Creating a family budget has been a goal of mine for the past few months. Mostly due to the fact that my husband and I went from 2 incomes to 1 and from 2 to 3 people this year! Finances can cause soo much stress in a family and relationships. It is a daily struggle for most and planning your finances is almost like a full time job.
Today it all came to a head and I had the hardest struggle in trying to decrease my bills: I canceled my home phone. Land line that is. I know most of you out there probably got rid of yours a long time ago and have just been using your cell phones and rolling your eyes at me. But I have had a land line since I was born, seriously. And I've loved keeping it as I only give my cell phone number out to people I know and enjoyed being able to hand out my land line number to unknown people, online vendors, salesmen, etc. Plus, it was nice to have a line that never had dropped calls and had great reception.
But in all seriousness, I knew I had to cut costs and could live without one. I couldn't live without my electricity, gas or water as necessities, but I realized that a home phone was easy to give up.
I ran through all of my other bills and decreased my cable bill and internet by calling the company to see what specials they had to offer. I then decided to cut back on little things like washing our own cars and vacuuming them instead of spending the extra cash on that. We also are going to start cutting coupons, and planning our meals for the week and not aimlessly shopping as we go up and down the grocery store aisles.
One of my friends (Thank you Kim) told me about Dave Ramsey's book Total Money Makeover to help get us on a budget. I read the entire book a month ago, but felt overwhelmed at tackling our budget. After all, it means going through all of your bank statements and admitting to overspending as well as allotting every penny you earn to a category. It felt like a huge ordeal, but I finally forced myself to do it last night, and I am SO happy we did.
For those that do not know his method, it involves setting up categories of spending such as utilities, food, pets, children, clothing, toiletries, gifts, etc. and filling in how much you spend on each a month. Then you put your income at the bottom, add up the categories and see if it matches up or not.
Sounds like a regular budget right? The difference is that you have to put your income in every category and no money is left over. So if you are foreseeing buying a sofa next year, then you need to put money in that category. You will also put money in a savings or emergency fund category, as well as any other future spending. Every dollar you earn is put into a category.
And, the other main difference of Dave's strategy is to use the 'envelope' method for certain categories. These are categories such as food, restaurants, entertainment, clothing, gasoline and repairs, toiletries, cosmetics, hair care, cleaners and babysitters. You put the amount of cash for the category you have allotted for the month in an envelope. And you withdraw from that 'account'. For example, if you have 150$ in your restaurant category then you put that much cash in a labeled envelope and once that cash is gone, it is gone!
The Envelope System definitely makes you accountable and shows you first hand how much you are spending. Oh, and you are not allowed to take from one envelope to the next. If you don't use all the cash that month, then you will have more for the next one. You can always move your budget around, but it really helps you curb your spending. When you feel the cash in your hands, it makes you more responsible. Everyone can swipe a card and get into debt, but you can't swipe away your cash and have more instantly appear.
Planning a family budget makes me feel much more liberated and free. Even though we are counting our pennies, it helps to finally have a goal and boundaries. When people live in the unknown, it can cause a lot of anxiety. If you spend money and cross your fingers things will work out well and do not plan for things, then this is when you start having problems sleeping at night and waking up worrying about how you will afford a mortgage, tuitions, and credit card debt. Especially during the recession times and the stress that comes from that alone!
To have a happy family, it's important to plan for your budget as well as COMMUNICATE it well with your spouse. If you need to move the budget around once, then both spouses have to agree on it which means talking through the issue. So many couples argue over finances and at times it can fuel arguments in other areas (displacing your anger). It's a good idea to consider seeing a Financial Counselor if needed and even a mental health counselor if it is causing marital problems.
But hopefully we will all not need to go down that path! I am so excited to start using this new plan. Has anyone else had good experience with the Dave Ramsey makeover? Or any other budget tips?