Thursday, March 6, 2014

Financial Peace - Our Total Money Makeover (Part 1)

Financial Peace - Our Total Money Makeover, Part 1

I've been considering writing a post on Dave Ramsey & financial peace for a while now. If I remember correctly from one of my Thankful posts in November, several of you are familiar with his work as well. Since it's Lent, and I go on a spending freeze during Lent, I figured now was as good a time as any to tell our story... 

Early in 2011, right after I began blogging, I tried out the Lenten "40 Bags in 40 Days” challenge. Doing that really fueled a desire to get rid of clutter. I was tired of taking care of things we didn't use or love. I was tired of not having a place for everything because all the places were already taken up! A good deal of this clutter had to do with me as I was mainly the one bringing new things into our home! :( 

In addition to physical clutter, there was the “financial clutter” of debt. In that same year, I read the book Total Money Makeover by Dave for the first time. That reading was my first venture into "learning" about money. I was primarily interested in two things: understanding our insurance and investments and getting a better grasp on our finances. I’d been doing “the budget” since getting married - growing up, my mom always did our family budget, and her mom before her, so I figured it was part of the SAHM’s job! I kept track of and paid our bills, and updated our Quicken software once money was spent. But keeping track of our money wasn’t helping me do a better job as far as spending the money! I wanted to be saving more. We were then and are still blessed with DH's current job (he works very, very hard for us!) but I was feeling overwhelmed and frustrated that our savings weren’t growing.

What exactly were the problems?

Problem #1
This first one is hard to admit. I spent too much. There was a little too much month left, as Dave often says, at the end of the money. I knew exactly where my weaknesses were- clothing, shoes, organization boxes or bins, pretty things for the house, and I found myself buying more than I needed - giving in to "wants". I would buy things and think, "oh, I can return it later" (that rarely happened) or "well, this can come out of next month's budget". It's so easy to do with a credit card. One swipe and there you go! Ouch. It adds up. We were always able to pay our credit cards off on time, but I knew I could be doing so. much. better. We needed to save more. We could save more. I said I was the one doing our “budget” but we didn’t really have a written budget. One that said “no, you can’t get that -insert want not need- because it is NOT in the budget this month!”

Problem #2
We didn’t have a written budget. (See #1!) And we didn’t discuss the our expenses each month so I wasn’t exactly accountable for what I did spend money on. 

Problem #3
When we were first married, we determined to live off DH’s salary alone. Any money that I earned teaching was supposed to go toward savings or debt. It wasn’t. We used it more for fun money instead. Or I used it for the “wants” (see #1).

Problem #4
Counting our chickens before they hatched - our biggest financial mistake. Also in 2011, (after talking about it for a few years), we decided to go ahead with upgrading our kitchen. We compared a few vendors, discussed whether or not to just upgrade countertops or to upgrade the cabinets as well --gosh darn it--the new cabinets were so pretty!-- so we decided to do all of it. The quote we got was higher than we thought to spend, but we knew we had a bonus coming in for DH. So, we signed the paperwork and sent it in. A few weeks later we found out the size of the bonus… to say that it was FAR less than we anticipated is a gross understatement. I almost couldn’t breathe when I found out and as we tried to figure out what on earth to do with our kitchen. We ended up delaying the work a few months and taking a hit on a home equity line of credit (that we originally opened to pay off school loans). I don’t think I’ve ever felt so sick to my stomach. I love our kitchen, but I look at it as a huge wake-up call even now.

Problem #5
No Emergency Savings. We were fully funding our retirements - 401K, and both of us have Roth IRAs and Traditional IRAs, but we didn't have anything saved for emergencies. Anytime a crisis hit we were scrambling. My dad always says “if you have a car, you have a headache. If you have 2 cars, you have 2 headaches!” Both our cars are paid for but they are 12 year-old and they need fixin’ every now and then! I was tired of “headaches!” And not being prepared for any other things that needed work since we also own a home.

So...it started with me reading the book and starting to do a little on my own as far as examining our family budget and trying to cut back on my spending. In early 2012, I started listening to podcasts of the Dave Ramsey show - they were great when I was driving to and from PA every morning for those ultrasound series! :) I found them inspirational, and most importantly, motivating. I cut up all the credit cards that I held on to for the perks and said goodbye to those nice birthday coupons - Ann Taylor, etc... And then finally after a while, and continuing to talk about it extensively with DH, I ended up asking him to get me the at-home course for Dave's Financial Peace University for my birthday after baby C arrived. That first lesson (for the record, we have the older version of FPU) got us both hooked.

In July of 2012, we decided to switch to debit-cards only and cut up our remaining credit cards. We paid off the one credit card we used for groceries, fuel and household items and closed the account. How freeing it was. Looking back, that was single-handedly the BEST thing we did. It's pretty clear I can't spend money I don't have when it means my bank account goes down the minute I swipe the card! And if I know I still need to buy food for the month, I better not be giving in to those pretty shoes, no matter how awesome they would look on my feet, haha. :)

We had more discussions about what we wanted and wrote down the steps we needed to get there. And we set up our family budget (we had been tracking everything in Quicken for a few years so it wasn’t hard to see where we spent money). 

To be continued in Part 2!

16 comments:

  1. Good for you! I am in the process of simplifying things here too. So tired of being overwhelmed by the stuff and realizing we really can live with a lot less (as we are only truly using about 1/2 of what we own).

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    1. It's so true, Lauren! Less really is more! More free time since you don't have to take care of and maintain all those things! :)

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  2. Love this post! We are on a spending freeze this Lent as well and I am tired of the savings acct going in the wrong direction. I mean, I am grateful we having savings, but I hate relying on it so much and yeah, so much of what you talked about here is relevant to us as well. I am looking forward to Part II!

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    1. Thank you, M! :) Woo-hoo for a Lenten spending freeze!

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  3. This is great! I'm very much looking forward to part 2. I'm pretty sure the couple we worked with during our pre-wedding marriage prep recommended Dave Ramsey, so it's nice to hear you endorse him too! Have you discovered mint.com yet for budgeting? I can't say we're the best at keeping up with it, but it's a great tool. :)

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    1. Hi Stephanie - thank you! Yes, I have heard of mint. I haven't used it myself, mostly we went with Quicken because my hubby already had the software. They are probably very similar!

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  4. We love that course! It has helped us tremendously! PTL, today we are debt free!

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  5. I have never taken a DR course, but I've heard a lot about them. Thanks for sharing your experience! There's things that I'm doing okay with, but this is a great reminder that I could be doing better.

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    1. Thanks for your comment! We can all do better!

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  6. I need to get this guy's book!!!!

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  7. i can be the same way with spending...even though it doesn't FEEL like i'm buying expensive things, even little things on sale add up. ugh. looking forward to part 2!

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    1. Really for me, I think that was a lot of it - the little things. I would think, "oh, this is only a couple of dollar." But like at Target, that dollar section can be big bucks if you're not careful!

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  8. I am terrified of finances!!! This post is very informative though and gives me a lot of ideas. Thank you for sharing!

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    1. You're welcome! If you have questions, let me know! :)

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