Financial Peace University – Week 3

As you all know, I’m going through Financial Peace University (FPU) with my BF. If you’re new to the story you can read about the Preview Night, Week 1 and Week 2 by clicking those lovely links. =)

This week was week 3: The Budget… errr… I mean “Cash Flow Planning”.

According to Dave (my new favorite saying these days) doing a budget is like learning to ski – you don’t start out like a pro – you fall on your butt a few times and eventually after you keep practicing it gets better. Apparently it takes 3 months to get a budget that actually works – so don’t give up! (I feel REALLY behind the curve, it took me about 6 months to finally get a budget that even half-way worked – and even then I still tweak it on a monthly basis!)

The fact of the matter is that I’ve been doing a budget for over two years now. I have a budget that mostly works for me, I end up at the end of a pay period with close to nothing in my account (which is actually a good thing if you’re doing zero-balance budgets). However – I just took a look at the spreadsheet that I use for keeping my budget and I realize that somewhere I’m missing $327?!?!

Well, I shouldn’t say I’m missing it, it is called “wiggle room” at the bottom of my budget. But you know what? I don’t end up with an extra $327 at the end of the month. Some how that money is wiggling right out of my budget and I have *no idea* where it is going!

Since I’m not relying on the credit cards and I’m not going overdraft, somehow the last 6 months I had just ignored the fact that $327 was flying right off the budget sheet with no rhyme or reason to it!

So, I’m going to do this the Dave Ramsey way! Here is my plan for the next two weeks before my next paycheck comes:

  • Rewrite my budget to be completely zero-balance. No extra $. No wiggle room. (Though I will have a Miscellaneous category, just in case!)
  • Switching to the envelopes. I am finding recently that I’m not giving enough thought to purchases I make on my debit card anymore. I have one account that is just for spending, so I just do everything out of there – but even though I have a budget on how much I should theoretically be spending in the categories for that account I’m not actually tracking to make sure that the money is being spent properly. To give an example: I have allocated to this account $300 for food, $70 for gas, $45 for pet food, $15 for toilettries, and $50 for miscellaneous. So I have $480 in spending money every month in this account. But I don’t actually spend $15 for toilettries and $45 on pet food. I just SPEND the $480 on these things and HOPE that I don’t overspend in one of those categories. I need to stop hoping and use envelopes!
  • Re-evaluate my spending habits. The number amounts that I’ve allocated to my different categories were based on my spending habits before I moved to Kansas. I’ve now been here 6 months I need to reassess my spending habits. I may be spending more or less in each category than I have budgeted for.

Thoughts of Week 3 of FPU: I was a little skeptical about going to the budget class. I know budgets, right? I’ve been making one monthly for 2 years. OMG I HAVE BEEN DOING IT WRONG! I shouldn’t have $327 wiggling out of my budget every month, I need to give that money a name and make it have a purpose! Expect a very detailed post about this soon, I’m been crunching the numbers and it isn’t good my friends… it is not pretty!

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12 Responses to Financial Peace University – Week 3

  1. I used the envelope method for awhile and at first I thought it was inconvenient to have chunks of money at my house but I soon figured out that it was working! I was totally staying under budget. I stopped doing it out of pure laziness and because I wanted all my finances to track automatically through Mint.

    • SS4BC says:

      I also did my finances for years with envelopes when I was in graduate school. But then I decided when I got a “real job” that I should manage my finances in a “more sophisticated” way – which ended up being a “going overdraft” kind of way. Which I’ve since revised, but man – envelopes do make you stop and think.

      The obvious benefit of not using envelopes is that you can very easily track online exactly where your money goes.

  2. Red says:

    I kinda do the same thing with “hoping” I’m spending within budget in any specific category. I mean, I’m a pretty strict spender, so I’m not buying a ton of expensive groceries and hoping everything works out. But I’m also not getting a running total of how much I’ve spent on gasoline in a month like I used to. I guess that’s because I couldn’t cut much of my driving out if I was going over budget. (I just go to work, to school and back home every day!) During the summer? Different story because I love going home to be on the lake with the family.

    The envelope system could be great! Before I became so tracking crazy, I would withdraw cash from an ATM once a week to pay all non-bill items (which I paid online). It really helped me to become critical of my spending because I had X dollars to spend in a week, and I knew spending this amount on groceries and this amount on eating out was going to mean I couldn’t fill up the car with gas that week.

    Even when I had been budgeting for 10 months, I let myself slip up in October/November and spent more than anticipated (and budgeted) on entertainment without even realizing what I had done. The no spend challenge (obviously) helps me out a lot, but once it’s over, I expect I’ll definitely have to go back to tracking individual categories all through the month.

    • SS4BC says:

      I think that I need to switch back to envelopes, at least for a few months just to get myself reintegrated into the mind set of how much I actually can spend on things. I’ve really become lazy about my spending and it is starting to show.

      You’re right, knowing that you only have “X” dollars to spend makes each purchase seem a little more important. “Well, I can have this Rockstar now for $2, but then I’ll have less money to spend on date night on Friday.”

  3. 2blu2btru says:

    I haven’t had a successful budget in my adult, out of school and on my own life (which isn’t much…I’m twenty-six next Thursday, and graduated college at twenty-three). In December, after nearly a year of late fees, overdrafts, robbing Peter to pay Paul, and general financial tomfoolery, I was able to get back on track. I have paid all of my bills on time for three consecutive months. I started my 401K in June. This is as far as I’ve gotten. Whatever is left after bills has to cover food & gas for the car, and acquiring furniture. I’m sure once I am completely furnished and actually have “extra” money, I’ll be returning here to find out about a budget.

    How long have you been working on your personal finances? I’m still relatively new to it all and am looking for suggestions/resources.

    • SS4BC says:

      I totally feel you, I graduate college at 21 – then didn’t even start to TRY to budget until 25 – and wasn’t even remotely successful at it until 28. Now I’m 30 and I’m finding that I STILL haven’t been doing it right!

      I totally understand you on the late fees, overdrafts, etc. I had one month when I was 27 (two months before I started this blog actually) when I had over $800 in overdraft fees. $800!!! in FEES. Not to mention I had maxed my credit card – was getting close on three other cards.

      The first thing I had to do: MAKE MORE MONEY

      Once I found a way to make an extra $200-400/month (I did this tutoring online), I was able to start planning a budget, saving an emergency fund, and stop living on debt.

      I’ve been going at this for 2.5 years now, and I’m STILL learning new things.

      The first things I’d suggest:

      1. Sit down and take an honest look at your spending habits.
      2. Figure out how you can, realistically, save up $500-1,500 into an emergency fund.
      3. Get yourself an ING checking account. No late fees, no overdraft fees, you can’t overspend. When you’re out of money, you’re out of money. (If you do decide to do this, let me know and I can give you a code for an extra $25, but rest assured I would refer you to them without the code. I frequently say if I could marry a bank, I would marry ING. Love them. So hard.)
      4. Keep reading the blogs! Maybe even start one of your own. The PF blogging community is SO supportive. If it wasn’t for them I’d be sunk!
      5. Check out a few books that deal with personal finance. “Your Money or Your Life” or “Total Money Makeover” come to mind. They’re easy to read and meant for people just like us. =)

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