How Bad do you Want it? (Bringing Balance to our Budgets Part 3)
Last week we got to be flexible and have fun with our budgets! We also brought some perspective: our sacrifices are only temporary and focusing on our goals can be great motivation! But you knew we were going to have to dig our heels in deep before it was over, right? Today is where the rubber meets the road. We're going to discuss credit cards, using cash for all transactions, and the Envelope System. Please remember as you read this, I'm not reiterating some advice I read somewhere. We were in the trenches of debt and we used these techniques to fight our way out. They aren't easy to swallow, but they yield proven results.
Destroy your Credit Cards
Cut up your credit cards - NOW! Whatever excuses you have for not being able to do this, we had them to. I am here to tell you it can be done. Yes, in this day and age, it absolutely can be done. We lived for years without any credit cards-not one. If you are well disciplined and have one card that you pay off every month, fine. But if you are not extremely well disciplined, then you will find a reason to carry a balance and before you know it you'll be back in over your head. I know what you are thinking, "But what about emergencies?" You'll find there are not as many "emergencies" as you think. And when they appear, you'll find another way to finance them. I'm not talking some pie-in-the-sky idea here. We've lived it. It can be done. If you don't want to do it, that is another thing altogether.
Pay with Cash
If you don't have the cash to pay for it, don't buy it. Wait. You'll be amazed how much you save simply by not having the option of impulse buying. There is a satisfaction in waiting until you have saved up the money and paying cash. Often, by the time you have saved the cash, you no longer want the item. Even if you want the item, you may find you don't want it badly enough to give up your hard earned cash! This also means you don't buy items "on time" - also known as "90 days same as cash". If you don't come up with the money in 90 days, you end up with monthly payments on the balance, plus interest. Sound familiar? It's called credit. It is another form of debt: you are using something you have not fully paid for, which means it belongs to someone else. Don't do it. Wait the 90 days. Put some money away each paycheck. When you have saved enough to pay for the item in full, go buy it.
The Envelope System
I can tell you where I got this one: Dave Ramsey. We used this for years. We have friends who are using this now and paying down debt faster than they ever imagined. Here's how it works...Once you figure your budget, take out money for groceries, gas, and entertainment and keep it in envelopes. Take grocery money with you to the grocery. When it is all gone, you're done grocery shopping for the week (or month). Same for gas...when you are out of gas money, you figure out where is really important to go!
Even if you are not using credit cards, it is easy to run out of money before the month is up. When we use our debit card, it is easy to watch money evaporate from our account! The envelope system gives immediate feedback on how much money is available for a given expenditure (groceries, gas, entertainment). Don't rely on your discipline to help you save money. Use your money to give you discipline. When there is no money left in the envelope, you're done spending!
I know, this post was brutal. I hit you with all the hard stuff at once. But I can tell you with 100% certainty, these steps work! How bad do you want it? Can you taste the freedom?
If you have any techniques that have helped your family's finances, will you share them with us?