Financial Friday the 13th. . .

Good Friday morning.    On this rainy and overcast Friday the 13th I think we should do a check up of our rainy day fund/emergency fund.   Are you saving for that rainy day or emergency?  If you are not prepared for the rain a simple appliance problem could send you in to financial ruin or at least zap your budget.  Dave Ramsey talks about saving $1,000 in cash and fast as your on hand emergency fund.  He also talks about saving three to six months of expenses for your long term emergency fund. If you have an emergency fund in place, your emergencies do not seem so big.  
If you have not checked out Dave Ramsey I highly recommend it.  Read his information and test out his theories for yourself.  I am not a financial guru nor do I claim to be, I have followed most of what Dave Ramsey says to do and we are debt free except our house and saving like crazy for the boys to go to college.   I was thrilled that my friend Beth invited me to my first Dave Ramsey class and I was excited when my friend Craig said he would be teaching a class.   You do not have to attend a class to learn his system, check out the Dave Ramsey website.  I also encourage you to read books from other financial people like Suzy Orman.  There are many financial businesses that will counsel you in your financial matters but, do you really want to take advice from someone who has less money in the bank than you?  I am not saying that they are all like that but, I find it hard to take financial advice from someone who is in more debt than I am.  As Dave says, if you want to be a millionaire you do what millionaires do and millionaires do not take financial advice from broke people.   You can find Dave Ramsey's books at the library and at some used book stores.
Here is my disclosure:  I am not receiving any perks or kickbacks for this post.  I write this because I truly believe in this system and I think we would all be better off out of debt.   Imagine the contributions that could be made to charity if we were all out of debt. . .  

New Year and Finances. . .

I am curious how everyone is doing with their financial goals and if anyone is still doing the Dave Ramsey plan I posted about last year.  If you are new to the blog, Dave Ramsey is a financial "guru" that says you should not use credit cards and to pay cash for everything.  The hubby and I have been doing his plan for many years.  I read all of his books and followed Dave for many years before I actually took his class, Financial Peace University.  I have to give a shout out to Beth Cotell for inviting me to the class she was taking.  A huge thank you!!  
There is a lot of free information out there for anyone looking for financial help but, be careful who you take advice from.  You would not want to take advice from a financial person that is broke, right?  Dave Ramsey is a millionaire and has been bankrupt too, so I feel like he has the credibility to teach me what to do and what not to do.  The information I share on this subject is Dave's and I give him all the credit.  I am not being compensated by Dave for writing this either.  I truly believe in what he says and how he approaches money matters.
One of the things that I really like about Dave's approach is, he not only uses a mathematical approach but a biblical approach too.  He incorporates what the Bible has to say about financial matters into his teachings and I love it.  His budget system is the first one that I have seen that put giving at the top over and above anything else.   Giving to others is so important in this day and age of the self-involved and self-centered society that we live in.   The hubbs and I have always given to our Church and other charities even when we did not have very much we still gave.
I am very proud to say that with the help of Dave's plan and his cash envelope system we are debt free and have been for two years, except for our house.  We are paying it down though with great speed and we are also saving for College for the boys too.   There are lots of options to save for college; there is the 529 if you are in North Carolina, Roth IRA, and I know that other states have savings plans for in state tuition.   If you are going to do the 529 and you have two or more kids you only need to do one 529.  Put the account in your oldest child's name and if for some reason that child does not need that money then it can be passed to the younger children and even to the parents if they want to go back to school.    These are all good ways to save for college and let's face it, College is not getting any cheaper.
Please check out Dave at www.daveramsey.com and you can follow him on Facebook too.

Commission Vs. Allowance for Kids. . .

Do you pay your kids an allowance or a commission?  Do you know the difference?  Do your kids know the difference?   This is a brief rundown of how I understand these words.  Allowance to me means; money given for just being around.  Commission, on the other hand, is money paid for doing work.  How do you want your kids to understand the money they are given each week?  Do you want them to take pride in their chores and do the work and get paid or do you just want to dole out your money to the couch potatoes that occasionally grunt hello when you come into the room?  I opt for the first one, I wanted my kids to have responsibility and chores in our house.  There are some things that they are required to do just because they are a part of our family and there are other things they get paid for.  Each chore has a dollar amount attached to it and if it is not done they do not get that money.  My hope is, this is teaching them to have a good work ethic.  My boys are 15 and 12 and this is what they are paid to do:  bring laundry down to be washed, put clean laundry away, take out the trash and recycle, stomp soda cans, and keep their rooms semi-neat.  These are the things they do just because they are a part of this family:  yard work with dad, get the mail, help with the dishes, unload groceries and anything else their dad and I can come up with that needs to be done.
I follow the Dave Ramsey plan with the boys too.  They have a give, save and spend envelope that they divide their money into each week.  I hope this is teaching them to spend responsibly and save and give to others in need.
I never had an allowance growing up, I had friends that did and maybe if I had I would have been better with money as a young adult.  My mom and dad gave me money when I needed it for clothes, movies or going out to eat but it was never attached to a specific chore.  I had things that I had to do around the house and at the barn.  I did not have money that I would call my own until I started working when I was a junior in high school.  I did not have a bank account until I started that job either.  My kids had savings accounts as soon as they were born.  I am sure I have mentioned this before but I will tell it again.  I had a big empty plastic water cooler bottle that we would put spare change in when Sprat was little.  I kept this in his room, when grandparents came to visit they had to pay to see the baby.  Ha ha ha ha ha!!!  just kidding.  Anytime they got money as a gift it went in the bottle and that in turn went to their savings accounts.  I only recently told the boys that they even had bank accounts.  The later they find out the better.  I ended up having to tell Sprat because he went to his daddy and told him I had stolen his money.  He told his dad he had X amount of money and now he had a lot less and of course I was the only suspect in this crime.   I did take his money to put in his bank account so it would not end up going to the grocery store for candy and junk.  Thank goodness my hubby was able to explain to him what I had done and I told him we had a savings account for him at our bank.  

Credit Card Craziness. . .

Flash back to 1997, I had been in business for myself for almost a year and had gotten involved in Junior Achievement through our Chamber of Commerce.  Junior Achievement was a program that sent business people from the community into the schools to teach a practical business class.  They had lessons that we used and this was all on a volunteer basis.  I went into the high school once a week and taught a lesson in practical business finance to a freshman economics class.  It was a lot of fun and the kids were great.

One of the lessons I wanted them to learn was about credit cards.  This was the prime time for credit card companies to send out credit cards to entice people to join their company.  I decided as part of a lesson I would keep all of the credit applications I received for a month and total the amounts to show them how much debt they could be in if they filled out all of the credit applications.  I think it is very luring for young people to think they can buy things now and pay later or buy things now and pay forever.    I took them the stack of applications both my hubby and I had received and wrote on the board the amount of credit we could have, had we accepted all of those applications.  I was astounded, my total was around $350,000 and my hubby had $400,000+ in one month of mail.   The kids were amazed too, especially when I told them if we had used those cards we would not have been able to pay them back.   

Today they do not send those out with as much frequency, thank goodness.   They have picked up recently though and it is funny they do not have an amount of credit they are offering you on them anymore.  I am not sure how that works now, maybe if you work for a credit card company you could post and tell me about that.   

I am sharing all of this because I fell into the credit card trap in college and I was in debt when my dear hubby and I got married.  I did get out of that credit card debt but I did not truly learn my lesson.  It is so easy just to swipe that card and not think about having to pay the bill for several weeks.  If you use it often enough it gets easier and easier and the deeper in debt you become.   I did get better about using my credit card and I tried not to use it until I had the balance paid off but then something would come up and I would use that card again.  

Here is my closing advice:  do a little plastic surgery and cut those cards up and pay that balance off.  We do not use credit cards any more.  It is a great feeling being out from under that credit card.  I encourage you all to step out and take charge, no pun intended, of your finances and stop being a slave to your credit card company.   Good luck!!

Feeling very excited about Financial Friday

I have told you some of the things I have done that I am ashamed of and I will tell you many more but today I am going to share something I am extremely proud of.  As of today we (my family) are Debt Free!!!!!! except our house.  Wahoooooo!!!
This is why I love Dave Ramsey.  I could not have done this without his class and my wonderful teacher that guided the class.  We paid off our car in 2 years with Daves' debt snowball plan, which is pure genius.  I will share that with you next week.    Today I would like to hash out the envelope system.  Dave gives credit to all of the grandparents for this system because that is how they managed money back in the day.   You were paid in cash and you divided it up into your envelopes to make sure your bills were covered.   I love this.  I told you last week that we started out with our Christmas envelope and we now have about 9 envelopes.   These are my categories, they work for us, you feel them out and see what works best for your family.  
Christmas, vacation,  restaurants,  groceries,  mad money,  entertainment,  clothes,  school, tuition, hair cuts, and prescriptions.  Most of these are self explanatory, mad money is money that I set aside just for me.  My hubby has his mad money too.  It is just for us to spend with no guilt on what ever we wish.  The entertainment envelope covers movies,  putt putt,  bowling, and football games.  School money pays for school fees, supplies,  lunch money, and field trips.  I put money in each of these every pay period according to what I have budgeted.  Just because it is summer does not mean I stop funding the school envelope, this is when I am saving for back to school supplies.   When an envelope is empty there is no more of that till next pay period, which for us is every two weeks.   It was hard for the kids to grasp that, when it came to eating out.  That was our big vacuum, when it came to spending.   Once I put a cap on what we would spend it was amazing how much we could save.  That is not to say we did not have our weak points, because we did.  Your budget is a living thing and it grows and changes just like your family does, that is why you need to look at it periodically to evaluate how it is changing.   The categories I picked for my envelopes fit our family, they may not fit yours.  You should evaluate what you want to pay cash for.   Some have a gas envelope to pay for their gas in their cars.  I do not like having to go in and pay for gas that to me is more trouble than it is worth.   

Dave says that when you pay with cash you feel that pang of the money leaving your hand.  When you swipe that debit card there is no feeling attached to it.   This is true, if you don't believe me pay for a meal at a nice restaurant with cash, you will feel it.  You can set your amounts that you put in your envelopes yourself.  Just be sure you are honest with yourself when you are setting up your budget, do not fudge on how much you spend in certain areas because that will just create a problem in the end.  Remember I have made most of the mistakes I warn you about.   If you are married you should set all this up with your spouse too, the system will never work if you do not work together.  I ask my hubby periodically if he is ok with our budget and normally he says he is fine but sometimes he points things out that I had not thought of and there is where we revisit our budget and tweak it.  He pointed out this year that we needed to re-evaluated our entertainment money during football season.  Both boys play football and going to games and concessions were expensive so the next pay period we upped our entertainment money amount to cover these things.  I love this system, it is ours and we can change it to suit our needs and so can you.  I would suggest that you pick one thing and try it out before you dive head first into all the envelopes we have.   I would love to know what envelopes you will have.   Good Luck and we will talk about Daves' debt snowball next week.  

Financial Friday. . . Background on Why. . .

If you are going to talk finances you should go to someone that has made lots of money because they are obviously doing something right.   My favorite financial person is Dave Ramsey, and just be warned you will see,  Dave says a lot on here.  I am not being paid by Dave or any other financial person, the things you will read here are my heart felt beliefs about money and some of my personal experiences along with what I have learned from Dave.  I do not have a background in finance but, goodness knows I have made enough mistakes to have learned what not to do.
I like Dave a lot, I like his Christian approach to handling money.  He is the only financial person that I have seen that lays out a budget with giving at the top.  
I was invited by my friend Beth to go to a Dave Ramsey class and I took her up on that opportunity.  It was one night and they were talking about investing, something I did but very minimally.  I was intrigued right off the bat and a big thank you to Beth for inviting me, this started my following of Dave with regard to finances.   I went to the Library and checked out one of his books, I loved it and I ended up buying it at our local used book store.  Notice I did not go out and buy his book without  checking it out at the Library first and when I bought it, it was used.   It was two years before I took Daves' Financial Peace University class.  During that two years I read everything I could get my hands on, from the Library and the used bookstore, about finances.   I was very intrigued by Dave's envelope system.   That was the first advice I tried and it helped.  I only used the envelopes for certain things, we started out with a Christmas envelope.  We put $20 a week in an envelope for Christmas.  Our first year we did this we got a little late start so we did not have enough money to pay for all of Christmas but it helped.  The next year we started earlier and that year we paid for Christmas in cash, with the exception of things we bought online.   The next year I was able to officially take the Dave Ramsey class.  I was so excited, I was like a kid at Christmas.
One of the first things we talked about in class was a budget, I am ashamed to say I had never done a budget before.  We did a "quick start" budget, this catches the major things, paychecks coming in and bills going out.  I always thought of a budget as being evil and very restrictive.  It is actually, you telling your money where to go rather than wondering where it went.  I was a wonder where it went kinda gal for many years.  Oh, I wish someone would have told me how to do this sooner.  I was actually relieved when I did that first budget and a little surprised at where we were spending all of our money.   I will tell another ugly truth about myself, I was not someone that balanced the checkbook either.  Now, I do a budget every two weeks and balance my checkbook every time my statement comes in.  Yayyy me!!  If you are a financial person you may think that is no big deal.  To someone that did not do either of these things for so many years it is a huge deal.   If you are doing both or just one of these kudos to you, you are already rolling in the right direction.   There are lots of places to go and find budget software or budget forms.  There are a lot of them on Pinterest.  I personally like Dave's forms for budget.  Check out his website www.daveramsey.com
Also check out your local used book stores and Library, they are full of good free information and I am all about FREE.   Here is something to think about for next Financial Friday:  what are some things that you could pay cash for?  Groceries, restaurants, clothes, school supplies or barber or salons.