Hi everyone! Long time. Please join me at the soapbox.
Gird up your pocketbooks, people. If you’re not debt-free, get that way, and get an emergency fund in place.
Everything’s about to get really expensive when the taxes go up drastically in January and all the ObamaCare regulations roll in on the businesses you work for and buy from (some already have, and companies have already stopped hiring full-time workers so they don’t have to pay the massive ObamaCare tax of being required by the government to buy health insurance for their employees), and the less debt you have, the better you’ll be able to deal with it!
We’ve been working through Dave Ramsey‘s baby steps since May 2011, and you should too. We’re almost done with our emergency fund, and then the real fun starts. We haven’t had any non-mortgage debt since March — no car payments, student loans, credit cards. We only have the mortgage. How much money could you save every month if you bought cars only with cash, paid off your student loans and credit cards, and quit buying things on credit? We have a significant amount per month more now that we’re out of debt, and we’re putting almost all of it into savings. After the emergency fund is in place, we will start chucking a ton at retirement and college funds, and the rest will go toward paying off our house. Can you imagine not having a mortgage? Can you imagine having that extra thousand, 2K, 3K a month? I can (for us it’s $1200). That’s when the real fun starts. That’s when you get to take big vacations and buy stupid things (only with cash, though!), and give a lot more to charity (real charity, not prison-enforced “charity” that you pay to the IRS), as long as it’s in the budget.
Eat beans & rice and cut out the luxuries (including eating out, alcohol — really, look at your alcohol expenditures and see how much money you’d save if you cut that out, tobacco, expensive clothes), and GET ON A BUDGET. Frank and I each still have an allowance. We each get a small amount every month that we can spend on anything we want. And that’s all. We don’t say, “Oh, I really want this, though, and it’s only $30, and we have $30, so I’ll just buy it.” If I don’t have enough in my allowance right now, I wait until I have enough saved up (we carry balances forward month-to-month, and I just make sure I mark in the budget that the full allowance amount was spent). It’s frustrating when I want something *right now* but it’s necessary. I live in a 1st-world country, so it’s all luxury. I’m not suffering if I have to wait until next month to buy the next Harry Potter book for my Kindle or wait two months to buy my Big Shot. We started with the allowance system back in 2007 when we realized that we weren’t making any headway with our finances, and that’s when everything started turning around. We also take 10% from any extra money (bonuses, royalty checks, etc.) that happens our way, and we put that in our “fun money” fund. We use that for eating out and non-fancy vacations, and if we don’t have money in our fun money fund, we don’t eat out, I don’t make sushi, and we don’t go anywhere that isn’t free. We have a small amount budgeted for vacation savings each month — yes, this is a luxury, but we need to visit family every couple of years, so we budget that. We also budget a small amount for Christmas savings each month so we don’t get hit with the whole thing in December — and it is a small budget. We don’t buy a lot of gifts for each other or for other people right now. It’s not in the budget. We occasionally splurge (for Buttercup’s birthday, we bought her a doll house), but only after both approving the splurge and putting it in the budget. Yes, we get each other’s permission to spend money that isn’t budgeted, because we’re married.
Set a limit for yourselves on money you get to blow, and you have a lot more money for the more important things, like life insurance, gas, saving for your next car (we’re about to save for a minivan so that when the new baby comes, we’ll have a nice used van for me to haul the kids around in), and groceries — which are about to get even more expensive. I’ve seen my grocery prices at least double in the last 4 years, and I expect them to skyrocket when we hit the fiscal cliff, which is coming, and it’s not racism telling you that, it’s math. January should be fun and/or horrific for everyone, especially people dealing with debt payments they can’t afford.
And teach your kids about living on a budget so perhaps the next gen of politicians can understand the importance of not spending more than you make and of saving money. And that people will vote for fiscally sane politicians in the future.