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The Busy PT's Guide to Finding Balance

How Bad do you Want it? (Bringing Balance to our Budgets Part 3)

Published February 9, 2009 11:13 AM by Janey Goude

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?

Happy budgeting! 

 

5 comments

Thank you all for your posts!  Great encouragement!  And great additional suggestions for living debt free!  

Our society is entrenched in the debt mindset to the extent that living in debt is seen as an acceptable lifestyle, "Everyone does it".  While credit cards come to mind most readily when talking about debt, mortgages and car loans are another way our society has made debt acceptable and given us the mindset that is impossible to live debt free.  If you came to this blog with those thoughts, I hope you are at least beginning to see that isn't true.  

Darlyn's post made me think of something that happened with our children recently.  We teach our children to avoid credit cards like the plague, but we take it a step further.  Two children wanted to go in and buy something together.  One of them had enough money for her share, but the other didn't.  The one who had the money asked if she could pay for it all and her sister pay her back when she got her allowance.  We told her she could not...that was encouraging the mindset of debt...of borrowing to buy something you didn't have the money for.  

So then, she asked if we could go ahead and pay her the allowance she was owed, after all she had already earned it.  While I understood her logic, we told her no.  We have set up their allowance to be paid out at a specific time, she would have to wait until that time to get her money.  What she was asking for was the same mindset as a cash advance:  getting money ahead of time...it is money you have already earned, but have not received the check for yet.  We also see this around tax return time when people buy on credit with the expectation of paying the credit card off when the tax return arrives.  How many times have you done that and then an "emergency" comes up that takes your tax refund so your credit card gets paid off in installments over time?

The daughter with the money had some logical arguments in light of how our society thinks today.  Her dilemma came in that the items they wanted were on sale.  What if by the time her sister got paid, the items had gone off sale?  Then they would be out more money.  I explained only she could make that decision.  It was her money.  But if she wanted the items now, she would have to pay the full cost, and she could not accept money from her sister later as payment.  Or she could wait, take her chances on the sale, and go in half with her sister when she got paid.  The decisions, and the consequences, were hers alone.  It was her money to do with as she wished.

It is never too early to teach fiscal responsibility to our children!

Thanks again for your great comments!!  

Janey Goude February 12, 2009 12:30 PM

For years our lives revolved around a budget.  I created a Simple Budget Plan that worked for me and it has worked for many in the past few years.  I knew each week what was to be paid and I knew what was left over to split with my husband.  We knew what we had left and that was what we lived on.  Today I can say we are debt free.  Now there are pleasures we can enjoy that wasn't possible while raising children and getting our home and vehicles paid off.  The secret is for us to control our finances and not spend for the moment and then panic when the money isn't there when needed.  It is very important to begin an emergency fund.  Recommended is put what you can back until you have at least 1000.00.  That way when the unexpected happens it's not another addition to an already bulging crecit card.  We teach our children dicipline and we should also set that example with our finances.  One of the greatest lessons I taught my children was to HATE credit cards.  I have three that I am so proud to say strive to obey the same principles.  It's not a fear but a peace of mind.

Darlyn Goude February 11, 2009 11:11 AM

We have gone thru the Dave Ramsey program and we have paid off over $24,000 this year.  We developed a budget and live on cash from our envelopes.  We have a cash reserve fund in our envelopes from just 1 year of over $2000.  This really does work!  It is also very freeing to live on a budget contrary to what we all believe.  With the ecomony going the way it is...I am so thankful that we started this financial system.  Janey, way to go by encouraging people to get on a plan and take personal responsibility for their finances.  It is individuals tackling their debt that will eventually stimulate the economy!  When we have no debt we can spend!

Elisa Lawson February 10, 2009 3:28 PM
SC

We've used the envelope system for years-it works!  We have one credit card and a debit card.  Here are a few more ideas from Suzy Orhman:  Don't buy anything for one day a week. Don't charge anything for one week per month. Don't eat out anywhere for one month.  That also helps!

Ruth February 10, 2009 1:30 PM

I want to share an email I received from a friend.  Rather than making a separate blog post, I posted a comment to a blog of a similar topic.  To access it, find "Archives" on the right column navigation bar on this page.  Click on "December 2008".  Then click on the "comments" link to the second blog post, "Where do All the Sick People Go?"  You'll find my friend's personal account along with advice from doctors to help keep your family healthy...which is always good for the budget!

Janey Goude February 10, 2009 11:31 AM

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