Budgeting can be such a nasty word, but Tsh reminds us that money is simply a tool. It’s not good or bad, it’s just money! We can follow plans, and spend on what matters most to us.
- Pay off debt from past choices
- Budget to make current choices with our money
- Save for emergencies, future choices, and wants.
The author uses zero based budgeting- the bottom line is zero, and every dollar is set aside for something– either a current expense or savings for the future. In savings, she advocates “sinking funds,” meaning that if you know a large expense is coming up, or there is a regular expense that doesn’t happen monthly, you set aside a portion each month so that your budget remains static. For example, we pay our house taxes twice a year, but I set aside a sixth of the cost each month so that the funds are available when tax time comes around again. See? Easy. Budgeting is easy.
She includes a basic budget worksheet in her book, but in general here is a form for you to use:
- List all income sources and amounts
- List all regular expenses
- List all irregular expenses and what you’ll set aside each month. This includes savings.
The bottom line should be zero.
Budgets require us to say no. It’s simply not possible to say yes to everything, and having a plan is an incredible help. We say no to what doesn’t matter to us. Also, if we are debt free, then we are free to save money for the future!
Here are some ideas of what to save for:
- We save for emergencies. Many people rely on credit cards, but the author reminds us “It’s so much simpler, so much more reliable, and so much freer to pay cash.” If you are currently paying off old debts, when the debt is gone KEEP paying those same payments, but put them towards savings if at all possible. We should try to have at least 3-6 months of basic living expenses saved up. If you have an accurate budget, you’ll know exactly what you need to set aside to get by.
- We save for the future. Retirement won’t be paid for by anybody else, it’s our responsibility if we want to live our last years in dignity. Saving for kids’ education is wonderful, but she reminds us that this is not something our children are entitled to- our retirement must come first.
- We save for our wants. Jot down your dreams. Is it a house? Car? Vacation? Maybe new jeans, or a weekend getaway? After your emergency fund is set up, set aside money for your wants. The total you want, divided by the months until you want it to happen, is your monthly expense line.
“One of the best side effects to financial progress is increased inner maturity, and part of this inner paturity is learning the value of saying “No.”
Tsh shares a bit of her own story in this chapter, lest the reader begin to think that we have nothing in common! She was a good student, and a hard worker, but lousy with money skills. She had student loans and no savings when she got married. As newlyweds, she and her husband felt like there were holes in their wallets- they had no idea where the money went. “How can my friends manage to save?” she wondered. “We often prayed our way to the end of the month.” Her response? “…I never looked myself square in the eye and took responsibility for my lack of money management. I always blamed it on the money side of hte equation, reasoning that if we could just earn more, we’d be OK.”
She’s now a Dave Ramsey devotee (you can google him, lots of folks just love his financial advice) and writing this book. So I guess she learned her lesson!
Our own family has certainly had lean years. We, like the author, have always paid tithing to our church first before any other bills (and we’ve always seen the blessings of that- I’m quite fond of saying that I can’t afford to NOT pay my tithing, because it’s totally true.) My husband started college just before we got married (right around the time I was graduating.) So yes- lean years. I worked until our first baby came, and he worked part time all through college. Employers helped pay tuition, and parents helped when we needed it. (And we needed it.) After we thought we were well settled money-wise, my husband started a tax practice with a friend. That was a lean time. Then, we weren’t part of that tax practice any more, and were looking for work. THAT was a lean time too. Now we have good employment again, and are doggedly saving as much as we can. Well, that’s not true, we’ve budgeted some fun lines into our budget (oh my goodness, for the first time I have cash every month that I can do whatever I want with- giddy!) I really like her take on budgeting, and yes- money is just money. We need to be dead serious about what is a need, what is a want, and knowing when to say no. Also, one of our biggest challenges is budgeting is being honest with ourselves- if we accept that money is just a tool, we can’t be bashful in calculating what we’re spending. Did you or didn’t you spend $30 on donuts last month? OK then! You lay it out, you see where it’s going. You decide if it’s going where you want it to, and you make choices.