While I haven’t been talking about it, I am still attending Dave Ramsey’s FPU. I’ve decided to wait until the end of the program to do a full analysis of it. There are some weeks that have been really interesting and some that have not, therefore I want to wait until the end to give you a good impression.
There is one aspect that I want to discuss now since I think it’s worthwhile to many of my readers. The program encourages participants to create a zero-based budget each month. I think this might be the best part of the program so far. At the beginning of May, Jeff and I estimated our income for the month. Since I’m self employed, I use a low-balled figure for my income. It’s an amount that I know I can make each month without a problem. We then sat down and spent it all on paper. Food, housing, transportation, utilities, fun, personal needs, debt payments and donations were all budgeted. We spent every penny on paper.
I can’t tell you how little you worry about money when you have a plan. You don’t find yourself wondering if you are going to have enough money to pay extra on the debt or how you are going to come up with the money for that large auto repair bill in a few months because you’ve already budgeted for it. As you spend money during the month, you need to have a way to compare your actual numbers against your budget. You can use a personal finance program, like Quicken or Money. Dave Ramsey subcribers get access to Gazelle Intensity, which is what I’m currently using to do our budget. You can use Quickbooks if you have a copy of the software and download your banking information into the program. You can use a spreadsheet or paper and pencil. You just need to have some way to know where your money is going.
Last month, there were a couple things were were over budget on (silly me for forgetting to budget for medication when we are in the middle of allergy season), but there were more categories that we were under budget on. All that extra money was rolled into planning accounts for future use. For example, I had about $60 left in my gasoline budget. That $60 is going into my savings account as part of my car replacement fund. Money I budgeted for gifts (including Christmas) will go into the savings account until Thanksgiving and then will be transferred back into checking.
I know this sounds like a lot of work. I won’t lie to you. It is a lot of work the first month you do it. I suggest you do your budget on a spreadsheet or in a program that allows you to copy your budget from month to month. If you do that, your second month should take you about 20 minutes. I just copied May’s budget, changed a few numbers and was done. The tracking should be done each week and will probably take you about 30 minutes depending on how much banking activity you have. I just download everything into QuickBooks from the bank and then review where we are compared to the budget.
I really love the idea of zero-based budgeting. Know where every penny is going before you spend it and then you don’t have to worry about it for the rest of the month. You have a date book or calendar to plan your schedule, right? Why not plan your money the same way?