Early last year, Bryan and I adopted a new philosophy regarding our family finances. Both of our careers were doing very well, but we were welcoming Brady into our family and wanted to be sure that we were making decisions (while we’re still youngish) that will benefit us down the road.
We started Part One in January, 2011 and Part Two in January, 2012. We didn’t hear about or read Dave Ramsey’s book until just a few months ago. Little did we know, we were following his theories almost to the tee! I’d recommend Total Money Makeover to anyone considering revamping their family finances. The one section that really stood out to me included Dave’s explanation on how rich people live. Rich people have no DEBT. They buy cars and homes with cash. A rich person might drive a luxury car, but you can almost guarantee if they’re truly wealthy, they don’t have a car payment and they probably didn’t buy it BRAND new.
Dave Ramsey also has a running footer throughout his book. It reads “Live like no one else to live like no one else.”
Think about that for a minute. Make sacrifices today to live the way you’d like tomorrow.
Is this process easy? HA! Is it worth it. Of course. Above are the things that keep me organized and keep this entire process simple day to day.
- Mint.com: We LOVE Mint.com. Its a great tool for managing your spending and tracking your accounts.
- Kate Spade wallet: So, listen. If I’m going to have to be careful with my money and have that gut-check every time I open my purse, I better be pulling out a fun wallet. Sound counter-productive? Trust me, it’s not. Plus, it doesn’t have to be a KS wallet, any cute one will do. I just drooled over this one when I saw it so I had to include it.
- Cute Envelopes: This is a great way to keep your pots separated. Sometimes I keep my money in these envelopes OR in my cute wallet depending on how much I trust myself to keep the EMILY pot separate from the FAMILY pot. I carry both since I do most of the grocery/Target/Brady shopping.
- Neat Receipts: I’m going to be purchasing one of these this week. Jeff Holt told me about it way-back-when and how great it is for business. I think it’s also pretty cool for personal family finances as well. I’ll be using it for both. You just scan your receipts in, categorize and go!
- Petite Folio: I’m not a big coupon-er (though I did do it at one time) only because of the time investment required. But I do save significant coupons for items we often purchase and places we frequent. (40% Joann’s Fabric, anyone?) I LOVE this Vera Bradley version in the Folkloric pattern. ELP needs a Petite Folio-ish coupon holder… hmm.
- Mason Jar: HA! Ok, no seriously. Using cash… you will have a TON of change. Bryan and I dump our pockets (or purse) in a mason jar in our kitchen. Last time we dumped that thing in a change-sorter we had almost $100. Sounds like a good date night to me!
Here are the steps we took (and are taking) to put the key pieces into place to really secure our future as best as we can.
1. PART ONE: Pay off ALL debt starting with the smallest debts first. As you pay off one, move to the next. Soon your dollars will begin to snowball and free themselves up. Sacrifice to do this. Last year, Bryan and I paid off our cars and my graduate school loan. We did this by sacrificing in other places, though. It wasn’t easy, but goodness… sending those last payoffs in felt good!
2. PART TWO: At the same time, commit yourself to a cash only budget. This is is something I did religiously when I was a new college graduate. I was making beans for salary and had to be very careful where I spent my money. It was less of a strategic move and more of a make-it-to-the-next-paycheck-without-having-to-ask-mom-and-dad-for-money move. Back then I withdrew a certain amount every week and made myself learn to respect money by using cash. While the circumstances are different now, this is where Bryan and I are – teaching ourselves to respect our money so that we can make long term plans.We’ve paid off our debts (with the exception of our mortgage) and are working on our day-to-day spending. Together, we created a budget for our family. (Bryan is sitting here telling me I MUST say “Pay yourself first.” That’s the cardinal rule to making big family finance strides after your debts are paid.) We allocated certain amounts for our bills, savings and day-to-day spending.
The day-to-day spending is cash we withdraw every Sunday morning. We have three pots: Emily, Bryan and Family.
- EMILY: This pot is mine-all-mine. I love the description of this pot that my friend (who is also doing this cash-only system) said to me before Bryan and I decided to also take this step. The “mine” pot is for things I want. The things I “need” pot falls under family. For instance, I needed a new wooden cutting board because ours was getting old and had been exposed to raw chicken. I wanted a stacking lemonade dispenser for entertaining. The cutting board was paid for out of the “Family” pot while the dispenser was paid for out of the “Emily” pot.
- BRYAN: The Bryan pot is for Bryan to do what he wishes with. Important things like Fantasy Football dues and fancy chicken wing lunches during the business day. The “Emily” pot and the “Bryan” pot are equal. (Sidenote: it’s VERY important to do everything you can to avoid the yours/mine mentality when having two separate pots like this. It works, you just have to make it work.)
- FAMILY: The family pot is primarily for groceries and other household needs. We also use this money for dinners out (We eat out about 1-2 times a week: a LOT less than we used to). We also use this pot for things for Brady: clothes, etc (oh my goodness, I am having custom clothes sewn for him right now. I cannot WAIT to share. I digress…)
Now… there are exceptions. We do use our American Express (that we pay off every month) for three things:
- Diapers (easier/cheaper to order from Amazon.com)
- Formula (easier/cheaper to order from Amazon.com)
- Gas (Obviously, I can’t walk inside to pay for gas and leave Brady in the car.)
At the end of the week, if you have money left over… GREAT! That’s yours to keep! We still take out the same amount on Sunday. This is how we accrue a small “for whatever we want” savings.
So far, all of this is working. Granted, we’ve hit our bumps in the road (like me griping at Bryan because I often pay for “FAMILY” overages with my EMILY money since I carry both pots) but we’re learning and adjusting each pot’s amount as we go.
It’s kind of amazing how you view spending $15 cash versus a $15 charge on your credit card. Not only is this philosophy (no debt + cash) really helping us make long term plans and establish a better relationship with money, we’re finding that it just makes us focus on material things less. It also makes me find ways to be resourceful. For instance, I’ve made a LOT of the pieces of Brady’s first birthday party myself, rather than ordering them or buying them at a store. More on this to come : )
Also, it’s allowing us to start to set aside money for the THIRD place we’d like to see it go [1) Savings, 2) Spending]….. 3) Giving. Philanthropy is so important to me. (See Bman’s lemonade stand!) My career background is in philanthropy, but more than that, my heart is in it.
That being said, I am excited teach Brady about money when he’s old enough. Thank goodness I married Mr. Finance, because my creative brain tends to say “spend spend spend”. Bryan is so forward-thinking and diligent. And… I’m finding my creative juices put to good use on the resourceful side. Tonight, I noticed that Dave Ramsey has a “Kid Bank” perfect for teaching 3+ year olds about money. Its a little bank that has three sections: 1) GIVING, 2) SPENDING, 3) SAVING. I love this!
I will never forget when I was in the third grade and my Mom (who was a teacher at my school) told me about a custodian (who was always so nice) who would not be having a Thanksgiving dinner with her children. She couldn’t afford a turkey this year. I immediately told my mom I wanted to buy her one with my own money. I saved my allowance and counted all the coins in my piggy bank and accompanied my Mom to the deli at Winn Dixie. I purchased a turkey and hand delivered it to this sweet woman at school on Monday privately in my Mom’s classroom.
I think I cried too. My mom definitely cried. And that left such an impression on my heart. I want Brady to know that no matter how much he has or doesn’t have, he always has room to give – of his time or his money. I have big plans for him to have a doggie party one day and collect dog food instead of birthday gifts (his daddy and I will get him a birthday gift of course : ) and then deliver the food to a local animal shelter.
Whew – so all of this is a lot to think about! Bryan and I are still figuring out this cash thing. It’s not easy, but its worth it. Just like Dave Ramsey says… Live like no one else to live like no one else.
PS: Leave me a note here and let me know your questions or tips for balancing family finances. On Friday I’ll give away a copy of Dave Ramsey’s amazing book: Total Money Makeover! The winner will be chosen at random.
PPS: I debated whether or not to write this post for a while. Money used to be the root of 90% of the arguments that took place in our house. (Sound familiar?) And while those have tapered off as we’ve established a “team philosophy” regarding our finances, making peace with your bank account is not what brings peace into a home. Faith, empathy and a good old fashioned sense of humor trump that any day of the week. BUT, I still couldn’t shake the peace we felt (and the pride we take in what we’ll be teaching our son one day) when we started doing this. That being said, WE ARE NOT PERFECT. Goodness knows we screw this up almost daily. But we start over and keep going, changing our habits and making adjustments as we do. It’s a journey, not a destination. As with anything, what works for us may not work for every family, but we’re happy to share what we’ve learned! : )