Friday, February 11, 2011

Do Budgets Make You Bonkers?

Do you budget?  I must admit I don't...but I would if I really needed to.  We all have our strengths and managing money is one of mine.  Stretching it, growing it, spending it, saving it, giving it....all comes natural to me and the discipline I need in this area is there.  Believe me I have my areas of weakness but handling money is not one of them.

For many, many people it is though.  I thought I would share some budgeting know-how from Dave Ramsey for those who need it.  If you don't have enough money to go around, it is daunting not to know how and where to spend what you have.  So here is his approach for people really committed to getting out of debt.

1.  Spend on food first. If you are trying to get out of debt, that doesn't include eating out.  It includes rice and beans....healthy and cheap food you make at home.
2.  Next pay your utilities. Keep the lights, heat, and water on.
3.  Now pay your rent or mortgage.  Don’t fall behind on your mortgage.
4.  Transportation costs (gas, car payment, insurance). You've got to be able to get to work.
5.  Clothing. The clothing budget —  when you’re trying to pay down debt — should only be for the essentials.
6.  Health care costs, insurance.
7.  Discretionary income is money that is left after these necessities.  Use it to pay the minimum on every credit card.  Whatever is left over, pay ALL OF IT toward the one credit card with the smallest balance.
8.  Do this every month.  Once that card is paid off you'll have all that money to put toward your next smallest balance until it is paid off.

Each month has its own budget because there are different requirements every month.  On the first day of each month, sit down and write down all money coming in that month and all known expenses that month.  Remember to save up $1000 in an Emergency Fund before you attack your debt.  That money is available so you don't have to charge even more for unexpected expenses.

When I have a goal such as this, I have to make it a game...a project that I can totally get behind.  I know it is no game, but if I'm not completely committed to whatever I'm doing, it won't happen.  So a halfway approach to this won't work.

Good luck with your efforts.  More to come.

Coming soon: The hands-on system he teaches to make this work.

6 comments:

  1. I never used to budget till my hubs lost his job and couldn't find a new one for 13 months. After he got a new job I budget everything, but it does make me bonkers.

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  2. A new follower from hop along Friday...

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  3. We don't really have a budget per say. It is a list of where we need to spend our money, and how much goes there, but then we kind of just put it where it needs to go, and spend extras after savings and investments

    New follower from the friday blog hop.
    http://theknitwitbyshair.blogspot.com

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  4. Great post!!

    We have a budget and do fairly well sticking to it... we use the envelope system and when it is gone it is gone!

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  5. I'm not good at budgets but this is good advice. I used to have a system where after the bills were paid I looked at what was left over. I picked a dollar amount (lets say 100) and once my balance reached that number it was the same as being at 0. The more the account grew the higher my "0" amount got. It really heped me grow my funds.

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  6. Alida...The envelope system works for a lot of people. I used to use it too.

    Ann...what a good idea. I like it! Some people say pay yourself first but I don't see how you can do that until after you pay your bills. Thanks for sharing.

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