I would love to give you a gym update but my schedule has been a little wonky this week and I wasn’t able to stick to the gym schedule I planned. In true perfectionist fashion, I just scrapped the idea of going because it wasn’t going to work out how I have in my head. I actually view perfectionism as a liability, not an asset because of situations like these. That will be a whole separate post soon though.
This week, I’m focused on closing out my budget for February and setting up my budget for March. I would like to share some of my budget philosophy with you all. First of all, a budget IS NOT a diet for your money. The only restriction is that you cannot spend what you haven’t earned and you have to pay your bills on time. After that, how you spend your money is 100% UP TO YOU and don’t let anyone tell you otherwise! Unless you’re married, then the spending is up to the plural you and you both have a say. If you want to order 10,000 bouncy balls from Amazon and you have the money, do it, you weirdo.
I budget in three sections. The first section is bills. These are things like the mortgage, water, garbage and insurance. Sometimes I can negotiate them down, sometimes I can watch my usage (water, natural gas and electricity) but for the most part, once the month begins, it is what it is. I have to budget for them as they are.
The second section is much more flexible spending. It’s food, household items, gas, and clothing. These are the areas where I budget what I feel is a reasonable amount but if something comes up, it’s the section I can scale back to make room for unexpected expenses. As a matter of fact, the $200.00 I budget for household seems to become a catchall for any expense that needs a home. My daughter needs reeds for her saxophone, household. My boyfriend forgot to cancel the landscaper so now I owe him for another month, household. I need to buy weed wacker string because I fired the landscaper, household. This budget category was originally intended for things like laundry soap, shampoo and dog food, so, yeah, that goes in there too. (Psst, this is where I’d put those 10,000 bouncy balls.) In February, I was able to keep this section right on budget, which is a huge win for me. Especially after January was more expensive than I planned for (really, I went to Disneyland for goodness sake. I should have know that would be a budget buster and I should have planned accordingly!)
The third section is debt payments. My car is handled like a bill for now. The payment amount is what it is until the Villainous Visa goes away. Any difference between what I bring in and what I budget in the first two sections goes straight to the Villainous Visa. It’s averaged about $400.00 a month since I refocused on paying it off in July. In December, I finally got it below the limit. In February, thanks to my tax refunds and an escrow refund, I was able to bring it way down. If all goes well, it’ll be gone in a couple more months. At the end of the month, any money left in my checking account (usually from the flexible categories) also gets transferred to the Villainous Visa. I start the new month with only the direct deposit that posts on the last day of the previous month. To illustrate, the amount in my checking account today will be transferred to Villainous Visa today, tomorrow is payday and March 1st I’ll start budgeting with that paycheck in my account. After the Villainous Visa is paid off, I will continue to do the same thing with my car loan until it’s gone.
In February, I read The Automatic Millionaire by David Bach and decided to deviate from Dave Ramsey’s plan a little bit. Yeah, I’m now doing Dave-ish. But as they say, “personal finance is personal.” I know Dave’s plan works. I’ve done it and millions of other people have done it. Dave recommends that you stop all savings except for keeping $1000.00 in a baby emergency fund, while you work your way out of debt. Focus gets the job done, and at the same time your anger about not saving is supposed to drive you. Like I said, it works. In the Automatic Millionaire, David Bach suggests setting up an automatic transfer to savings and/or retirement so you don’t see the money come in, therefore you don’t miss it going out. The ideas are not mutually exclusive. Ramsey recommends the same once you’re out of debt. Personally, now that I see the light at the end of the tunnel with the Villainous Visa, though, I knew that I needed a little extra motivation. I needed to know I’m working for me a little bit.
This month, I opened an online savings account with Ally (after seeing the recommendations from the #DebtFreeCommunity on Instagram and doing a little of my own research). It literally took me five minutes to open the account and I had thirty days to fund it. I then calculated about 2% of my gross income from my day job and contacted my payroll person there to set up a direct deposit of that little amount into the Ally account. I also had her start sending another 2% to my 401k so I’m getting a whopping 1% match from my employer. Once I get adjusted to living without this 4% (total), I’m going to increase each by another 2%. I plan to do this until I get the 401k up to 6%, which is the maximum for my employer’s match. I plan to hold there until my car is paid off and I have my emergency fund rolling, then jump up to the 15% Dave Ramsey recommends. I also read The Richest Man in Babylon which repeated the refrain of “At least 10% of what you earn is yours to keep.” I’ll be very happy when I’m keeping 10% again, and even happier as it creeps up!
All in all, I feel good about the progress I made in February. I made good headway on the Villainous Visa, I’m keeping a little bit of what I’m earning, I’ve read some great books that exposed me to new ideas and methods. I’m feeling optimistic about March also. That budget is set, except for the power bill I haven’t received yet. As soon as I get that, I’ll adjust accordingly.
Of course that leads me to one more very important budgeting tip. Not only is your budget yours, your budget is flexible! There is no such thing as a perfect month and things rarely go as planned. You’re an adult; you know this. If you want to succeed in budgeting, you need to be ok with this. YOU CANNOT TOSS OUT YOUR BUDGET ON THE 8TH DAY OF THE MONTH BECAUSE YOU “BLEW IT!” In his book You Need A Budget, Jesse Mecham compares it to a halftime adjustment a coach makes in a game. If the game plan you set out in the beginning isn’t working by the middle, you make adjustments and finish strong, you do not throw the game. It’s a valid strategy in football, basketball and budgeting. When I get my power bill, it will not equal what I estimated. If it’s higher, I may need to take it out of the household budget (some people keep a miscellaneous category in their budget to use like I use my household category). If it’s lower, then yay! I get to put the difference towards the Villainous Visa. Stuff happens. Adjust and move on.
I hope this was helpful to you. Are you working Dave Ramsey’s plan? Do you have any book recommendations for me? Any budget tips? Please leave them in the comments section.