dave ramsey preaches the zero-based budget. personally, i highly recommend this idea.

the basic idea is that you “spend” all of your income on paper. when you receive your paycheck, write out where that money needs to go. the order i use is giving (or tithing), bills, sinking funds and cash envelopes. all are equally important, but my order goes from least flexible to most flexible.

for instance, we give a “non-negotiable” amount to our local church
next, our bills are mostly the same every month
then, we have our sinking funds and some are more flexible than others
and then our cash envelopes, and i’m the master fudging our grocery budget : )

subtract all of the above expenses from your net income and your number should be $0.00. thankfully, it’s not a super complicated idea.

it’s also not the only way to do a budget, it’s just our method of choice.

what is a sinking fund?
a sinking fund is a “savings account” that you deposit small monthly amounts for those large irregular expenses such as auto insurance, property tax, christmas, vacations, etc.

here is why i love sinking funds:
they save you money
we save over $200 each year by paying our car insurance in full every six months. if we didn’t use a sinking fund to save up for our car insurance, we would be unprepared to pay this larger amount and have to pay a more expensive monthly price.

they save you from stress
what? christmas is here already? i have seven immediate family members, six in-laws, one niece, four “adopted” family members and one husband. that’s a lot of presents! not to mention mailing out christmas cards, travel expenses, and a slew of other things i always forget that cost money around christmas time. because we save up for the expense of christmas all year round, it’s not nearly as stressful.

they keep it real
sure, it would be great to spend thousands of dollars on vacation every year, but realistically, we can only afford to save $40 per month toward a vacation, which totals up to $480 annually. we can still have a lot of fun with 500 bucks, and it keeps us from having unrealistic expectations for our vacations.

here’s a list of our current sinking funds:
general savings
auto insurance
christmas
eye exams
vacations
home insurance
property tax
birthdays
vehicle tax

note: in the last couple posts i stated that we had $13,000.00 in debt at the beginning of 2009. after going through our financial records and realizing i don’t have much recorded before june of 2009, i’m going to revise that statement. we had approximately $13,000.00 in debt in june of 2008. i thought you might appreciate correct facts! 

here’s what 2008 & 2009 looked like for us, debt snowball style:

2008
in six months (june-december), we paid off roughly $3,000.00 in debt. i didn’t keep great records of our finances personally, and mostly relied on online banking. so this a rough estimate.

january
started the year off with a little over $10,000.00 in debt
fully funded our honeymoon budget with christmas money/bonus
started financial peace university with our connection group
paid off debt

february
started couponing more
received a tax refund
put $1,000 in an emergency fund
paid off debt

march
found out my dad lost his job, God provides for our wedding.
purchased our wedding bands on 0% interest credit: increased our debt by $500
shared all of the above with our connection group
paid off debt

april
worked on our married budget a lot
decided to live off my income after we get married
paid off debt

may
got married!
paid cash for our honeymoon
wrote hundreds of thank you notes to our generous wedding guests
cashed our wedding checks!

june
started married life with about $8,000 in debt
paid my car payment down by $2,000
started saving for tuition

july
paid my car payment down by $900

august
paid off my car (our only interest-accruing loan)!

september
paid off our wedding rings!
paid down our debt to bryan’s parents by $850
ended september with $2,600 in debt

october
bryan’s car requires $2,620.68 in repairs

november
paid for the car repairs with the money we were going to pay off our debt to bryan’s parents
stopped in awe at how precise the numbers were
revised our debt pay off plan
ended november with $2,600 in debt

december
bryan’s parents gave us the gift of being debt-free by forgiving the balance on our loan from them!

by God’s grace, we started 2010 with a plan to move to iowa city, and nothing in our way. we had no debt! hopefully this encourages you that in time and with a lot of effort & hard work, being debt free is possible!

[sorry this post is a week late!]

as i mentioned in my last post, at the beginning of 2009, we had about $13,000.00 in debt. also at this time, we enrolled financial peace university with our connection group.

a few things about financial peace university:

• dave ramsey is the creator/author
• it can be a semester long course, around 13 weeks, there are “quickie courses”
• it usually costs around $100
• it centers around dave ramsey’s “7 baby steps”

i’m going to give a quick summary of our thoughts on those above bullet points.

dave ramsey
first impression: he’s a little nuts. giant scissors and a deer on stage? is this guy for real? bryan doesn’t take well to overly excited people, and dave ramsey’s one of those people. i’m a little more unaffected by the hype but i can understand why some people (my husband included) are a little overwhelmed by him.
my advice: listen to what he has to say and ignore the hype if you must. don’t tune him out completely, even if you’re a little overwhelmed! he has a pretty incredible personal story, and he has a lot of wisdom but hey, he’s an excited guy.

long or short course?
we went through almost every week in the series with our connection group and we were also required to complete a quick version of it for our engagement class. we did have some debt, but we had pretty good foundations for personal finance already, so i think we could have just taken a day-course and called it good.
but, there are many benefits to taking a semester long course, and it’s what i would recommend to any one who needs help with their personal finances. one huge benefit of the longer course is that you have incredible motivation and accountability with your class or small group. every one shares stories each week and it’s so encouraging to be walking through the learning experience together. plus, you can all make inside jokes together about dave.

the cost
to someone struggling with finances, $100 can seem like a small fortune. but i strongly feel that it’s totally worth it. spend the money, it will save you a lot more later. i promise.

the 7 baby steps

1. quickly save $1,000 in a baby emergency fund
2. become debt-free using the “snow-ball method”
3. fully fund your emergency fund (from step 1) with 3-6 months of living expenses
4. contribute 15% of your income to retirement
5. fund your kid’s college educations
6. pay off your mortgage
7. invest money and give a bunch of it away-live like no one else

being engaged for 13 months wasn’t exactly our preference, but it was our choice. it was long, believe me, but i’ve never regretted our decision. there were lots of great things about a long engagement, but i’ll stick to one for this post. we were able to pay cash for our awesome honeymoon.

so how’d we do it?

a couple months after we got engaged, after some of the initial wedding planning craziness was behind us, we started thinking about the honeymoon. we looked at some different options: cruises, resorts, hotels, airfare. we talked about what the ideal honeymoon for us looked like. i knew that i wanted a beach, a comfortable room, and no planned activities. bryan agreed so that ruled out a disney honeymoon or a cruise. we wanted something remote, but not so remote that there was nothing to do.

after we had an idea of what we wanted, we discussed how much we’d be able to save before the wedding. bryan’s parents were so generous to give us a sum of money for our honeymoon as a wedding gift. thanks again mom & dad! they were even more generous to give us our gift early, and we used it to book our flights early and pay for the deposit on our lodging.

we searched through many options and decided that while an all-inclusive resort might be nice, it was likely going to be more expensive than booking our own lodging and eating out. in the end, we spent about 2/3rds of our budget on lodging and travel expenses and saved the rest for food and fun.

we put a monthly amount into a savings account over the course of the next year and had all the money we needed for tons of food, fun and all those unexpected travel expenses. and we didn’t have any credit card debt after we got home! in this, we were able to truly start fresh financially as a newly married couple. God is so good to us!

i’m sure you’re wondering, what was the most fun thing about our honeymoon?

mini golf, of course!

click here to start at the beginning of this series!

hopefully it’s obvious that this is just one of many stories about our financial journey as husband and wife. but if i had to just write one post, neigh, one sentence about our journey it would be this:

God has done a great work in us, blessed us much and always provided. 

hopefully that sets the tone i’m going for. i take no credit for the way that God created bryan and i, nor the protection, wisdom, and blessing He’s given us to make wise financial decisions throughout our lives. while we’ve worked hard and learned a lot and have had great luck in our financial decisions, God has been in charge and leading the way.

so i’ll try to start in the beginning. ish.

i married an amazing man. he is the hardest worker i know. he’s always been like that too. he always had a job in high school, he paid for a lot of his own possessions. he got good grades too! he’s amazing. i remember him working 60+ hours a week the summer after we graduated high school. he worked hard and he was never tight on cash, because he never let himself spend too much of that money. he planned on going to iowa state in the fall. i was so impressed by that 18-year-old.

meanwhile, i got a great job right after i graduated high school. i loved it so much that i decided to skip the typical college route. i didn’t have a car at the time, but had a steady and decently paying job, so i bought a brand new car and took out my first loan. a friend helped me get a pretty good rate, and i didn’t mind a car payment. i didn’t know how else i was going to get around.

i also applied for the first credit card offer i got in the mail. i thought it might come in handy and i could get a cool picture on it. yep, that’s how a 17-year-old thinks.

by God’s grace, i knew that i shouldn’t carry a balance on my credit card, so while i forgot to pay it off on time once or twice, i never got charged any interest or had outstanding credit card debt. i’m so thankful for that!

bryan went to iowa state for a couple weeks. after learning he didn’t have as much savings as he thought, he dropped out. he decided he didn’t want to rely on his parents money or student loans to get through school at that point, so he just worked and applied to go to dmacc, our local community college.

bryan worked around 30-40 hours per week and took 2 or 3 classes at dmacc each semester. he always paid with cash. i continued to work, got a few raises and lived stress free. both bryan and i pretty much lived paycheck to paycheck as we navigated the adult world. but we never bounced checks or went into consumer debt.

and that gives you a picture what we were like in our single years. then we got engaged.

more next week!