Week 3 of the Dave Ramsey Financial Peace University is “Cash Flow Planning”. Which is basically advanced budgeting. We made “quickie budgets” in the first week of class but this week we dove deeper in to budgeting.
I actually missed the live version of this class because I was getting my party on at the Financial Bloggers Conference. I have the audio version of this lesson in my kit but Brad was kind enough to lend me the video version that he had, so in the end I did get to watch the presentation. There are lots of forms and worksheets that go along with this class so it was nice to be able to follow along with the video.
Dave talked a lot about why we should live on a budget and how it will reduce stress and fighting in your home. It does take a while to get a process going and he recommends giving it 3 months before you should expect to have it running smoothly. He quotes Zig Ziglar by saying “A budget is telling your money where to go, instead of wondering where it went.” He also brought up an excellent point about how the average person makes $40,000 per year. Which means in 10 years they will have $400,000 run through their bank account. You wouldn’t handle that kind of money without a plan! So you need a plan, and that plan is your budget.
I mentioned earlier that this class has a lot of forms. When you pay for the course you get a CD-ROM with all the forms on there and they are also downloadable from Dave Ramsey website once you are a member. Here’s a list of the forms you receive:
- Major Components of a Healthy Financial Plan
- Consumer Equity Sheet
- Income Sources
- Lump Sum Payment Planning
- Monthly Cash Flow Plan
- Recommended Percentages
- Allocated Spending Plan
- Irregular Income Planning
- Breakdown of Savings
During the class Dave goes over each form and explains how to use it. You can then download the forms and fill them out for your situation. Which is pretty cool. Not all the forms will work for everyone, but it’s still a great starting point. A lot of people don’t want to start a budget because they are afraid of what they will find, but as Dave points out, it’s usually not as bad as it seems. Once you put it down on paper you will see exactly what you need to do. I look at it this way, the money is going to be spent, we might as well know where it’s going.
Unfortunately since I didn’t go to the live version of the class this week I don’t have any stories about my fellow classmates, which is a big bummer. But I’m not planning on missing another class so from here on out we will get all the good gossip!
It is good to know that it takes about 3 months to get it down. I practiced a little bit last month and completely stunk at it. Hopefully, by the end of the year I can get it together.
Yeah I kind of hated the budget stuff at first. The very first month I secretly didn’t follow it but quickly realized that was no different than what I had been doing. Dave reminds us that the definition of insanity is doing the same thing over and over again and expecting different results.
So I started working harder at doing the budget and it does get a lot easier if you stick to it. Quick tip though. Every time money is spent a receipt needs to be put in the same place because one of the quickest ways to bust a budget is to get behind because you failed to keep track of all expenses. My wife and I used to bicker back and forth at first because when she would spend money I would only find out when I balanced the check book. It was harder to keep track of the budget like that so she does a lot better now. LOL
It’s a process and any process takes time to master but you will get it! Team EOD has got your back!! Thanks for sharing your thoughts! 😀
My wife and I have been challenged emotionally and financially trying to put a budget together. Our mistake the first month was being too aggressive trying to pay off the debt. It caused all sorts of problems in our relationship. My advice is to take it slow. I’ve never had a budget in my entire life, so it takes time to get used to it. For me, I have a sense of loss (grief) over not being able to spend as I want. I know in the long-run our sacrifice will pay off. In the short-term, I am not handling it well. She is more positive about it.
Sun, you are likely experiencing the same thing my wife and I experienced in the very beginning. Real quickly, my wife was in nursing school and I was breezing through the FPU stuff so I was excited and pumped but my wife wasn’t able to listen to the same information I was.
With that said I practically dragged her down the road because in my mind how could anyone not want to do this to transform such a difficult but important part of their lives? I made the mistake of not allowing my wife to ease into this life-changing process and in doing so caused some resentment to surface.
She even told me that Dave Ramsey was going to ruin our marriage. Ouch right?
It was at that moment that I decided to be more tactful (and fair) because after all my wife was in the process of getting her Nursing degree. I took a step back, gave her more of a voice (and time) and allowed her to gradually catch up in terms of being on the same page. As we paid off more and more debt, she began to see the light and thankfully she was sold on this process.
Lesson learned for me was that I was kind of being a jerk at first because I was expecting her to just follow along but wasn’t giving her the opportunity to express how she felt. That is super important.
With all of that said, there are different reasons people have for not being on the same page, which I will definitely cover in future articles. I would say that most of the time the “stubborn spouse” is stubborn because of how the other person approaches them with change, as was the case in my situation.
It sounds like you feel kind of forced into this but also want it and understand why it’s important. Just keep an open mind and keep doing what you are doing. I believe you will eventually get fired up after the initial feeling of loss and sacrifice subsides. It is definitely hard to go from spending the way you want to budget with a watchful eye. I kind of hated that part but then kept reminding myself that not watching or making sacrifice caused us to end up in debt.
You are going to be so pleased as you really start achieving those quick wins. Are you doing the Total Money Makeover using the baby steps? It’s what FPU is based on and is very good in relieving some of that overwhelming feeling in the beginning. Please keep us posted and thanks for sharing. Your thoughts are so helpful for others going through the same thing.
Going through this process improved my marriage twenty-fold. Money can cause lots of problems in any relationship. Good luck Sun!! 😀
Marriage is forever and our debt will not be… So I realized I put my wife’s feelings first. Your experience is really helpful to me… Thank you! We listen to the show but haven’t gone to anything in person.
The nerd side of me loved this lesson. But I’m a slow learner (apparently) because it took me about six months before I got my budget running smoothly.
The big trick for me was to make it accessible. It’s easier for me to type and have a spreadsheet do the math. The trouble was the spreadsheet was at my home computer and a lot of the time I wanted to look at it while at work. I solved that problem by making a spreadsheet using Google Docs. I created another workbook within the doc to keep a “Running Tally” of how much I had left in each category. I created a template for anyone to access here; just create a copy and adjust the categories for yourself – the math is already taken care of! There is also a workbook for your savings account, debt snowball and net worth. Did I mention I’m part nerd? The template can be found here: https://docs.google.com/spreadsheet/ccc?key=0AqSftGYzZuYWdElxYVBBdTFJdGJ1T2lONk5KQW5fa2c&hl=en_US
Another thing I learned was how important is was for me to have money listed by paycheck! Since most of my 1st paycheck of the month went to rent alone, if I didn’t allocate the 2nd paycheck to thing like say, food, I would be short before getting paid again on the 15th.
Great comment Jerry Lyn and thanks for sharing the extra resources that have helped you. Having a spending allocation plan for your paychecks is a great idea to keep from running out of money when you need it the most. 😀
Travis, how about THIS for insanity?? The fact that I have been tracking my spending for YEEAAARRSSS now. I mean, literally, years. I’ve got a spreadsheet with all the different categories of my spending, and I save every receipt, and I log my receipts. I could tell you how much I spent in gas last year. So with this sort of extensive data on hand, you would THINK I would put it to good use. I would divide the totals by 12, get a monthly average, and then budget that out. Do I do that???? NO. Have I tried??? Yes. Myself and 3 friends even started a money group about 2 months ago (we’ve met 4 times), and each time we have met, we have created budgets…tried to stick to them…and fail miserably. Things that have come up for me that have been challenges:
1. Not logging my receipts DAILY, so that I wait until the end of the month and can only look back in hind-sight at how good or bad I’ve done.
2. Doing unbudgeted projects around the house, such as a bathroom makeover.
3. Having to buy all new (expensive!) car seats for my car to accommodate our new child coming and my 2 other young children. Although the seats they had were in good condition, there was no way I could fit 3 in the back without purchasing all new, slimmer models. And, really, what’s cheaper–buying new car seats to fit my Honda Accord, or spending thousands on a minivan and/or car payment right now? The choice is obvious.
4. Poor meal and food planning. I SUCK at this!! I live at the grocery store because we are always running out. I try to buy enough, but it still doesn’t ever seem to be enough. I don’t clip coupons because most of the products I use are from places like Trader Joe’s, which, although affordable, isn’t going to have $0.50 jars of spaghetti sauce. Not to mention all the many times I stop at the store, I am a) wasting time because it takes me longer to get home in the evenings, and b) wasting money because I ususally end up picking up more than I planned to get.
5. Trying to live on a cash-only envelope system, but after one week, all the cash for the week is gone, and instead of figuring out how much cash I have left to withdraw from the ATM, I end up using my bank card. For me, bank card = spending more, because I am not paying attention to how much is really available.
6. The biggest hurdle, really, is not wanting to feel restricted. Because I am not a big spender on clothes, or gadgets, or things like that, I feel like I should be able to just buy whatever (usually food, lol!) I want, without having to feel like I have to budget for it. If I want to buy a gallon of paint because I am so moved or motivated to finish a paint job, although I haven’t BUDGETED for it, I feel like I want to just be able to go and get it without having to wait. I wonder if this stems from my poor childhood, where we couldn’t just get what we wanted, when we wanted it. But, all those small splurges, I’m sure, do equal out to some cash that I could be saving or paying down my $3,800 credit debt or my $26,000 school loan.
So there you have it. My struggles!
Good morning Serena. I think you meant Ashley. 😀
I can relate to you on so many levels. One being the grocery shopping stuff. I SUCK at meal planning and grocery shopping efficiently. I don’t coupon because it takes so much time and I am a busy dude. Not sure that’s a good enough excuse but it’s my story and I’m sticking to it. 😉
The one thing that has changed for me that I wasn’t expecting was the wanting to buy what I wanted when I wanted it. I struggled with this at first but it didn’t take long after really knocking out some debt for me to appreciate being a little more patient with my purchases. However since becoming debt free my wife sometimes has to remind me of this because if we’re in the market for something I tend to want to buy it from the first place instead of trying to find a better deal. It must be the guy in me because I just hate to drive around from store to store shopping for that better deal. Sometimes my time is more valuable than $20. LOL
Great comment! 🙂
Hi Serena, great comment. I think you have a very good understanding of your road blocks which really is the first step. I’m certain a lot of people feel exactly as you do.
Maybe step one is real time tracking rather than waiting for the end of the month. Not necessarily budgeting, but just daily tracking. No new rules, just a new system at the moment. I’m assuming you use a spreadsheet for your tracking? Maybe not, but whatever you use set it up for the month and then you can see what you are spending for the month as you go along. I know I used to do that with gas and groceries. I used to just write it on the calendar when I came home “gas=$40” on the day.
It won’t curb spending right now, but perhaps knowing where you stand each day will help you think about budgeting a little differently.
I’d be happy to help you set up a system that works for you or talk about it further if you want. Just shoot me an email. Ashley@moneytalkscoaching.com
Hi. I just finished FPU through my work, and I was looking online for more information. I found your blog and am reading through your information on each class.
Serena, I read your message, and I had similar issues. So something that really, really helped me was finding a way to do a budget online and get some graphs on spending. I use my debit card a lot, although now for food/household/clothes I use an envelope system. 🙂 But before I could do that I had to get a really good grip on where I was spending my money.
So I found mint.com (and I am sure there are others out there, even Dave just started an online budgeting tool and lots of big banks like PNC are going this route too). Mint hooks up to your checking and savings account and pulls the data transactions. You can’t change any of it, so you don’t have access to withdraw money or anything from this website. It is a tracking tool only. It takes all your debits and categorizes them into budgets. You create a monthly budget online with your categories, and it tries to pull your transactions automatically into those categories. And it’s free. And there’s a phone app for iPhone/Droid that gives you alerts when you spend money. For a computer nerd like me, this was awesome! I can see my budget and how much I spent on my phone any time I want. And I see all my debits within a day, so I can see what I am over spending on. It’s like having daily receipts without paper. So if I am at store going, how much can I spend, I have it right there. And it pulls in initially 3 months of data, so I could see where my spending was going when I started my budget. Once I had my budget and spending figured out because I actually knew where my money was being spent, I was then in subsequent months able to make small adjustments and trim things here and there or put things into new budgets.
So for anyone who is a computer nerd but is having problems with debit cards and receipts, this is a FREE tool that I would look at. They do throw up ads to you, so you have to be aware of that, because that’s how they keep the site free.
And I spend a lot on food too because I really like to cook, but that just means I make my food budget bigger. I also create a splurge account. If I’ve already splurged, I just tell myself, if I really want it then I’ll splurge on it next month or if it’s unexpected necessity than I rework my other budget categories to fit it in for the month. And if you like home projects, make that part of your budget. Maybe that’s your hobby. Just add it and budget for it each month or change your budget as you need. That’s a lesson that I missed in reading the TMMO book. If you need to change your budget during the month, you can. But it does mean moving money from one budget item to a different one. You can’t make money out of thin air, but you can change your budget as you need, but you will have to sacrifice something else. Such as I am going to spend $20 less on food to get paint or whatever especially if you have a budget item that is bigger than necessary. Also, sometimes, you can put off a purchase for a month or maybe sell the other seats on E-Bay/consignment shop to get some money back to cover costs on the new seats.
Also with regards to food planning, look up recipes and create grocery lists. I now bulk cook on weekends and freeze stuff to help me budget better. I am not good at this either, and I am still learning.
I hope that helps you. Good luck!
Natalie
Hey, Natalie, thanks for the reply! I think Mint.com is a great site to use for tracking if you’re using debit. I had set it up some time ago. However, for the past 2 months (or longer!) I’ve been using cash only (woohoo!), so Mint hasn’t been valuable in that respect. Cash only has allowed me, however, to keep my spending in control!
And, because I have been using cash only, I have not been spending AS much on food, because I am not more cognizant of my purchases!
I totally agree that cash is the way to go. Congratulations on going cash only. I use an envelope (cash system) too for food, clothes, household items. All my bills are electronic withdrawal. I now use my card for gas, online purchases, entertainment expenses and unplanned purchases (which are generally the result of something breaking). I still use mint for an online budget because when I withdraw cash I can split the amounts on mint.com into their envelope categories so I know how much I have left before I withdraw more. I really just like it now because I can see debts and loans online and my budget all in the same place and on my phone. And it was immensely helpful when I was addicted to debit spending and had no idea where my money was going at all. It just works well for me because of all the time I spend on a computer and my phone for my job. But it’s not for everyone. The important thing is that people at least try to make a budget and track where they spend stuff regardless of the tools they use. That’s really step 0 in this program in my opinion and the most important step to start with. You can’t change anything until you know what you’re doing now.
Good website by the way!