Total Money Makeover, Week 5

Week 5 of the Total Money Makeover and Week 2 of Financial Peace University.

Budget recap

I just finished up my first month’s budget – a full four weeks adhering to the outline I set for myself.  Dave says that it takes 90 days to really hammer out the budget, and he’s probably right.  I had to readjust a couple things, like gas money (ran out, oops), and adding some money for a visit to my sister, a day of yard sales with my mom (only spent $20!), and money for “business expenses” relating to my paintings.  Overall, I feel comfortable with how I did in my first month.

The biggest change to the budget was the fact that I had initially planned it from 8/23 to 9/26, but that was one week too long.  I need two paychecks before the first of the month to make the budget work, otherwise rent will be paid for but I won’t be able to eat or pay any other bills.

Income for the period of 8/23-9/19 came from my full-time job, freelance income, and liquidating all savings beyond my $1,000 emergency fund.  I also sold a few things on ebay.  All told, I have $1635 to pay toward my car this month!  I cannot wait to write that check.

FPU Class

FPU was better this week.  Though it’s still just me and one other couple, we had more discussion as a group this week and I felt more comfortable.  I did get a little teary talking about my divorce and how my life would have gone so much differently if I had known how to handle and communicate about money.  But I wouldn’t change my life at all because I am happy where I am.  And I will learn from my (immense, innumerable, inane) mistakes and be a better steward of my money in the future.  I will also be better at relating with money with any future partner or spouse.

Men and women think of money differently.  Dave says that women have a gland men don’t have… the security gland.  And when they feel insecure about money, or work, or whatever, the gland goes crazy. And the gland is attached to their face, so they go like this:

Do not doubt how much I love this blog.  I do this for you.
Do not doubt how much I love this blog. I do this for you.

And that’s why ladies need an emergency fund.  Guys think the emergency fund is boring, but women need it so our faces don’t stick like that every time something happens.

Don’t let my face stick like that!

There are also generally two types of people in a relationship when it comes to money, budgets, decision making, planning, etc.  The nerd and the free spirit.  Guess which one I am, as soon as I tell you all about my spreadsheet.  Hint: It’s a nerd.

There is also generally a spender and a saver.  You can be a nerd spender or saver, or a free spirit spender or saver.  I am definitely a nerd and still trying to figure out if I’m more of a saver or a spender.  I think I’m a saver, though I am currently spending every extra cent to pay off debt.  At least it’s not shoes.

The lesson also touched on raising your kids to be debt free.  DR suggests putting children on commission, not allowance.  This allows them to make the connection very early between work and money.  If you just hand them money every time they ask for it, you’re not teaching them realistic things about money.  No one in life is just going to hand them money.  Kids under 5 can save up their cash in a large clear container, so they can see it grow.  Kids from 5-12 can use cash envelopes, one for giving, one for saving, one for spending.  They divide up their money in that order and then spend or save accordingly.  Kids 13-15 can get a checking account and learn to write checks and balance their checkbook.

FPU Homework

Identify your accountability partner: It’s pretty much this  blog and my friend Kate on Facebook.

Share your budget with your accountability partner: I totally sent it to Kate on Monday! Winning.

This month I am budgeting for a haircut and some savings to save up for new tires in the next few months.  I will also need new glasses soon.  Hmm, perhaps I shouldn’t liquidate my whole savings account just yet.  I’ve also decided to start investing $2,000 per year in a Roth IRA.  Gotta start NOW!!

What I did in the past week

What I’ve done since we last checked in was start a new job!  I got a side job working on the weekends.  I also had seven paintings go up at the local farmstand to be sold, so I am hoping that works out and people really love paintings of chickens and flowers.


7 thoughts on “Total Money Makeover, Week 5

  1. I’ve been reading your blog for some months now… what a strange coincidence that we started following Dave’s plan at a similar time. While the wife and I are not taking FPU (at least for now), we’ve been following the Toral Money Makeover very closely and I listen to the podcast daily to help stay on track and intense.

    One thing I question in your post above is the IRA savings. My understanding is he advises focusing on each step exclusively until each goal is reached. So in this case, absolutely no retirement savings until the debt is paid and the emergency fund is full. I believe he only advises doing that differently if it’s going to take several years to get through your debt.

    It’s so important to stay focused and intense with each step. It makes your mind do crazy things and start looking for ways to accelerate your progress, in a way that just doesn’t happen when you dilute your effort. The question my wife and I ask as we budget for each category is, what *needs* to be spent in this category before we get paid again? If something is not absolutely required in the next two weeks, it gets no money, and the rest goes to debt. If you will often have $1600 to pay towards debt, why save for tires? You can budget those in full when they are truly needed, pay $400 less on your debt that month, and stay more focused and intense now.

    A good test of this is: if it’s pretty easy to shuffle money between budget categories when you overspend in one, your budget is too loose. It should be incredibly painful to readjust the categories, because that money is truly needed in each category. If it’s easy, you probably left yourself some wiggle room that could’ve gone to paying debt. If it’s tight, you’ll *really* avoid overspending because you know there’s really nowhere else the money can come from. It just doesn’t exist until you get paid again, so you have to wait. If it’s truly necessary? Well that’s what Step 1 is for.

    Hopefully these were welcome comments for you. Since you’re viewing the blog as part of your accountability check, just thought I’d do my part to help!

    1. Eric, thanks for your very thoughtful comments!! With the Roth IRA savings, is it not better to start early (Ben vs. Arthur)? I am not contributing to any retirement at all right now but I feel that it would behoove me to put $2k per year away (far, far less than 15% as is recommended in later steps) to start working on the compound interest? One thing I definitely picked up from Dave’s money saving chapter is “You have to start NOW!” At the same time, I know he also says to focus focus focus on one step at a time, so I’m really not sure what the best option is for that. Perhaps I’ll call him and ask. 🙂 I

      With the tires, I see your point. How I am structuring my budget is that I wait until the end of the month and then pay all of the excess money that remains after the budget is done and then pay that toward the loan — today I wrote a $1,258.40 check for the car (after “September” is said and done for me). So I don’t think I will just have a point where I can pull out $400 cash the instant I need new tires. It’s probably related to that security gland Dave talks about… I just feel safer knowing that I’m preparing for my need for new tires in the next couple of months. I want to make sure I have them before it starts to get snowy. I’m going to have my stepdad take a look at them and if he says they’ll last through the winter, I’ll cash flow the savings back into the plan. I think they’re on the way out though 😦 tires, blah.

      My budget is looser than it could be. I have allowed myself a larger than average budget for groceries because I eat organic and my grocery store is pretty expensive. I could just eat a few basic things (and generally I will just cook a pot of soup and eat the same soup every day) but haven’t yet buckled down to that necessity — perhaps I should to get this stuff knocked out faster. I guess I still am attached to the wiggle room. Maybe I’ll readjust for October to be more frugal and put more toward my debt. The additional job should help too!

  2. Glad to hear you got your answer on that!

    I appreciate you taking the time to reply to my comment in detail. It definitely sounds like you’re on a great path and I know exactly how good it felt writing that big check towards the car!

    I was wondering if I read this right… you budget for the month, adjust as you go, and then at the end of the month, take what is left and write the big check towards your snowball? If I’m understanding correctly, that seems a little risky. Obviously you can make good progress that way, as you’ve done this month. But you might want to make the payment sooner as you become more confident in your budgeting.

    Right now we’re not budgeting for the full month all at once. We have a budget meeting each time we get paid (twice a month) and only budget for that money until the next paycheck. We’re still pretty new at this and it helps having a shorter time frame to deal with, so we can be more confident in what we’ve put towards each category. This usually takes at least an hour, going over each category 3-5 times, looking first at what’s absolutely necessary, then what’s prudent, then maybe a couple of wants. Once we’re absolutely sure that the budget is the best it can be with what we currently know, we take the extra and budget it towards debt. Then, we make that debt payment immediately, in the same session, right at the beginning of the pay period. This adds a much higher level of intensity, knowing that the money is *gone*. Putting things back on a credit card is not an option, so since our categories are pretty tight, we have no choice but to make do until more money comes in. It usually ends up being painful right before we get paid again (for one thing, because we too will only buy quality food).

    Obviously you don’t want to take on too much too quickly, but these are some things to think about as you continue in the coming weeks and months. I can already say it has helped me look at things differently, and more aggressively, in just a couple months. Everyone’s situation is different, but part of our debt that I thought would be paid off by mid January I’m now seeing could be paid off by Thanksgiving.

    In any case, there are many of us out here cleaning up our messes right along with you. Thanks for having the courage to post your details and share your progress. It is always helpful to hear from others on the path!

    1. I plan out the whole month’s budget at the beginning of the month. For the first three months, I want to allow myself some wiggle room (I clearly needed more for gas than I initially thought in September, and with a 30 mile one way commute, that’s not something I can just make do without!) and then in future months I’ll be more confident about exactly how much I will need. I don’t find it to be too risky; I am too determined to pay the stuff off that I don’t allow myself “a little extra” here and there or anything. Last month I was $0.45 shy of being able to afford Chipotle and I skipped it because I wasn’t willing to add that $0.45. Slippery slope! I did find that I prefer to allow myself a small budget for “business expenses” as they pertain to my painting as a side job, since the paintings may now be bringing in income. However, the budget I allowed myself was to prepare some display boards for two art shows, which I had to cancel so I could start work for the new job, so now those DIY projects are no longer an urgent priority, so I don’t need the business budget for now. I definitely want to get more aggressive but still am not comfortable relinquishing the cushion in my first 90 days as I figure out just how much budget I need. It’s helpful that my first month was a 4-week month and my second month is a 5-week month. That should really help me set a standard! Thank you for your reply, I agree that it’s wonderfully helpful to hear from others working on the same thing. Good luck, and keep up the good work!

  3. I think you’re doing great Caitlin, and I don’t really see a problem with a little wiggle room. For one thing, since you’re so determined, you can just put anything you end up not needing towards your debt as you go along, as you say. Secondly, and I personally think this is key (it would be for me anyway), if the wiggle room allows you to be comfortable and at peace with the process and sleep well at night, that will go a long way in making sure you stick with it and come out happy and healthy aswell as debt-free. I think everyone needs to do what works for them, and that can certainly change over time and from person to person. Good luck to everyone paying off their debts. 🙂

    1. I talked through it with my class tonight and I’m pretty comfortable continuing with my end of the month snowball plan. It’s easier for me to feel safe, and I don’t feel like it will tempt me into making irresponsible money decisions. I’m determined!! 🙂 thanks for your comments.

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