Monday, February 27, 2017

Financial Peace University Week Three: Cash Flow Planning

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I know I'm behind on these posts for you again, but trust me when I say live has been INSANE. I have so much to catch you up on, so just stay tuned for it all.

During week three of our class, we focused solely on cash flow planning, or how we spend our money during the month. The key is to have an assignment, a plan, for every dollar that comes into your account every single month. You don't deviate from your written plan unless you actually consult that plan and figure out where that money is going to come from, but always being in step with your partner. Most of the time when you say "budget", people freak out and say there's no way they could live like that.

But you actually can if you simplify it. In class, the video mentioned it is going to take us three to four months to really get the hang of the budget. You are inevitably going to forget something (I originally forgot dog grooming because that happens every six weeks, but Matt and I decided we should put money aside for that every month just in case.)

I can't find a video for you this week, but on Dave Ramsey's website is all of the information on the zero based budget, including forms! Matt and I are using the Monthly Cash Flow Plan worksheet, I've printed enough for the rest of the year, and each month we are going to sit down and decide what we are going to spend in each category. And stick to it.

The next task is to set up your Money Envelopes. Categories like food, gas, household shopping (your Walmart or Target runs), entertainment, allowances, etc are things you would use the Money Envelope system for. I am going to set ours up in about a week and I'll share with you what we decided on.

The key about the envelope system is that it emphasizes that you need to feel your money leaving. Swiping your card doesn't give you that gut punch that you just spent money. Handing over actual cash gives you that but it also makes you make better choices on what you spend your money on. Do you want to spend another $5 on coffee or do you want to save it for something better?

The other thing that was a breath of relief is that it's not about punishing yourself. If you don't want to give up your movie date, don't. Budget for it. You want a little spending money to treat yourself, maybe get your hair done or buy a new book? Budget for it. The nice thing about having your budget all worked out is you can see on paper where your money is going. If you are spending $200 on cable, ask yourself is it really worth it? Where could that $200 be going to make more of an impact on your financial well being. Add up what you spend in a year on cable, could that pay off a credit card?

There are a lot of different options for your money envelope system, it kind of depends on how many envelopes you want to use and what works for you. In the video above she uses clips but for me that doesn't work because I like different dividers. Someone in class mentioned that they use a coupon organizer, which would be an inexpensive option to start off with. If you want to get a little fancier, here are a couple of options for you:

If you are following along and maybe want to implement some of this into your own finances, I really implore you to check out Dave's page talking about budgets. If you do nothing else, this is what will make a huge difference in how you spend and how you track your money. Later this week I'll talk about the next lesson, Dumping Debt! 

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