Budgeting and getting your finances under control

I've been reading lately several books by Dave Ramsey.
What I've noticed is that if you have a budget you'll be able to get your finances under control and you will also be telling  your money where you want it to go and making it work for you.



So what is a budget?

As I understand it a budget consists of what you have to spend and then the allocations on what you want to spend it on.  Seems fairly simple right?   It basically is though many people including myself are not very good at doing a budget.

Now they mention that if you do a budget you will seem to have gotten a raise.  How could that happen?  Well it appears that as you preallocate your money you gain more control over said money.
You learn or set limits on what you want or are willing to spend your money on.  Then if you do the all cash purchase system you find you really do have more control of your money.

Budgeting works best with cash or check and not credit cards.  Why?  The tendency with a credit card is to purchase and forget about it.  You don't see the money leave your hand so you don't feel the potential pain right away.  So if you have $60 for food allocated that week and your working with cash you can't really buy $65 in food... you won't have the money at the check out.  Might now be the same if your using a credit card.  Now the Debit card acts like a credit card but, the money comes straight out of your account.  You can't go over unless you have overdraft protection.  Risk here is how that is handled.  A person here at works said she kept getting hit with a fee if she tried using her debit card with nothing in the account.  I would have run from that bank in a heart beat.  I had a bank charging a fee for not having enough movement on the account.  I was well above any typical minimum of $200-$500.  Got hit with the fee one to many times and then moved my money to a credit union.  Good old banks for you.


So what goes into a budget?  It is not simply tracking what you spend.  That is a start since you can see what you spend the most money on.  But, a budget is really much more then figuring out what you are spending your money on.
A budget is really telling your money where you want it to go.  A budget is figuring out your needs, want, and how much you have.  Then you decide where your money needs to go, how much you have left over and how much you can use now, how much you can save for a bigger purchase in the future etc.  Ultimately, if you plan right you will not over spend and can plan to pay cash for things.  You'll get stuck with little or no interest and that lack of interest coming out of your pocket will be the ultimate wealth builder.

So let us work on a sample budget.  The best idea is a zero sum budget.  That means that everything is allocated .... even savings or payments as savings for things like a car.

OK so let's get somethings down here and do a sample.  I'm going to keep things simple with this monthly budget.

Monthly Budget
Income	+$3,000
Rent	-$1300
Food	-$550
Utilities	-$150
Entertainment	-$75
Gas / Auto	-$150
Savings	-$675
Misc	-$100
Total Unallocated	0

As you see there is a specific line item for savings.  That can be actual money set aside for an emergency fund or you can line item it as if it was a car payment.   Then as you have built things up you can go and pay cash for the vehicle instead of financing.  Think of the savings over time.  Think of 4 years of payments at 5% interest.   Per bankrate.com and their calculator if the car is 15,000 you will have paid about $1,580 in interest.   That works out to be about $33 on your ~$345 monthly payment.  The idea here is that if you pay cash you can put more money back in your pocket.  It also requires that you make a wise choice on how much to spend on a vehicle.  Doubling the amount of the car to 30k gets you a double payment.  Thus ~3k in interest.  So the more you can pay up front the more you have in your pocket.  Think of the ability to pay cash for your car, and then save up what would be a car payment.  You have the car paid for in full by the time you need a new.  That is if you stay practical on how much you can afford.  Avoiding getting too much car and this principle works wonderfully.  check out the calculator here.

In a previous post I talked about a sink fund.
Pay Yourself First - some thoughts on personal finance
It's the same idea.  You pay yourself the amount you'd end up putting on your credit card.  Then you go and pay cash for the item.  Saving 15%-23% in interest.  You might think a few bucks in interest on a low cost item is nothing.  How about when you do that a few too many times?  The interest can start adding up.  I'm doing it currently for a Blu-ray player.  I'm putting aside $5 a week.  I'll have enough by the time Christmas comes around.  I'll also be able to take advantage of specials etc.


The bottom line is if you can tell your money where you want it to go you can come out ahead.  You'll actually appear to have more money because you stick to a budget and your defined limits.

So what are some of the recommended limits or percentages for a budget.
I found a reasonable chart from the Michigan credit counseling association
http://www.michigancounselingassociation.com/uploads/2/6/3/4/2634297/budget__financial_education.pdf
There definately is no hard can fast rule on all numbers.  For example housing is labeled as between 25-35%.  Food goes from 5-15%.  See a large variation in the values.  If one area is higher (housing is really expensive in California compared to Iowa) you then have to reduce another.  But, don't be such a nickle and dimer that you don't have any fun in the middle of everything.  You'll just have to find cheaper methods if you have a lot of debt your trying to get out of.   We use the library weekly for movies and more.  Pay only a few fines here and there...... saves on having Netflix, or cable.  Allows us to put that money to other categories.





I'd like to hear some of your budgeting ideas.  Things that work, things that have not, any ideas you have used to stay out of debt.
So the best thing I can say is get to work... and just do it.

Additional resources:
One for the Money
One for the Money - Low cost booklet on Finances
Dave Ramsey Budgeting forms
How to Budget - 50/20/30 Principle


Buaidh - NO - Bas

Ever wonder why so many are home schooling?

As I ponder the question - Ever wonder why so many are home schooling?  I wonder in reality the many reasons.

For one I know some are doing it to shield their children from all the social issues that come from normal school.  At least in our area so many have foul language or behave in such demeaning ways to others; along the lines of bullying.  There are also those that are worried about the curriculum being taught.  They may not want their child exposed to "SEX ED" at a given time or some of the other ideas floating around out there like evolution and the like.



But, I know of the opinion there is more.  It appears some are turning to home schooling as a way to counter what is being perceived as a poor quality education.  Class sizes are getting bigger year by year.  Right now in California 20-25 is normal for a class.  They still have some things in place to help make sure that kindergarten is lower but the norm for higher grade levels is over 20 pupils.
Combine this with ineffective teachers and/or burnt out teachers and you have a recipe for disaster.   And that's not taking into effect or consideration the excessive number of students ending up in schools that ADHD/ADD or autism and other learning disabilities.



I don't know if it is better diagnosis or what but when I hear about 1 in 180 people has some version of autism I get scared.  Did they lump a bunch of things that were being classified differently in the past now as autism or what?  Those figures are amazing when you consider NF(Neurofibromatosis) is generally considered found in 1 in 3000 persons.  That make it very common for a relatively unknown genetic condition.  So Autism is all over the place.  There will be by the numbers 2-3 people with autism at my daughter's school.  So with about 10-15 elementary schools and another 8 high schools and middle schools in the district you are looking at easily 200-250 autistic kids in just the local school district.

So you start to see the disaster that may be boiling below the surface.  The whole broken school system.  And some would say we have depending on the area the premier school system in the world.  Granted some of the rural locations may not have everything the bigger metropolitan locations have but, still we have a fairly comprehensive system.  Ranking high in many indicators compared to the world.  However, can we do more?

I say we can do a heck of a lot more.


many complain that poor or burnt out teachers due to tenure can not be removed without a long costly fight.  Then there is the little known secret (Dirty Little Secret Blog Post) that keeps laying off teachers each year and rehiring the same ones.  What this creates is a bunch of people that can not get tenure and/or access to the pensions. They lose out on retirement funding and the others grow fat on pension that are outrageous.




We need to hold the teachers more accountable.  We also need to have more parent involvement.
When the parent is checking up on the homework, complaining when things get lost in translation and the like things can get better.
If we just assume all is ok, don't verify anything when the teacher says "your kid is doing find in math" then all may be lost.  Or you might just find out things are not as good as you though when it is a bit too late to intervene appropriately.

We have to ask ourselves and our children what is going on at the school.  Is there an area I can reinforce at home?  Where can I get involved and make a difference.

And as we get more involved and hold the school administration and teachers more accountable things will begin to change.

    And now let's not get started on the state of colleges and universities.  I know they have increased the cost per semester he like 200% over the last 10 years or so.  Inflation has not been nearly that bad........  and you can't home school for that one even if you wanted to right?

Buaidh - NO - Bas

P.S. I found an article that is great on home schooling -
Why are homeschooled kids so annoying?