I got my first credit card when I turned 18. I walked into Victoria Secret like SIGN. ME. UP! They really get you with the whole, “you only have to pay $25 a month” and of course I got approved to screw up my credit. In today’s society, it’s the norm for everyone to have huge amounts of debt. We have been brainwashed to think we HAVE to have debt. I am leery of everything that the government has created for our society to think is normal.
They didn’t teach much in school about managing money and living debt free. If they did, I clearly wasn’t paying much attention. From the time I got my first job, through my young adult life before I got married, I literally never saved my money. Coming from a home where my mom was a penny pincher because she LOVED to save her money, you’d think I would have known better. However, the struggle has made me appreciate my new found love of budgeting my money and saving it. It feels good to have a peace of mind around your money.
So let’s just skip right ahead to how I did this. My dad bought me Dave Ramsey’s Book, “The Total Money Makeover” for Christmas last year. I literally tried so hard to get into the book so many times but honestly, it’s hard for me to stay interested in books without a storyline and sex scenes. Eventually, my husband and I began watching Dave Ramsey’s talk show on YouTube and BOY did that immediately start changing our thought process of money. It definitely encouraged me to continue reading this book; he had some gems.
STEP #1 – STOP USING YOUR DEBIT/CREDIT CARD. CASH ONLY PURCHASES!
Now obviously for big purchases, if you’re traveling, or have to place a card on file for anything then do so. The point here is when you’re shopping or you’re going out to eat you always use your cash. When you swipe your debit card you don’t feel as attached to the money because we’ve become so accustomed to just swiping and going. We don’t see the decrease in our money, we don’t feel the connection to it like you do when you’re handing over your cash. Before breaking the twenty or using the last of your money you will think twice, be patient and look for deals, instead of the normal “fuck it” action. No more swiping your card for small $1-$10 purchases. Hand over the cash.
Dave Ramsey | Carrying Cash
Now after watching him on YouTube, I started the cash-only method first and I definitely felt a difference. However, after a while, I started backsliding. I started still having a fuck it attitude with my cash because I could just go take more out. I had it all wrong. So I read some more and watched more videos.
STEP #2 – ENVELOPE SYSTEM BUDGET
The envelope system completely changed how I managed my money. This is a major key. It’s old school, this isn’t anything new. Take it back to the basics and get a few envelopes that you will use to separate your money every payday. When you get paid you can still pay your bills from your bank account. For example, you will want to create a budget for your Entertainment, Groceries, Gas, etc. (I will create another post more in-depth using this method). The way this works would be if you get paid bi-weekly, let’s say you have a $200 budget for groceries for the next two weeks, $50 for entertainment and $50 for gas. You will go to the ATM and pull out $300 and place the cash into its designated envelope for that two weeks. As you go grocery shopping, whatever money you have left over from your trip goes back into that grocery envelope. Once it’s empty you’re cut off. You can’t add more and you don’t pull from other envelopes. Again, I will go more in depth on this topic later. This is my favorite.
Dave Ramsey | Envelope System
(These are only a few of my envelopes pictured, there’s more!)
STEP #3 – SAVE $1,000 EMERGENCY FUND
I know if you’re struggling to budget now, saving $1,000 can seem challenging. If you are serious about having financial freedom and becoming debt free this is crucial. There are ways to do this. You want to complete this as fast as possible. Go through your home and find things that serve you no purpose and sell it! Dave Ramsey even recommends picking up a side job to save this $1000 as fast as possible. If you feel you can not do that there are other options, whether it’s saving $200/month for 5 months, $350/month for 3 months, or even using that unexpected refund check or whatever lump sum of money you may receive. Don’t be frivolous and spend it on clothes, food or unnecessary items. We are on a mission to save and get out of debt. Save your $1,000 and leave it alone. It’s the beginning of your EMERGENCY FUND. Later on down the line, you will turn this fund into 3-6 months of living expenses.
Dave Ramsey | Emergency Fund
STEP #4 – PAY OFF DEBT USING DAVE RAMSEY’S DEBT SNOWBALL
First thing’s first, list all your debts. I write out my monthly bills in a bill organizer book, so it was fairly easy to write out every company that I owe. Don’t worry about your fixed expenses like rent, utilities, and cable. You want to list things like student debt, credit cards, car debt, tickets, etc. For me, I added up all of our debt minus the car debt, for now, and I made that number my goal. Dave Ramsey recommends paying off the debt by tackling the smallest bill first from smallest to largest until it’s gone! Once you pay off the first one, the money you were putting into that bill you will want to put it toward the next debt. Pay more than the minimum balance so you can tackle it faster. We did this differently. Luckily, my husband had been saving $100 or so a check in an account we never touched or had access to since 2014. What we did was take the money in that savings and used it to pay off all our debt at once. I mean you can’t really have a savings if you’re in debt to multiple companies anyway. So now that the debt is paid and no more $25-$250 bills here and there to pay out every two weeks we have freed up so much of our money to continue saving back up again.
Dave Ramsey | Pay off all debt
Now we aren’t completely finished because we still have our car debt to tackle. Being out of debt from everything else, and even having our 6-month premium paid for our car insurance, is very liberating. We have a considerable amount of money left over each month to continue saving just by completing these first few steps of the baby step system.
Dave Ramsey | Baby Steps
Let’s be real, bills are stressful and who doesn’t want the financial freedom to buy what you want when you want, and not go broke trying? Having a savings is so crucial. There’s always going to be something that comes up in life. You will need a nice chunk of money for a repair, or because you lost your job, etc. When you have savings you relieve yourself from so much extra stress because you simply prepared for events you know are bound to happen.
I can’t wait to share more about how I budget and save my money.
What’s the hardest thing for you when it comes to saving money and budgeting?
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peace & light,