. We have numerous bank accounts to help us keep track of this. Some people like to save all this money in one account and track it via a spreadsheet but for us each account having their own name allows us to easily see how much is saved for our specified categories. One of our favourite accounts is one named “miscellaneous”. This is our catch all account for those costs that might not have a particular category like birthday/Christmas presents, out to tea, or we need some new clothes.
To stop the boredom of budgeting, we give ourselves “blow money” which we can spend on whatever we like and we don’t answer to each other as to what we are spending this on. Out of the two of us, this account proves that Kev is the saver and I am the spender!
All of our excess money goes into an account we call the “mortgage blaster”. Once a year we pull this lump sum of money out and put this on our mortgage as a lump sum additional payment because our big goal is to knock that sucker off as fast as possible. But having that account where we build up our spare cash also gives us flexibility if we need to pull back from paying the mortgage off quickly. Although earmarked for the mortgage it could be used in other ways as a very last resort.
Our budget took a while to fine tune, at least six months, and as bills change, we alter our budget to reflect his. But now each time some money comes in it literally takes about five minutes to allocate it as we know exactly where our money is going.
A BIG THANKS TO RONNIE FOR WRITING THIS! I know a lot of people I speak to resist the thought of a budget because they think they “know” by some form of mental telepathy exactly where they spend each cent. And those exact same people all say “holy heck, I didn’t realise how much money I was wasting on XYZ” when they do sit down and make a budget. So, do it folks, get out those bills and bank statements and make every dollar count. Because a dollar knocked off debt or a dollar pushed into an investment is going to either save you interest or pay you dividends in the long run. I blogged about budgeting a while back here: Budgeting. Such Fun! and Tracking Your Net Worth
Ronnie found www.daveramsay.com. Now as a warning to some and a comfort to others he does mention Jesus on occasion but the way he teaches you about money and the plan he encourages people to follow is excellent so I really encourage you to check him out. I listen to his podcast where everyday people phone in and ask their money questions about investing and I like hearing the “debt free screams” of the people who have killed all their debt. Ronnie and Kev are following the Dave Ramsay plan and you can’t argue with the fact that it is working really well for them and it ALL centres around the theory that if you want to get out of debt you gotta have a budget.