Envelope System: March Review...

Month three of our Dave Ramsey plan to financial freedom has come and gone.  In the past two months, I have posted ideas and suggestions on ways that we save money in our house... but to be honest, this month has been kinda difficult with this whole plan, and I just need to work out some of the feelings I have been having with it.  Because seriously... this plan is not always easy to follow.

Sometimes it is hard.  There are times when I just want to go out to eat for lunch.  Or I really want to join some girlfriends for a day out of town or a dinner and a movie.  There are times when Popeye is out of lunch money by the end of the month and he is completely desperate for some fast food and a respite from PB&J and Famous Amos cookies day in and day out.  But I have to keep the end in sight.  I have to concentrate not on the the fun or things that I am missing out on now, but on the freedom we will have in a few years once we are free of this debt.  But I can't lie.  It. is. hard.

Sometimes I cheat.  Toward the end of this past month, we were just simply out of grocery money.  Even with my Vons gift cards from prescription transfers, we had spent too much.  I blame this mostly on my increasing hunger, and the fact that we make every single meal homemade.  No more eating out, no more just eating cereal for dinner.  We are really trying to be healthier and eat more well-rounded meals in this house.  That means more veggies, more whole grains, and much, much more fruit.  When it came to the last few days of the month, and I had already started putting some money aside for next month's envelopes, I had to cheat and "borrow" some money from April's grocery fund.  I don't suggest this.  That just means that April will be short money... which means I will most likely borrow from May... and will then have to borrow from June... and so on and so forth.  I try never to do this in any other category... but with food, you can't just say, "Sorry hubby and child... no food for you this week!"  Even though we couldn't stick within our budget for groceries this month and I had to cheat and take from the next month, I make a point to not just pretend like that money didn't come from no where.  I still mark down that we spent allocated grocery money from a grocery envelope.  Every dollar is still accounted for.  

Sometimes it is humbling.  We can't just go out of town on a whim anymore.  We can't participate in all family activities that we'd like to.  We can't just run to Target when something new and cool comes out or is on sale.  We have to admit to people that we just don't have certain things in our budget, and we have to sometimes bear the guilt of not being able to participate or the frustration of watching others participate when we can't.  It is hard to admit that we can't afford things sometimes... or that no, we can't work certain things into our budgets... or that yes, a lot of things that we do are a sacrifice that are planned out and saved for, often many months in advance.  Every dollar is accounted for.  Every penny saved.

Sometimes it is revealing.  After our anniversary dinner this past month, Popeye and I went to Target to check out some workout stuff we are interested in and browse through the summer patio furniture.  We found a little couch and table set we are interested in for the back patio.  We have wanted a set like this for three years, and just never have found one that is comfy, not hideous, and within our price range.  Of course, in the midst of Dave Ramsey, we find a set we love.  As we sat in the squishy chairs relaxing after our ginormous delicious BBQ dinner, Popeye sighed and said, "If this was last year, we would have just bought this even if we didn't have money, wouldn't we?"  I just sighed and said, "Yup."  We had no problem whipping out the credit card before to justify purchases, knowing that it would "only" take us a few months to pay it off.  It was kind of shocking to realize how much we depended on our credit card before, and how easy it used to be for us to just buy stuff on a whim if we really liked it.  

Sometimes it hurts.  It hurts to not be able to join our family and friends on outings.  It hurts to write that extra big check for our debt snowball every month.  It hurts to have to say "no" to so many things that we want to say "yes" to.  It hurts to know that we still have so many more things we need to cut back on, especially as the summer comes and the cost of electricity and water and such begins to rise.  It hurts to know that only a few months have passed since we started this whole thing, and we still have more than two years to go before our debt snowball is done.  Yeah... it kinda hurts.  

Sometimes it down right stinks.  This past month was hard, I'm not going to lie.  We were excited when Popeye graduated from academy back in January and officially became a Deputy Sheriff.  But with his graduation came the duty of paying much of his paycheck into retirement.  I know that this is going to be awesome in 30 years when Popeye retires and we have no income coming in other than retirement... but right now, it just plain stinks.  In fact, I'll say it.  It sucks.  I am so thankful that Popeye and I both even have jobs with this insane economy.  And I'm so thankful that we are being diligent about putting away generous amounts of money into his retirement.  But between this debt-free plan and our focus on being faithful with tithing (even when it hurts!) the past few months have been frustrating.  We have cut from every place we can think of... and the hardest part is that the true cuts have realistically not begun.  We still have a home.  We still eat good food.  We still use two-ply toilet paper.  And quite frankly, all those things seem like luxuries when I realize how many people are going without right now.

Okay.  So there it is.  We are still chugging along... and trying to be positive... and working our way along with our little envelopes-o-cash.  For those out there who are working on this system, I want to encourage you to hang in there!  For those who are thinking about it, I want to encourage you to try it, even if you just work on reducing a specific debt or cutting out your costs in one area.  It is tough... but I know that in the end it will be so very worth it!

Envelope System: February Review...

We did it! Month two of our Dave Ramsey plan and the envelope system is finished! Just like last month, we were hit with some unexpected bills... the Camry needed new tires, which sucked our emergency fund nearly dry. But hey, that is what it is there for, right?! It felt so good knowing we had the cash on hand to pay for such a big expense. As soon as we used the money, we got right to work replenishing the cash we had used. This month we also made our first balloon payment toward our debt snowball. Yeah! It is so freeing knowing we are working toward a better future for ourselves, and knowing that at the end of the month, as long as we are diligent, we can be free and clear of credit card debts and an over-extended bank account.

This month was a bit harder I think for Popeye than for me to hang onto the strictness of the envelope system. Popeye is a gift giver... and I told him NO GIFTS... even though Valentine's Day and my birthday both fell in the middle of the month. I know it must have killed him to not lavish me in gifts as he has done in previous years (how did I get so lucky?!) but he stood by the rules (for the most part!). I did get a nice box of chocolates, a container of yummy ice cream, and an adorable pot holder for my kitchen. Of course this money came out of the gift envelope, so I was happy that we stayed in our budget and he was happy that he got to give me at least a little bit of something for those special days...

This month I really worked on strategizing ways to save money while grocery and house shopping... I am not an expert at this in any way, but here are a few of my ideas that you may find helpful if you are looking to save a bit of money yourselves!

Buy in Bulk: I can't even begin to add up all the savings that buying in bulk has provided our family. Costco is our best friend... and even after paying the $50 for a yearly membership, the savings in the end are still amazing. I buy anything I can at Costco... some of my regular purchases are diapers and wipes, cleaning supplies, meat, milk, cheese, yogurt, and other similar diary products, cereal, oatmeal, coffee, and soaps and shampoos.

One of my most recent super savings purchases at Costco was lint rollers. Popeye uses these daily for work, so we go through plenty. At Target, one pack of 70 sticky pads for the roller is $3.99. At Costco, a pack of 5 rollers with 80 sticky pads each is about $8.50. That means the Target rollers are 6 cents each, as opposed to the 2 cents each the ones from Costco come out to. This may not sound like much when you are talking pennies, but when you add up how many we go through in a year, the savings is about $16. And this is for only one item! Think about how much you would save if you purchased all your cleaning supplies and everything else you can at Costco! That is savings a-mundo!

Plan ahead: I try to never purchase more than a few cleaning supplies or certain grocery items a month. In fact, I only have to purchase certain items once a year. I hate to run out of things, and so I keep track of what I need by taking inventory at the end of each month to see what is about to run out. If nothing is about to run out, but I can tell that 3 or 4 items will run out at the same time, I try to pick up a couple of those items this month and a couple the next month. When I have extra money at the end of the month, I take what is left in that envelope and get as much stuff as I can (especially if that item is on special or has a coupon!). I have a large storage shelf in the garage and a cabinet in the laundry room where I store all my goods.

Note: I got this great idea from my mom... forget about expiration dates... instead, mark your goods with the date you purchased them... this will show you if you actually use this stuff, and how quickly you go through it. If it is November and I still haven't eaten these Poptarts, I will know not to purchase so many next time, no matter how great the deal is!

Check out coupons and sales: I try to plan my weekly menu based on what is on sale. For example, if tomatoes and avocados are on sale, our weekly menu will probably consist of tacos, BLT's, and hamburgers. If bell peppers are on sale, we will probably plan on eating shish kabobs, stir fry, and fajitas. Stock up on what is cheap, and make sure you use every piece of fruit, vegetable, or meat that you purchase. Last week, whole chickens were on sale at Fresh and Easy. I purchased a few, made sure they were sealed up nicely with my vacu-save, and stuck them in the freezer for future (cheap!) dinners. Poptarts were on special at Target, and since Popeye eats a packet almost every morning on the way to work, I grabbed several boxes... I got 5 for the prices of 3! Costco has amazing coupons each month. I actually go into the store at the end of each month and ask for a coupon book; even though they don't usually start until the 2nd week of the month, I use the packet to plan where and what I will spend my money on that month. One of the best coupons I've ever gotten there was for face lotion. I was purchasing it at Target for $15 a bottle. I then noticed that the exact same lotion in the exact same size bottle was 2 for $20 at Costco. I then got a coupon for $5 off... which meant I got TWO bottles for the price of ONE! What a deal! They always have great deals on diapers and wipes and cleaning supplies too!

When it is helpful, transfer your prescriptions: If you have to pay for prescriptions anyway, why don't you use the recent influx of store specials on transferring your prescriptions to a new pharmacy to help your budget along?! Last month I received two coupons in the mail that offered a $30 gift card to Vons when you transfer your prescriptions to their pharmacy. I also received two coupons for $10 off my purchase of $50 or more. That meant that I could potentially get two weeks worth of groceries (I spend about $50 a week at Vons...) for just $20. Add some store coupons and coupons from the Sunday paper, and my weekly groceries could actually be free.

$140 worth of groceries... after using lots of coupons and one of my $30 gift cards, I got it all for just $31 out of my pocket.  Those bottles of soda were even FREE.  That isn't what we drink on a normal bases, but HEY... free is free!

 

My Food Saver is pretty much my new BFF... I love to buy in bulk when sales are awesome... My freezer is happy when stocked with yummy goodness!

I hope a few of you can find at least one or two helpful tidbits in this post... and I want to encourage all of you who are working on the Dave Ramsey plan to keep at it!  Every month that goes by is another month towards "financial freedom."  And please!  Share your helpful hints with me too!  The more the merrier when it comes to saving money during these struggling times... :)

Envelope System: January Review...

As discussed in this post from a few days ago, Popeye and I have decided to use Dave Ramsey's baby steps towards finding financial freedom in our lives. We began to discuss this plan wholeheartedly in the fall, and decided to implement our plan beginning January 1st of this year.

I want to keep track of how I am doing with this plan and how each month goes so that I can see what we need to fix or change in our plan and what we are doing that is working.  I'd love to hear from any of you who have used this plan or are currently using this plan to see how your stories compare to ours and how you are making this system work for your household. I also want to stay motivated to continue to plan for as long as we need to in order to pay off our debt, and to move on to saving and building for our future.

This is a review of how our first month went.

The first step towards the total money makeover is to accomplish baby step one: a small emergency fund of $1,000. It was funny to read in Dave's book about how people put this money aside. Some put it in a bank, others stash it somewhere in the house where no one could find it. One woman even took ten $100 bills and put them in an 8 x 10 frame in the back of her closet. She wrote on the glass: Break only in case of emergencies. We started our month by committing this amount of money to an emergency fund to be used only for just that: emergencies.

Baby step two is much more difficult and takes much more time. This step involves paying off all debt, except for a home loan, starting with the smallest debt amount first. You then use the Debt Snowball to pay off each loan, progressively working towards your largest loan. Basically, you pay the minimum on each loan you have, but put every extra cent you have to your smallest loan. Once that is paid off, you put whatever you were paying on that towards your next smallest loan, in addition to whatever you were paying on that loan. You continue paying off loans this way until all your loans are paid off. I am not a money manager or an accountant, but in Dave's book there are great outlines and lists of how this plan works compared to other

 popular debt-payment plans, Dave's plan always came out paying off debts sooner using less money.

So, having completed baby step one, we are now on baby step 2: paying off debt. We committed to no longer using any credit cards, and do not even use our debit card unless it is a strict emergency and we don't have cash on hand. I made envelopes listing every "department" we had (aside from bills) and from each paycheck we receive, I put aside cash into each envelope which we use to pay for various items.

The envelopes we had for January were:

Dr/Health/Beauty (all co-pays, medicines, soap, shampoo, diapers, wipes, make-up, etc.)

Car/Repairs (oil changes, tags, etc.)

Gas

Home/Repairs (detergent, cleaning supplies, printer ink, decorations, etc.)

Groceries

Entertainment (eating out, movies, fun activities)

Swee'Pea

Popeye

Olive Oyl

Gifts

Terminix (this is a bill we only get 4x a year, so I put aside a little each month towards it).

Here are the problems I discovered along the way while I was using the plan this month:

1. We don't just get paid once a month... and our pay dates are never consistent because Popeye works for the county. Therefore, I can't fill each envelope at the beginning of the month, and rather make 'payments' to myself. I keep track of the money I've put into the envelope on the right side of the front, and the money that comes out is kept track on the left. I have run into a few situations where I had to hold off getting gas or groceries by a day or two because we had to wait to get cash into our envelopes. I am committed to not using credit cards though, so I kept committed to only purchasing things that I had the actual cash on hand for.

2. Sometimes unexpected things happen. Like having nine doctors appointments with nine co-pays between Swee'Pea and myself in a two-week period in January. Or having to purchase a stinking boot because I was being ridiculous and thought that cheap towel bars could hold my body weight (sidenote: I now need to buy a new towel bar....). We went way over on our Dr/Health/Beauty budget this month. But of all the things you may have to compromise on, this is one I couldn't say no to. Doctors don't exactly like you barter at the counter for what your copay will be for your visit. Or your ridiculous boot.

3. There were some things I simply didn't think of that we spend money on. There were some things that simply don't seem to fit in any category. Like gum. And dry cleaning. And stamps. I don't want to use what little personal money I get each month for gum... but I can't exactly count it as groceries. But what if I buy a large box and Popeye and I share it... then does it count as groceries? And what about dry cleaning? Popeye needs it way more than I do with his uniforms and suits, so should he have to pay for that out of his personal money or do I make an additional envelope? What envelope can stand losing some money if I have to put more money towards a dry cleaning envelope?

4. No matter how much I deny that I needed it, I have to have a clothing allowance. There is never going to be enough in it each month to actually purchase anything of value, but after saving up a few months worth of envelopes, both Popeye and I will be able to purchase a few things. Between the two of us we've lost 40 pounds in the past year... new clothes aren't just a want in this house, they are a need right now.

Here are the things that made me happy and helped me to feel good about the plan:

1. I knew we would never overdraw our bank account. Popeye didn't have to ask me for money to get gas for the truck or how much money he had to eat lunch or go out with friends shooting. We each have our own personal envelope with our own cash. It isn't much by any means, but it is enough that we can have a few times out to coffee or lunch with friends without feeling guilty. It is funny to see how we each use our money: I choose to save mine up until the end of the month to go out to a nice dinner or drinks with friends... Popeye chooses to get as many ridiculously cheap fast-food meals as humanly possible out of his funds.

2. There is no guilt!!! I can buy Swee'Peah\ a pair of flip-flops or a little water bucket and shovel from Target without feeling guilty. I can buy a yummy sandwich or a coffee drink without worries that we won't have enough money left at the end of the month for groceries. Each envelope is meant for what it is labeled, and that is what that money is used for. I loved how at the end of the month if there was extra money I could choose to save it towards something special or buy something extra I wasn't planning on. Swee'Pea's extra envelope money from last month went into this months envelope, as I know that he'll soon need new shoes and summer clothes and I'll want some extra money. And the extra grocery money? That went towards soda and chips and some other treats we normally don't get to purchase. And I got to do it all completely. guilt. free.

3. It is fun! I feel like I am going on an adventure. I love the challenge of seeing where else I can save money, and I love the feeling of accomplishing our goal of paying off debt. I love making my envelopes and lists of finances and typing up my report at the end of the month listing what we spent for each bill and in each "department." Yes, I am well aware that I am a nerd. I've stopped fighting it.

I think that overall our first month went well. The best part of this plan is that I can change it as I need to in order to fit the different needs we will have each month. For February I adjusted the amounts of cash I wanted in each envelope, and also added a few new categories: lawncare and clothes. We no longer have a gardener, so it did not even dawn on me that we'd have to spend money for our lawn. Um, yeah, apparently we still have to buy weed killer and grass seed and gas for the mower.

I am excited to see what February brings with our budget and our envelope system. I feel encouraged by how well this month went, and I'm motivated to continue our plan for as long as we need to accomplish baby step two and beyond!

All my envelopes... I keep track of what I've spent and where on the left hand side and keep all my receipts in their respective envelopes which helps for easy returns when necessary...

My new "wallet"... ignore the labels, this is from my wedding.  I divide my bills into those that are due first of the month and those in the  middle.  I have my stamps, envelopes, address labels, and my check book in here.  And, of course, my trusty calculator!  I just grab an envelope out when I need to go shopping, and this helps with the ease of paying and organizing my bills.

I keep a little flip book in my purse to write down things I notice on sale and things I know I need to purchase in the next few months.  I try to put an estimate of how much they will cost on the side so I can evaluate which I should purchase first or which I have enough money for that month...

My monthly "statement" of all money brought in and taken out.  We paid off some stuff this month with accordance to baby-step one, so we had some transfers from our savings... this was the HARDEST part for me... letting go of my savings.  I swear I keep looking over my shoulder waiting for one of our cars to breakdown or for our house to flood now that we are doing Dave Ramsey.  I'm trying to trust in the Lord though that this plan is right for us!

I know this post was RIDICULOUSLY long. And perhaps no one will read it. But it really helped me a lot to sit down and think out what I have liked and disliked about this plan so far. I hope that this may help some of you who are thinking about doing this plan, or have started this plan but have felt discouraged lately about sticking with it. I just want everyone to know that it is possible, and how excited I am that we are on the road to a Total Money Makeover!

Kickin' debt's butt...

We're kicking debt's butt...

Well, at least we are trying.

Many months ago I asked some advice on how others manage their debt and bills and finances and such. I got some great advice, but over and over again I heard the same name:

dave. ramsey.

My mom had mentioned this name to me around the time that Swee'Pea was born, but I had brushed off what she had to say and made the excuse that, "We don't have enough money to budget," or "We can't use our savings to pay down our debt, then what if a disaster strikes?" I made the excuse that the debt we had was perfectly normal debt. House loan, two school loans, two car payments, and a small credit card from purchasing work and school clothes and Popeye's uniforms. "That kind of debt is perfectly acceptable," I cried. "Who doesn't have that kind of debt?!"

Excuses, excuses, excuses.

Then there I was, months later, ready to fight and excited to commit for the first time in our marriage to making and, most importantly, keeping, a strict budget.

I was given Dave Ramsey's book The Total Money Makeover in November. My mom had purchased it for me some time before, but with my adamant refusal to follow his plan, she hadn't given it to me until then. I picked up the book and read it from start to finish in a period of just two days.

By the end of the first few pages, I was hooked

Right away I loved that Dave's approach was based on his belief in God and His word.  I was thrilled that his principles were based off of giving to others and not just living in the world by purchasing things that are unneeded and can't be afforded. He doesn't offer a "get rich quick scheme" or a promise of early wealth and satisfaction in the world. His basic principle is to "live like no one else now so that you can live like no one else later." To live a debt free life later, we have to be willing to give up some of the things we have enjoyed (trips, dinners out, clothes) now. We have to stop relying on the money we owe to others and instead rely on our own income to pay for the things we want and need.

Dave's plan is simple, but it takes work. It takes effort, planning, and stamina to make it through his steps. It takes commitment. It takes time. But most importantly, it takes a true desire to beat debt to its death.

His plan follows the following seven basic steps:

1. $1,000 to start an emergency fund

2. Pay off all debt using Debt Snowball

3. 3 to 6 months of expenses in savings

4. Invest 15% of household income into Roth IRAs and pre-tax retirement

5. College funding for children

6. Pay off home early

7. Build wealth and give! Invest mutual funds and real estate

Sounds easy, right?!

I thought so, too. Basic. Straightforward. Easy to understand.

I spoke to Popeye, and he was on board. As I am anal and organized and am in charge of the finances, he is pretty much on board anything I suggest as long as I am willing to do the work to make it happen. Only two things stood in my way from being totally gung-ho about Dave's plan...

#1: Ramsey promises that as soon as you decide to tackle debt in this way, a disaster will strike.

#2: We would have to set aside only $1,000 in our savings and use the rest towards our Debt Snowball. This would leave us without a soft cushion in case off future pay-cuts, illnesses, etc.

I thought about it for about a week... I spoke to my parents... I spoke to friends. I met more and more people who had tried or were currently trying Dave Ramsey's plan. And over and over again, I heard the same thing:

The plan works.

With my research done, and my concerns discussed with people I loved and trusted, I finally made a decision I felt 100% confident was right for our family.

We were going to commit fully to following Dave Ramsey's plan!

Within days I had printed off worksheets and began organizing my budget. We decided to start the plan slowly in December and fully hit it hard in January. I was stoked. I was excited. I was anxious to get our debt paid off and feel free from the burdens of endless monthly payments.

And then I had my seizure.

Just as Dave had promised, the moment we decided to implement our plan, disaster struck. We were hit with huge ambulance and hospital bills. We spent days in various doctor's offices, and had to get prescription after prescription filled. Our saved Christmas cash went to making payments, and our hope for beating debt felt like it was quickly going out the window. I was upset. Quite frankly, I was livid. This isn't the first time that this has happened to us. Every time we decide to do something important and huge, it seems like something stands in our way. We get a bonus check... the brakes on the car go out the next week. I get a refund check in the mail... we have to pay to reseed the front and back yard. I felt frustrated that this wasn't what we should be doing at this time, that it was a sign that we should just keep living our lives the way we were.

Thank goodness I was wrong.

My parents gave Popeye and me Dave Ramsey's Financial Peace University boxed set of CDs and workbooks for Christmas. I quickly got to work deciding which debt we would pay off first, and organizing how much we would spend in each area. My plan was to start the plan come January 1st. It was going to be a new year and a new start. We were going to get through baby step #1 and move our way onto baby step #2. We were going to commit to beat debt, and we were going to commit to it now.

I spent the last few days of 2008 getting my "envelope" cash system ready and making a list of what debts we would work towards paying off first and how much of our budget we would allocate to each payment or "envelope" each month.

I fell asleep on New Year's Eve strangely excited about the new financial path we would be starting the next day.  I awoke to a new year with new hope for our future and our financial freedom.

Stay tuned for my review of how our first month on the plan went...

This is how I have been feeling since deciding to follow through with this plan... it is so freeing having a plan and knowing that Popeye and I are working toward a better, brighter, and more secure future for our family.  Okay, so if this was really me in the picture I would have chosen a less masculine pant suit... but still, you get my drift... :)