How to make a simple Budget

Budgeting is the easiest way to find out where your money is going, and for the future, to know where your money is going to go.
To prepare you budget, you're going to need to know a few things:
1. Your household income
2. The average amount of all of your monthly bills, to include rent/mortgage, electric, gas, water, garbage, debts, etc.
3. The amount of money you need to survive.

I attached a simple spreadsheet that will help you create a budget.

MONTHLY BUDGET
INCOME
	TOTAL	PAYCHECK 1	PAYCHECK 2
SPOUSE 1 MONTHLY INCOME	$       5,000.00	$       2,500.00	$            2,500.00
SPOUSE 2 MONTHLY INCOME	$       3,000.00	$       1,500.00	$            1,500.00
OTHER INCOME:	$          200.00		$               200.00
TOTAL:	$       8,200.00	$       4,000.00	$            4,200.00
EXPENSES
	MONTHLY	PAYCHECK 1	PAYCHECK 2
MORTAGE
RENT	$          950.00	$           475.00	$               475.00
GROCERIES	$          400.00	$           200.00	$               200.00
RESTAURANT	$          200.00	$           100.00	$               100.00
ELECTRICITY	$          250.00	$           125.00	$               125.00
WATER & GAS	$             50.00	$             25.00	$                  25.00
GARBAGE	$             24.00	$             12.00	$                  12.00
CHARITABLE GIVING	$          800.00	$           400.00	$               400.00
CELL PHONE	$          180.00	$             90.00	$                  90.00
TELEVISION	$             50.00	$             25.00	$                  25.00
INTERNET	$             40.00	$             20.00	$                  20.00
RENTER/HOME INSURANCE	$             15.00	$               7.50	$                    7.50
HOME SECURITY SYSTEM	$             50.00	$             25.00	$                  25.00
CLOTHING PURCHASE	$          200.00	$           100.00	$               100.00
CAR REPAIRS	$          100.00	$             50.00	$                  50.00
VEHICLE FUEL	$          400.00	$           200.00	$               200.00
VEHICLE INSURANCE	$          180.00	$             90.00	$                  90.00
CAR SAVINGS	$          600.00	$           300.00	$               300.00
HOLIDAY/BIRTHDAY GIFTS	$             40.00	$             20.00	$                  20.00
ENTERTAINMENT MONEY	$          200.00	$           100.00	$               100.00
REGULAR SAVINGS	$          800.00	$           400.00	$               400.00
SPENDING MONEY	$          240.00	$           120.00	$               120.00
SCHOOL LOANS	$          450.00	$           225.00	$               225.00
EXTRA DEBT PAYMENTS	$       1,600.00	$           700.00	$               900.00
CAR LOAN	$          250.00	$           125.00	$               125.00
CREDIT CARD DEBT	$             50.00	$             25.00	$                  25.00
TOTAL EXPENSES	$       8,119.00	$       3,959.50	$            4,159.50
TOTALS
	MONTHLY	PAYCHECK 1	PAYCHECK 2
TOTAL INCOME:	$       8,200.00	$       4,000.00	$            4,200.00
TOTAL EXPENSES:	$       8,119.00	$       3,959.50	$            4,159.50
REMAINDER:	$             81.00	$             40.50	$                  40.50

Dave Ramsey and Financial Peace University Changed our Lives!

After graduating college and commissioning as a 2nd Lieutenant in the US Army, I moved to Fort Rucker, Alabama for flight school in May 2012. My fiance at the time, Megan, moved back home to Wisconsin until we go married the following December. She had a job working at the local hospital, and I was living the Army life.

Upon graduation, we had a combined $90,000 in debt.  About $65,000 in school loans (my tuition was paid for, but I still had about $30,000 in loans for my personal flight training, the remainder of the school loans were for Megan's tuition and private/instrument flight ratings). The remainder of the loans was a "Career Starter" cash loan from USAA that I took out my senior year of college to pay for my brand new Jeep Patriot and our honeymoon.  We had a lot of debt and no real plan to pay it off, making the minimum payments as required.

In December 2012 we got married, and I brought her down to Fort Rucker with me.  At the time, I was making about $3,200 per month and had about $1,500 in loan payments. ALMOST HALF OF MY INCOME WAS GOING TOWARDS LOANS! We didn't have any type of budget, and had no idea where our money was going.

In February 2013, we started Financial Peace University, Dave Ramsey's Program to "living like no one else"  After the very first class, my wife and I sat down to create a budget that would get us on-path to being debt free.  We attended all of the classes and for the most part, follow what Mr. Ramsey says.  We did make a huge mistake in the winter of 2013, when we took out a loan on a car.

Throughout Financial Peace University we learned about the Baby Steps Listed Below:

1. Establish a $1,000 Emergency Fund.

2. Pay off all debt using the Debt Snowball

3. 3-6 month expenses saved in your emergency fun

4. Invest 15% of household income into Roth IRAs and pre-tax retirement

5. Fund your children's college

6. Pay off your home.

7. Build wealth and give!

Here's a youtube video that describes the baby steps

We are still on Baby Step 2 and at the time of this post, have about $45,000 left in debt to pay off. We are a lot further along in paying off debt that I would have expected at this time and we should be debt free by the end of 2018.  

Financial Peace University Changed our lives for the best! We are not as worried about our finances as we used to be and have an idea of how we are going to reach our goals!! If you're intersted in finding a Financial Peace University Class, click here to start your journey to being free.

Dave Ramsey's Baby Steps — the plan to win with money.

Beginning Net Worth Statement

As I mentioned yesterday, one of my financial goals is to have a positive Net Worth by the end of the year. To calculate your net worth, you add up all of your assets everything you own (cash value) and then subtract your liabilities (any debts you have).

How are we going to raise our net worth?

We will continue paying off debt  (approximately $1,000 per month), continue contributing to savings (about $200 per month), and continue contributing to retirement account (only about $45 per month until our debt is gone). With all of these transactions, we should have a positive net worth by the end of the year.

To start off the year, we have a net worth of -$12,037.02. We have $33,476.04 in assets and $45,513.06 in liabilities. A majority of our assets are not liquid, meaning the cash is tied up in items and not cash. A majority of our debt is school loans, and our next largest loan is a car loan. We don't carry a balance on our credit card. (We pay our credit card off every month, but the payment just hasn't posted for this month yet.) 

If you have any comments or questions, feel free to leave a comment.

2016- A New Year and New Goals

2016 is finally here! With that, my first goal is to rejuvenate this blog. I'm going to try to do at least three posts a week. Here are some other goals (financial and personal that I have for the year)

Financial:

1. Have a positive net value by the end of the year.

2. Pay off 2 school loans completely by the end of the year. Approx. $8,000 between our two smallest school loans)

3. Maintain our emergency fund at the level it is currently at.

4. Increase our savings by at least $1000 by the end of the year.

5. Don't worry about finances as much as I had in the past, everything is going to be AOK.

Personal:

1. Show my wife how much she means to me every day.

1a. Spend more time with my wife, because she is there for me and deserves more than the time I gave her last year.

1b. Be more active in church.

2. Go on a multi day backpacking trip

3. Volunteer more

4. Be more simplistic in my lifestyle.

5. Start and maintain a garden.

6. Be a better person.

7. Live a healthier lifestyle: workout more and eat better

What are some of your New Years resolutions?

An Emergency Fund. What is it and why do you need one?

An emergency fund is a liquid savings account in which you can easily access in the event of an emergency.  An emergency is something that happens such as losing a job, the dishwasher breaks, or you get an unexpected medical bill. An emergency fund is not "Oh look at the car, I need to buy a new car." or "That's a cute purse, I want that." It is for EMERGENCIES!!

Recently, my 2012 Jeep broke down.  The transmission went out and I was stuck on the side of the highway.  Luckily, it was covered by warranty. That didn't prevent me from dipping into my emergency fund.  I had to get my Jeep towed to the repair shop.  I paid $150 to tow my Jeep.  I didn't even break a sweat.  That is exactly what my emergency fund was for.  The best part is, my insurance company repaid me for the towing, so it was back up to its normal amount within two weeks.

Why do you need an emergency fund?
1.  An emergency fund will give you a sense of comfort.  It is comforting to know that in the event of an emergency I have some cash that I can use in my bank account to cover the cost.  I don't have to worry about my credit card limit or going further into debt.

2. It gives you a source to fund an emergency.  A majority of people that I talk to don't have any type of emergency fund.  They say that their credit card is their emergency fund.  To be honest...Three years ago, my credit card was my emergency fund.  And I used it as an emergency fund.  At the time I was a broke college student and bartending at a Golf Resort. I was driving to work and I rolled over something and got two flat tires.  I had no cash to pay for it and my credit card only have a $500 limit.  I had to go out and find two new tires for under $500, which wasn't too difficult but I just about maxed it out.  It was at that point where I decided I needed an emergency fund.  A credit card will only worsen your financial situation in an emergency.  How do you plan on

How much should be in my emergency fund?
Dave Ramsey suggests building a $1000 emergency fund until you get out of debt.  I personally did not feel comfortable with having only $1000 in my emergency fund.  Even though I have a steady job in the military, my wife and I felt more comfortable having a $3000 emergency fund.  This will allow us to fix our car if it breaks down.

After getting out of debt, Ramsey suggests building your emergency fund up to 3-6 months of expenses.  For us, that would be about $4,000- $7,000. We'll build up to about $7,000 once we get out of debt. But for now, we're comfortable with the $3,000.  It's enough to cover two months of expenses, or an emergency with our car.

How to save and buy a car for $30,000 CASH

I’ll tell you right now, this article will not teach you a quick way to get the money you need to buy your dream $30,000 car.  This will take time and commitment.  If you follow this method, you will be able to afford the car you want.  Let’s start off with the basics:

Why is it stupid to take out a loan to buy a car?

1. You’ll be a slave to the lender.  Proverbs 22:7 states, “The rich rule over the poor, and the borrower is slave to the lender.”  Taking out any type of debt automatically makes you a slave to whoever owns your debt.  Once you take out a loan there is only two ways you can get out of it: you pay off the loan or you go bankrupt.  Either way you are losing.

2.  You are spending way more than the car is worth.  If you purchase a $30,000 vehicle with a 3% interest rate over 60 months, you’re looking at car payments of $539.06 per month.  If you take out a loan, you will be paying $32,343.60.  That’s $2,343.60 lost over a 5 year period, which equals about $450 a year that you could have used on something else, or saving for your next vehicle.

3. Your brand new $30,000 car will lose about $3,000 the minute you drive it off the lot.  Once you drive it, it’s considered “used”.  So, if you read point #2 on why car loans are stupid, you’d actually be throwing away $5,343.60.  A loss of about $1,000 per year.

Why buy a car with cash?

1.  You have leverage. If you walk into a car dealership with nothing in hand, the dealership will squeeze out as much money from you as they can.  Show them the cash.  If you show them that you are serious and have $30,000 in cash with you. They will take a knee and get you into the vehicle you want.  You have the ability to say, “I have $30,000 and not a penny more.” That $34,000 vehicle that you wouldn’t be able to get with a $30,000 loan just became available to you for $30,000 on the nose.

2. You won’t be a slave to the lender.  You own your car, nobody else does.  You won’t have to worry about making monthly payments on something that is losing value every mile you drive it or every day it gets older.

The strategy

This strategy takes about four or five years to get you to that $30,000 car, so plan ahead.  If you can, keep driving the car you have now.  If you can’t continue driving your current car (if it is completely broken with no chance of a reasonable repair) then take your savings and purchase a car that you can afford with cash. Now, let’s say you take that $539.06 per month and you start putting it into savings instead of towards a car payment.  In one year, your current car breaks down. You can afford a $6468.72 car.  You keep on saving that $539.06 per month for another two years, and that car breaks down.  Your used car probably lost about $1,000 in value since then, but you saved $12,937.44.  You can add the extra $5,000, making that $17,937.44 in cash to purchase another used vehicle.  This will get you a very reliable vehicle that should take you to the end of your $30,000 car journey.  Chances are, in the last 3 years, you earned a pay raise.  You bump up your monthly savings to $600 per month.  After two more years, you saved another $14,440 towards a car.  You current vehicle is now worth $15,500.

After 5 years and two different cars, you have $14,440 in cash and a $15,500 vehicle.  That $30,000 vehicle is now only $100 dollars away, but the good news is, you have CASH! Cash is king when it comes to purchasing a new vehicle from a dealership.  They will, in most cases take your $29,900 for your new vehicle.

Conclusion:

By saving your money and stepping up vehicles in small increments, you have saved yourself about $3,000 over five years.  Not a bad savings for purchasing a piece of equipment that is guaranteed to lose value.