This has been a blog post that I have gotten many requests for, but that I have found daunting to hammer out...because well it is involved and will be very, very long! I have talked about budgeting and saving money many times before on here. But, what I have not done is walk you through exactly how we do what we do.
When we got ourselves in major financial trouble the year after Vivi was born, we turned to our church's financial ministry and were connected with an elderly gentleman who had retired from making lots and lots of money, to help the church members learn how to balance and budget theirs. He was hardcore, ya'll...bringing me to tears at times as I had to let go of the "American Dream" that had been laid before me when I got my college degree. No... life was not about making the most money possible, buying a house and car, and acquiring stuff, stuff, and more stuff. The Lord used that time in my life to say "Let it go. Let go of everything you didn't get emotionally that you feel spending money will fill. Let go of feeling like you have to keep up with people you don't even really want to keep up with. Let go of needing things to satisfy, when only Christ alone can." So I did. We did. We sold our house and moved into a tiny two bedroom apartment with two kids that we lived in for 18 months. We have fond memories of that time when we hunkered down, I extreme couponed...and we carved away at our debt.
And you know what? Obeying the Lord was tough. But it came with SO many, many blessings. And we are still, 3 years later, crawling out of the hole. But the end is in sight. And one of the many blessings that have come about as a result of our financial stewardship has been that in 3 years, we have not incurred a single dime of more debt in any way, and have managed to pay off more than $10,000 of debt that once threatened to drown us.
So it CAN be done. We didn't do our money well with 2 kids, and we paid dearly for it. But we are now doing really well with 4 kids...so that just shows how far we have come! My husband works 2 jobs so I can be here to raise our kids. We stick to our budget. We don't have cable, flat screens, the latest vehicles or gadgets. I don't have a purse or shoe collection. Billy can't collect the guitars he wishes he could. We don't have Ipads or Iphones. We just can't. But our kids are very well dressed and they have amazing birthday parties...and even with all the sacrifices of not acquiring more stuff...we have found a lot more freedom and contentment in what we do have.
So onto the how of budgeting, planning, and paying off debt as a family of six!!
Our first step in working with our financial advisor, was to sell our house, (which we took lots of flack for amongst the American Dreamers in our life) sold furniture, and downsize in a big way. Any extra funds acquired during that step goes directly and fully to credit card debt.
Our second step was we cut up ALL credit cards, 3 total for us. We determined to never use credit again. We determined to never, never open a store credit card even with the allure of a discount or delayed interest payments...and believe me I have had to get attitude with some very pushy salespeople!! We only went back on that one time to buy a fridge when we moved, but paid it off before the interest incurred.
Our third step was to plan our budget around a Percentage Guide for Family Income that we got off of Crown Ministries website. Here you will see all of the free down loadable worksheets I will be talking about. These sheets are a vital part to doing this! The percentage guide is super important when doing your budget, so choose the one that represents your family size. You need to see how you are allocating your income and where. For instance, housing on all income levels should only be about 30% of what you take home after taxes. Many, many people use up 50% of their monthly income to their housing...keeping in mind that this includes your rent/mortgage AND utilities, housing taxes, AND home owner association/storage fees. We had close to 55% of our income going to housing expenses. What does this mean for you? You MUST downsize in some way to be able to make your budget work. Another important thing to point out with this sheet, 5% of your monthly income should always go into savings. Always. That is the only way you will remain out of debt.
Our fourth step was to do a 30 day spending diary, found here, where you and your spouse write down every single purchase you make and for what. This will be important when you are ready to create your budget sheet, so you will know how much money needs to go where and where cuts can be made.
Our fifth step was to create an "emergency fund" of $1000 working up to a savings of 3 months income. We have not gotten that far yet! This will allow you to tap into that fund for new tires, repairs, Dr.'s bills, and the like that pop up unexpectedly to which you would have normally used a credit card for. This is very important to stay out of creating more debt for yourself.
Our fifth step was to create our budget and to get to a balance that zeroed out. Meaning every single penny we make is allocated to a section of the budget. Cuts get made where they need to to buffer the more expensive items. This is our most important form and the exact budget sheets we use every single month is found, here. This budget is tight, as it should be. We choose to do cash only envelopes for gas, groceries, eating out, pets, medicine, gifts, and haircuts. We keep it them in a little white photo file box on our desk. Billy hits the bank at every paycheck and takes out he exact amount we need to fill the envelopes. This means that I spend the same amount of money on groceries every week, which requires me shopping with a list and a calculator. You have to be planful with the weekly ads, or coupons, or where you choose to shop. I have noticed if I shop off a menu for the week (including specific snacks)...I always have cash left over vs. when I just wander the aisles and hope for inspiration. I am hoping to become more disciplined with this over the summer.
Our sixth step was to fill out our Income allocation form found, here. This is where you allocate what paycheck will pay what bill/need and on what day of the month this will happen. We pay everything about 2 weeks before it is due.
When we got ourselves in major financial trouble the year after Vivi was born, we turned to our church's financial ministry and were connected with an elderly gentleman who had retired from making lots and lots of money, to help the church members learn how to balance and budget theirs. He was hardcore, ya'll...bringing me to tears at times as I had to let go of the "American Dream" that had been laid before me when I got my college degree. No... life was not about making the most money possible, buying a house and car, and acquiring stuff, stuff, and more stuff. The Lord used that time in my life to say "Let it go. Let go of everything you didn't get emotionally that you feel spending money will fill. Let go of feeling like you have to keep up with people you don't even really want to keep up with. Let go of needing things to satisfy, when only Christ alone can." So I did. We did. We sold our house and moved into a tiny two bedroom apartment with two kids that we lived in for 18 months. We have fond memories of that time when we hunkered down, I extreme couponed...and we carved away at our debt.
And you know what? Obeying the Lord was tough. But it came with SO many, many blessings. And we are still, 3 years later, crawling out of the hole. But the end is in sight. And one of the many blessings that have come about as a result of our financial stewardship has been that in 3 years, we have not incurred a single dime of more debt in any way, and have managed to pay off more than $10,000 of debt that once threatened to drown us.
So it CAN be done. We didn't do our money well with 2 kids, and we paid dearly for it. But we are now doing really well with 4 kids...so that just shows how far we have come! My husband works 2 jobs so I can be here to raise our kids. We stick to our budget. We don't have cable, flat screens, the latest vehicles or gadgets. I don't have a purse or shoe collection. Billy can't collect the guitars he wishes he could. We don't have Ipads or Iphones. We just can't. But our kids are very well dressed and they have amazing birthday parties...and even with all the sacrifices of not acquiring more stuff...we have found a lot more freedom and contentment in what we do have.
So onto the how of budgeting, planning, and paying off debt as a family of six!!
Our first step in working with our financial advisor, was to sell our house, (which we took lots of flack for amongst the American Dreamers in our life) sold furniture, and downsize in a big way. Any extra funds acquired during that step goes directly and fully to credit card debt.
Our second step was we cut up ALL credit cards, 3 total for us. We determined to never use credit again. We determined to never, never open a store credit card even with the allure of a discount or delayed interest payments...and believe me I have had to get attitude with some very pushy salespeople!! We only went back on that one time to buy a fridge when we moved, but paid it off before the interest incurred.
Our third step was to plan our budget around a Percentage Guide for Family Income that we got off of Crown Ministries website. Here you will see all of the free down loadable worksheets I will be talking about. These sheets are a vital part to doing this! The percentage guide is super important when doing your budget, so choose the one that represents your family size. You need to see how you are allocating your income and where. For instance, housing on all income levels should only be about 30% of what you take home after taxes. Many, many people use up 50% of their monthly income to their housing...keeping in mind that this includes your rent/mortgage AND utilities, housing taxes, AND home owner association/storage fees. We had close to 55% of our income going to housing expenses. What does this mean for you? You MUST downsize in some way to be able to make your budget work. Another important thing to point out with this sheet, 5% of your monthly income should always go into savings. Always. That is the only way you will remain out of debt.
Our fourth step was to do a 30 day spending diary, found here, where you and your spouse write down every single purchase you make and for what. This will be important when you are ready to create your budget sheet, so you will know how much money needs to go where and where cuts can be made.
Our fifth step was to create an "emergency fund" of $1000 working up to a savings of 3 months income. We have not gotten that far yet! This will allow you to tap into that fund for new tires, repairs, Dr.'s bills, and the like that pop up unexpectedly to which you would have normally used a credit card for. This is very important to stay out of creating more debt for yourself.
Our fifth step was to create our budget and to get to a balance that zeroed out. Meaning every single penny we make is allocated to a section of the budget. Cuts get made where they need to to buffer the more expensive items. This is our most important form and the exact budget sheets we use every single month is found, here. This budget is tight, as it should be. We choose to do cash only envelopes for gas, groceries, eating out, pets, medicine, gifts, and haircuts. We keep it them in a little white photo file box on our desk. Billy hits the bank at every paycheck and takes out he exact amount we need to fill the envelopes. This means that I spend the same amount of money on groceries every week, which requires me shopping with a list and a calculator. You have to be planful with the weekly ads, or coupons, or where you choose to shop. I have noticed if I shop off a menu for the week (including specific snacks)...I always have cash left over vs. when I just wander the aisles and hope for inspiration. I am hoping to become more disciplined with this over the summer.
Our sixth step was to fill out our Income allocation form found, here. This is where you allocate what paycheck will pay what bill/need and on what day of the month this will happen. We pay everything about 2 weeks before it is due.
Our last step is that we have a Freedom Account set up at another bank that we deposit a set amount from each paycheck into. This pays for birthday parties, holidays, Christmas, and vacations. We budget how much we are going to spend on each person at Christmas for instance, total that up and divide that by 12 months. That tells you how much cash beginning in January, you need to put each month into that account. Then when December comes, we pull out the money and get to shopping. We plan one to two vacations a year, plan how much it will cost us...and save the money up in the account. That way everything we spend money on...everything...is cash only.
This is just to get you going! There is so much more information on the Crown Ministries website. I have heard Moms say that they just can't afford to let go of a second income. But I argue that you can. Cuts will have to be made and you will have to have discipline in spending. I had a hard time of it for about 6 months. It felt SO restrictive, and sometimes still does. But we know that our value is not in what we get to purchase, it is the size of our family and the fact that we have made it possible for me to be home with our kids. You and your husband will have to do a real check as to what is of greatest value in your life...and be willing to let the rest go.
Phew! It took me two days to compose this post, but it is here and I pray will be of use to your families! You can click on the label below, Saving Money, for other posts I have written on this topic. And as always leave any questions you may have in the comments box.
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9 friends commented!:
Love, love, love this!! Our only debt is our mortgage. But I do like your ideas to sticking to a strict budget weekly. I have not done a great job with this.
Both of our cars are payed for and we recently cut the cable cord. We will never pay for TV again!
I think your right about your values to stay home. I am ready to do something part time, but I want to still be here to raise Levi. The current position I am hoping to get will allow me to do that.
We used to do the envelopes, but we don't anymore. I want to get back to that. It really helps. I find I use the debit card way to much. Thanks for this post Laurie. It is really so good, with Godly principals.
We could be financial sisters. :o) We do the Crown thang too.
The other best advice ever was during our premarital counseling. Our pastor told us to start by living on only one income (mine went to house downpayment savings and paying off a car loan), and to use cash envelopes. WISE advice -- because then when I went part-time and later left my job altogether, we weren't used to a second income. So we bought a house we could afford on one income, etc. I should sit down tonight and write him a thank-you note!
Keep up the great budgeting work!
Nancy
Great advice. My husband and I used Dave Ramsey as our financial guy and the advice is pretty much the same. We had to do the same thing as ya'll and move into an apartment when I decided to stay home. We were obedient to the Lord in doing this and He paved the way to move back into our home a year later. We didn't have debt, but we couldn't afford our home on one income. Praying for you as you continue to pay off debt, but it looks like you are doing great! I always wonder, "How are we still living the life we were living without my $48,000?" You'd be amazed where money is wasted when you have a lot.
We are a work on progress over here as well. We have spent the last three years working to get out of debt, and our home is the one thing we have not cut, but only because the market dropped about the time we started our financial class. We were advised to stay put since we would actually be the ones paying out at closing if we were to sell. It has been difficult, but I find that every time we pay another bill off the load gets a little lighter. I was so glad to read that you still have big birthday parties. That is one thing I would not budge on, and I have felt a little guilty over. Birthdays are just non-negotiable for me. I do as much free fun as I can, but the birthdays are still made to be a big deal.
Having done Ramsey's program I can say that the way you're explaining it is much simpler then his steps.
Taking the step to envelopes this month. Haven't used credit in 2 1/2 years but we're not living with a good budget. I know if we could get that right I wouldn't need to work even part time.
Very timely post for me. Thank you. Been working on our budget right now and these forms will help for sure.
yes, we did Ramsey's Financial Peace University our first year of marriage. It just didn't stick like Crown has.
Thanks for this post! I have been waiting for it, and can't wait to sit down this weekend, print the sheets, and get to work! I am ready!!! Thanks for the hard work of putting this post together!
Hi Laurie! Debbie sent me to your blog because I posted about our budget on facebook.
Jonathan and I just went on a one income family, and so far so good. We are trying to see how it will be when we have children, and clearly our budget will change again since children are a very expensive blessing.
It is encouraging to see others that are in the same boat, especially at our Church :-)
Thanks for sharing. This is very similar to what we just started doing. It's really helping. And, of course, God is good. Very good as he has immediately blessed our efforts to live within His means for our life, not our own. :) I've been good about several money saving things over the past few years including making a menu, planning for meals & freezer cooking (I can get 8-10 meals that will feed 4-6 adults for about $60...nice!) and even shopping the "loss leaders" to save money on meat and other typically overpriced items at supermarkets, and even a few more. This leads me to believe that I've been wasting even more than I thought I was as I'm ahead of the game in that aspect, but still behind on everything else. We have gone to the envelope system, but I have tweeked it a little. My bank has a rewards program that allows us to get gift cards for date nights out and I didn't want to give that up, so I now purchase gift cards for gas and Wal-Mart with which I do my shopping during the month. I still budgeted the money ahead of time and can leave my debit card tucked safely away at home, but get the points on my card still since I use my card to initially purchase the gift cards right after payday. Just a little way to work the system and still get a $50 Olive Garden gift card to be used for a date night every 3-4 months. :) I really appreciate that you've made this work and took the time to share. Thanks!
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