What you do in your house is worth as much as if you did it up in heaven for our Lord God. We should accustom ourselves to think of our position and work as sacred and well-pleasing to God, not on account of the position and work, but on account of the word and faith from which the obedience and the work flow. ~ Martin Luther

Friday, March 27, 2009

The Strategy

Yesterday I told you the joys and sorrows we faced when we got out of debt, only to get back in it. I told you the hows and whys of all. And then I told you about the turning point.

The moment eventually came but only after many MORE moments pouring over books, listening to the wisdom of biblical advisers and nights laying in bed talking to Matt about what I had been reading. Dave Ramsey was the guy behind all the books and he really made sense! What I especially liked about one of his books entitled The Total Money Makeover, he shared tons of success stories. People who had royally screwed up and not only had rebuilt their lives (albeit the hard way) but were now thriving with money AND happiness. These poor people had such incredible debt I can not EVEN fathom it. Double and triple the amount of money Matt EARNS in a year. Our one measly credit card balance didn't seem all that terrible compared to THEM, and THEY did it! SURELY, we could get out of debt too!

But I realized, I don't just want to get out of debt. Been there, done that.

I wanted more. I want our family to THRIVE. I didn't ever want to NEED to use a credit card again. I want to think less of the here and now, and more of the future. Can something so radical be done? Can something so radical be done with a family who has what most would consider a very modest single-income? Could something so radical happen to a family who would love nothing more than to have a whole passel of children running about? It certainly could, CAN and WILL--but only with the RIGHT tools and the RIGHT plan.

That plan requires a whole new mindset of us. It takes us out of the defense and puts us in the offense. We are no longer reactionary, but PROACTIVE.

Anyone familiar with Dave Ramsey knows his Seven Steps to Financial Freedom, so I am writing nothing new.

The very first step for ME that was necessary was to recognize the part I played and repent. At the time this all transpired, Matt was making more money than he ever has. We came to that job from years of working jobs that barely paid the rent and years of me struggling to make money stretch in ways it just can't. I remember my sister loaning me money for groceries one day, we were that poor.

When he got that new higher-paying job, we let loose! Oh MAN it felt good! We bought pizza, we went out to eat, we spent money. We earned more than we ever had, and despite getting out of debt, there was nothing to show for it. We had no savings, we weren't PLANNING for the future. Well sure enough--the future comes. I say this because, credit card debt was not the only issue that needed to be worked through. Maybe the credit card was in Matt's wallet and I never touched the thing. That didn't negate me from the situation. That was just the apple on the tree. I needed to get to the root of the problem-to cut down the TRUNK of the tree-which was me. I was the trunk of the tree by foolishly allowing hard earned resources to fly like a brittle fall leaf on the wind.

Letting so much money fly out of our fingertips on foolish things without planning for the future made the meeting not so pleasant when those necessary costs met us head on. There was no fall back, no money set aside because we had used it on pizza or REALLY cheap clothes (but they were only $2.00!!!) I remember working it all out and had I budgeted and dealt with our finances responsibly, we could have saved an unsightly amount of money each year~like LOTS (Matt asked me not to write specific numbers but in this case, I wish I could because. oh my goodness). Realizing that number and seeing what we actually had literally made me sick to my stomach. It took a long time, but I knew I had to actually FORGIVE myself too. The numbers haunted my dreams and I saw very clearly my shortcomings and I beat myself up about it to within an inch of my life. Even now at times, I cringe and what could have been. I try to quickly squash those feelings though, because they are not at all productive.

We established our emergency money right away and began our debt payoff.

I had a lot of trepidation about starting a zero-based budget though, and really did drag my feet in that area. It seemed too hard, too foreign to me. I had never ever done a budget before. I had never ever (even in our poorer than dirt days) accounted for every dollar spent and/or allotted money for different areas. This was all new and terrifying to me and I DID NOT WANT TO DO IT.

But I did do it, knowing that change needed to be made.

I sat sweating, fingers computing and recomputing calculator numbers many a night until I finally figured out just where our money was going and where it NEEDED to go. I filed my debit card away and created envelopes instead, labeled 'em, planned what money needed to stay in the account and what needed to be divvied out. I made revision after revision and note after note.

Now, almost four months later, I realize this is the single most important change in our financial gameplan. Here is why.

A zero-based budget means every single dollar spent is accounted for and divvied out and "spent" (in theory). This means I was IMMEDIATELY required to have self-control, I was FORCED to pay attention to how much I was spending and it was absolutely NECESSARY not to spend more than was allowed. Unless of course, I wanted to pay late and over-drawn fees. Trust me, I don't. I have stories about those, too.

In my zero-based budget, I not only accounted for monthly expenses (rent, utilities, debt reduction, car, etc.) but FUTURE expenses. (See?! PROACTIVE!) I created envelopes (LOTS of 'em!) that would ensure that when the need arose (and it inevitably will) I can have it covered, ELIMINATING the need for any plastic credit card buffer!!! Isn't it a BEAUTIFUL thing?!

Some people make categories and work out the details without using envelopes and that is something that would be wonderful for me to do someday (using envelopes can illicit the most horrifying stares!) but right now, for me, I need the TANGIBLE reminder to stay on target and the touchable proof of improvement as the amount of bills add up. I still need to force myself into financial submission. ;-)

The only money that stays in our account is for tithe, rent, utilities, life insurance, Netflix and debt pay off. Everything else is divvied up into envelopes. These are my cash categories.

Preparedness (food supply, grain mill, garden seeds, etc.)
Homestead (animals, animal feed, tractor equiptment)

There are several categories I would like to add, but am waiting until the credit card is paid off and that cash is freed up. One is a homeschooling envelope for curriculum and supplies. Any envelope system fans out there? I'd love to know what's in YOUR wallet?! That is, what categories you have created.

What isn't SPENT in a category simply rolls over until the money is needed. Again, self-control is necessary not to raid envelopes simply because the cash is there. (I am practicing!)

What I love about this system is that I don't FEEL limited in my spending (It's like those diets that promise you can eat all the food you normally do while still losing weight. Only this works! hehe) and I don't feel GUILTY when I go to buy needed shoes for the children. Because the money is already there and had been planned for! I also love the recreational envelope...because that is a really fun one! ;-)

My husband has changed jobs twice since the time of the higher paying (for us) job, and with each move he has taken a drastic pay cut. We are now working with almost half the salary that he had been getting before but you know what? I have never been more EXCITED or at EASE about our finances before.

I am writing all this here in as transparent a way that I am allowed and admitting my own mistakes in PUBLIC (man, I AM insane!), in order to encourage us all to be better stewards with our money and to debunk a few myths even I fell for up until recently.

Myth #1) "If only we made more money, we wouldn't be in this mess..." DEBUNKED. It isn't about the amount of money you make-it's about your mindset.

Myth #2) "If you have are debt-free, who cares about a budget?" DEBUNKED. You still need to know where your money is going.

Myth #3) "If only I were debt-free it would be okay". Being debt-free is NOT enough...you also need to be PREPARING for the future!

Myth #4) "It's all the credit cards fault!" DEBUNKED. We need to stand up and give accountability for our own shortcomings. Nothing can change unless we are honest with ourselves.

Myth #5) "It's impossible to live a happy, luxurious life on a modest single-income with lots of children."

You just keep visiting this blog from time to time and I hope you'll see how untrue that is.


MidnightMom said...

Amen! We are Dave fans, thanks to this guy (www.delandshore.blogspot.com) and experienced much of the same thing you blogged of. Praise God, we just paid off our credit card! Baby fund is funded! We still have to pay off a car, but that will happen next year. YES, the freedom is unreal. It's like a raise, and yet, realistically, our expenses are higher than ever and our paycheck hasn't increased. Still, the freedom is amazing; we are in control over every dollar. Much practice, some difficult talks, difficult days...but praise God, we have learned much and are plowing through! Baby steps, baby steps. :) Congratulations to you all; good work!

Jessica said...

Don't even get me started on my LOVE for DAVE RAMSEY! Isn't it funny how God works?

KaitlynRae said...

We too are Dave Ramsey fans! We were just married a year when we took the classes at our church. I'm so thankful! Our first year was very rough, coming up on our second I can see the actual financial peace we've had by being on a budget, getting our debt paid off, etc... We went against some of the teaching. We had just started on the preparedness part of saving for a new car because we knew my husband's car was on it's last leg. Two months in and the car died. We hadn't even saved enough for a down payment on a not so great used car. So since we're planning starting a family soon, we decided to get something a little more dependable. We took out a car loan. Eeek! I physcially felt ill for a while. But I'm over it now. We have it almost half paid off. We've been attacking it with Gazelle Intensity! I could go on and on about out budget and what we've discovered works better and how we've been blessed by being good stewards and such and such... but I'll just answer your question. We have 4 physical envelopes that we put cash into. The other "electronic" envelopes which I have set up in an excel spreadsheet, gives us another 9 envelopes. Food, Toiletires, Housing-includes insurance & repairs, Transportation, Medical, Dog, Giving(Tithe), Utilities, Music-Husband is an Itunes maniac and we just give him like $3 a month. I'm glad he's satisfied with that. There's a couple others I cannot remember right now. I'm so glad you and your family are doing so great with the budget. It can be difficult but it will be so worth it! I love reading your blog and hearing about the ways that you save and your CVS excursions, etc... It's so encouraging! Please keep us updated on any ways you've found to save another penny!

Jessica said...

I am sorry...our story sounds just alike...I want my family to THRIVE also. The Total Money Makeover was our turning point also! Reminds me...I just might blog it also!

JenniferM said...

The zero-based budget is an interesting idea--I'm not a Dave Ramsey fan, so the concept is new to me. (Don't get me wrong, I'm sure Dave has tons of great advice, but I never made it past reading his 7 steps because I didn't agree with them.) My husband is also self-employed, so some months we have tons of money and some might go by with no pay at all.

But, we do have digital "envelopes" for the spending categories that tend most to get out of control if you don't keep an eye on them. The primary ones: clothing (mostly kids'), gardening, preparedness (other than food), and dining (a VERY small amount).

I don't think I could pull off a grocery budget because the line between weekly groceries and food 'preps' is very hazy. We buy plenty for storage, but also eat the older stuff and have yet to get a real solid system in place to know exactly what we have or need.

Otherwise, I keep a certain amount for unexpected needs (medical, home repair, needed furniture/appliances, etc). If I dip into this, we pay ourselves back until it reaches the target amount again. If it exceeds the target by much, I send the extra to our mortgage.

It's great to hear your system is working for you! Keep up the great blog--I enjoy every bit!

Michelle said...

We've never read Dave Ramsey, but from all the stories I have read, he seems to be a blessing to many.

I am glad you found something that works for your family and my prayers are with you to get out of debt, and SOON! :)

Anonymous said...

We're taking Ramsey's Finacial Peace University program at church and it has inspired me to stay out of debt (just paid off the last school loan in February!). No more car loans, nothing more than gas on the credit cards (I know he says to cut them up but we've always paid the balance) and saving up for the future. I had a similiar reaction when I realized how much money flowed out of our hands before we started budgeting. It mad me sick, sad and mad :(

We started a homeschooling envelope. I'm excited to have money especially set aside for that :)

I like hearing about you're doing with your new system. Keep us informed!

Mrs. Bowen

Regina said...

We are doing envelopes too. Yes, it is a very difficult thing not to raid another envelope, but so satisfying when you see those envelopes growing.

We've listened to Dave Ramsey on Friday evenings online. The "We're Debt Freeeeee" screams are not just obnoxious, but addicting at the same time. Hearing these people's stories about how they've eatten rice and beans, beans and rice for months to just get debt free is inspiring. I love it! :D

I thank you for your transparancy Rebecca. ((((hugs))))


sem said...

Thank you for this post!!! I got the Dave Ramsey book for Christmas and started reading it in January. I loved what I read but started to lose sight of all of it when the tax refund came. Same old story...a pizza here, a 'lunch out' there. I read this just in time to get myself back in line before the surplus disappears. Again, thank you!!!

Jinger said...

I am new to the Ramsey world, but after reading this and other's comments, I was wondering if you could suggest which one of his books you recommend (first)? We are not currently in debt, but we don't have a 'savings' built for our future. Just trying to avoid wasting time & resources if one or some are better than others.


Rebecca said...

4Bitts~thanks for your question. If you are not in debt (good for you!!!) I think that Dave Ramsey's "The Total Moneymaker" will not suite your needs. It is more an inspirational book to get people OUT of debt. After having read all three of his books in a one month period, the information all seemed to meld together and reiterate so it is hard to remember which were the best. I would say you would probably enjoy Financial Peace and glean more from it than any other one. You'll have to let me know if you get a chance to read it and whether or not you like it! I'd love to hear!

Christine said...

I love Dave Ramsey! We are, thanks be to God, debt free except for our house, which we are trying to pay off quickly. Thanks to hubby's good wisdom, we have a nice cushion saved, (close to a year's worth of income), yet it never seems like enough, in case of an emergency. Way to go, Rebecca!

Anonymous said...

Thank you so very much for sharing your ideas and thoughts. It's very helpful and encouraging. I sent your post to a couple of friends who need this type of encouragement too.