It’s Thursday, and that means one thing at my house: budget day!
There are a few things that I do before diving into the budget.
First, I pay tithe
Second, I take stock of the finances.
I am going to save what I mean by paying tithe for a later post and first discuss what it means to take stock.
Taking stock as described by Ramsey is totaling one’s “non-mortgage debt,” including “any money [one] owes on anything.” This means listing totals of credit cards, student loans, bank notes, car loans, outstanding doctor/dentist bills, home equity loans, etc. Everything one may owe outside of the first mortgage and monthly utilities.
This assignment was probably the single most eye-opening assignment of the class. I knew in my head how much we owed and to whom, but I never actually added it all together. Listing our debtors by name or title and the amount we owed to each brought a new level of seriousness to our situation. When I calculated the list and wrote down the total in the workbook, it brought me to a shocking realization: we were in debt more than $50,000. It took the wind right out of me.
What the heck? How did this happen? We can’t possibly own that much?
So I added it together again. The total was the same.
What the heck? None of the bills seem that large! Well, except the two car payments, but that couldn’t be helped. You can’t plan for a deer jumping out of the ditch and totaling your car.
And on and on went the week-long conversation I had with myself.
By the end of the week, I was mad. I remembered going into the first class hopeful that we would learn to live debt free. Now I was determined. It wasn’t a regular type of determination. It was fire and brimstone determination. I walked into the second class ready to get to work and pay off all the debt.
After that class, every Thursday I have taken stock of our finances. I make a grid on a simple sheet of writing paper, write the debtors on the lines, how much we owe, what is paid that week, and how much extra we can afford to pay, and then I total everything up.
I do this weekly because we get paid weekly. Plus we make weekly car payments and bi-weekly mortgage payments (I’ll explain why in a later post), so it helps me to keep track of how much we pay and when.
It may seem tedious, but I do this every Thursday for three reasons:
- It reminds me of the reality of our situation. By writing it down every week with my own hand, I am forced to claim it and take responsibility for it. That’s is my handwriting. That is my debt.
- It reminds me from whence we came. Each week, I am reminded of how much has changed for the better.
- It encourages me to not give up. As I see the gap grow between where we started and where we are now, I take pride in writing down a smaller number each week, not to mention the great satisfaction I get from crossing a debtor’s name off the list.
Once I have taken stock of our bills, I am ready to dive into the budget. Taking stock before doing the budget strengthens my resolve to live debt free, and I start cutting out unnecessary spending with a renewed vigor.
As Dave Ramsey says, “If you live like no one else, later you can live like no one else.”
That’s the goal.
This is an example of what it looks like filled in. The grid is designed according to Ramsey’s signature “Debt Snowball” – listing debts from smallest to greatest by the balance owed. The amount listed in the “Payment” column is how much is being paid out that week. The “Extra” column is for any additional payments I can make that week.