Building a Beer Budget on a Champagne Taste
Posted on | January 2, 2013 | 22 Comments
This past weekend, my sister-in-law and I were driving home from lunch out when we started talking about money and budgeting. She mentioned that she and my brother-in-law were starting the Dave Ramsey “Snowball Debt Payment” method and that she thought it was a really good system. She gave me a rundown on the basics, and when I got home, I brought it up to Taylor.
You see, money has always been a subject we kind of steer clear of during our typical conversations. He brings it home, I pay all the bills, we occasionally have a meeting of the minds, but we don’t talk about the really important things. We haven’t done great at creating and sticking to a serious budget. We tend to have the habit of just going ahead and buying something when we want it instead of budgeting for it and saving for purchases. Because we still put away for retirement, college, and are up-to-date on all bills, it’s never seemed like something we really needed to get under control.
But over the past couple years, we have slowly let our debt begin to climb. Before kids, we were doing really well with saving and not having any real expenses. We rented, usually with a roommate, and we didn’t even have a car payment. So we put as much money away as we could, and we’re always grateful for that period of time in our life where we didn’t spend much and saved as much as we could. It saved our butts over the past couple of years. Because, right before babies were born, we purchased a car. We faced some major student loans. The we bought our house (a huge fixer-upper) while we were still renting, and we took out a line of credit to do some of our home improvements. In addition to acquiring more debt, we let our savings account grow smaller as we worked to turn our house into a home. The result has been us looking at our account every now and then and feeling a little sick. It’s nothing devastating. Some people would probably think nothing of the debts we owe. They are typical family debts; a car, a student loan, a couple cards, a mortgage. Nothing worse than the vast majority of middle class Americans, but we are not in a position where we feel really comfortable with our finances or how we’re handling them.
So as I proposed the new Snowball Method to Taylor over the dinner table, his eyes lit up. He’s a man who loves a good, sensible plan, and for once, we had a clear-cut way of getting out of debt and taking control of our situation. The idea behind Dave Ramsey’s method is that most people get into debt because of behavior (duh). It’s not that we don’t understand the math behind debt, it’s that we get used to the idea of getting what we want when we want it, and we thrive on instant gratification. It wasn’t easy admitting that we needed to change our ways, but it was the first step.
The second step, was coming up with a serious budget. And honest-to-God, down to every single dime, budget. No, “Well, let’s just grab lunch because it’s easy.” No, “Hmm…I think I want some extra eye shadow while I’m at Target!” Cutting out all the extras. Budgeting every dollar that runs through our hands. And making it happen. It means no more nights out for awhile, no more grabbing up a bottle of wine because I drank all of mine over the weekend, no more picking up extra Red Bulls or trashy magazines. Taylor is currently driving an old Corolla that was my high school graduation gift. We need to replace it. But he’s waiting until we tackle this mountain for awhile before he gets his first car (he’s never been able to pick out and buy a car for himself with a reasonable budget). It’s not going to be fun, but it will be worth it.
The next step is making sure you have $1000.00 emergency money. If you have any extra savings, it goes directly towards your debts (not retirement savings, but just cash flow savings).
Then, you sit down and list every debt. Every single bill that you owe every month (not counting utilities and such, but true debt), from smallest to largest. This part wasn’t that fun. You have to be completely honest with every bill owed. Luckily, Taylor and I are always upfront about money, so there were no hidden expenses that either of us have tried to keep a secret. But it still wasn’t a good feeling to see all the debt on one piece of paper. Now, we are making double the minimum payment (or more) on our smallest debt and the minimum on everything else. This was a new plan for us. We’ve always paid more than the minimum on everything, but it’s never been enough to feel like we were making a real dent. Instead of a clear, aggressive plan, we were kind of all over the map. It gets discouraging to feel like you aren’t making much change to the issue even when you’re paying bills constantly.
To jump start our pay off, I sold off some Pyrex and other little things we had in the house that weren’t getting used. I decided to postpone my master’s program to the fall so that I wasn’t accruing extra student loan debt while we were trying to pay down our other student loans. I am looking into getting an evening/weekend part-time job where the extra pay would go directly towards payments (Taylor isn’t digging this step yet because he would prefer that we have time together when he’s home). I called and refinanced our car with another bank, saving us almost half the payment cost. I consolidated our credit bills from the home improvement onto one card with 0% interest for eighteen months, which will give us more than enough time to pay it down completely. We’ll be doing a big yard sale this Spring to sell all the things that have been sitting in our garage since we moved in last May. When you pay off that smallest debt, you add its payment towards the next debt, creating a “snowball” of funds to put towards your other bills.
If you follow Dave’s method to a tee, and if you put your all into it, most families have all debt minus the mortgage paid off within eighteen to twenty-four months. Once your debt-free except for your home, you build a three to six month emergency fund and then attack your mortgage while contributing to retirement/college funds again. We probably won’t get to the mortgage part…at least not yet. Most likely, we’ll move in three to five years, so we will try to follow this plan with our next mortgage instead. I’ve heard some criticism that you should focus on highest interest debts first. I understand where people are coming from with that. Just looking at the math on our debts, most of our loans/cards are low or no interest. Even tackling our highest interest debt first wouldn’t make much difference, and it would be awhile before we saw a real dent in the debt (because our highest interest is our car at 3.59%). So, for us, that isn’t an issue.
Even though we’re having to make some major sacrifices, including putting life plans and purchases on hold, this is the first time in a year that I feel really good about our financial path. There is a place for every penny we bring in, we’re making our money work for us, and it’s a great feeling to know that things are falling into line. I have to admit, it was kind of hard to sit down and write all this out. I feel like, everyone I talk to seems to have it all together with money. People don’t want to admit that they have debts and have made a bad financial move or two. It can feel lonely when you think you’re the only family who doesn’t have it quite together financially but who isn’t completely falling apart either. But if you’re in our shoes, rest assured, you aren’t alone. And if you want to tackle your debt with us, please join in! I probably will not share exactly what we owe until it’s all paid off (just feels like way TMI), but maybe once we’re finally done, I’ll share our numbers.
Good luck if you’re dealing with financial issues this year, too. Here’s hoping 2013 ends on a much brighter note!
I am in no, way, shape, or form connected to Dave Ramsey. I am not getting paid or recognized for this post. His method makes sense, so I wanted to share it with you. To see a real break down of the plan, check out his book. (not an affiliate link).
Tags: Budgeting babies > Debt management > Making ends meet
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22 Responses to “Building a Beer Budget on a Champagne Taste”
"I'm a twenty-five-year old mama to two little boys and married to the love of my life. I have a serious Diet Coke addiction and a tendency to overshare. My biggest dream is to write a book. A good book that tons of people buy and relate to and love. In the mean time, this is the story of us as we flounder through raising our wild, little boys, moving a million times, and buying and renovating our 1968 Ranch home."
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January 2nd, 2013 @ 11:00 am
Thank you for posting this. What a great idea! Money is a tense issue in our house, as well. I’d love to be able to afford to travel again!
)
Sally Reply:
January 2nd, 2013 at 2:08 pm
That’s how we feel, Anne. We are so ready to be able to go and do whatever we want again. We make too much money to feel as tight as we do.
January 2nd, 2013 @ 11:07 am
Awesome post! I love personal finance and Dave Ramsey is a great method that gets people financially motivated. Can’t wait to hear more about your journey!
Sally Reply:
January 2nd, 2013 at 2:08 pm
I’ll be sure to share as we go, Anie
January 2nd, 2013 @ 11:26 am
Sally, my husband & I followed this plan as well. It is such a good one too!! We are COMPLETELY debt free other than $5,000 in my student loans left to pay. It is a pain in the behind at first, but after a few months, when you start to see the end results, you’ll be super happy you did it. Best of luck to y’all!!
Sally Reply:
January 2nd, 2013 at 2:08 pm
That’s so great to hear, Rebecca! It’s definitely an adjustment to have to really think about every purchase, but it’s going to be worth it.
January 2nd, 2013 @ 11:41 am
I’ll join you on this as well. I’ve NEVER been a great financial planner, but since I handle all the bills in this household too, it’s time I try something new. I was told about this idea years ago from a friend of mine that was a long time loan officer/financial planner. Her advice was to take the lowest balance of credit while paying minimum on the others. When that is paid, use that money to add to the next lowest balance and so forth. It is a great idea and one that is never too late to put into action. Good luck with yours and wish me luck on mine. Happy New Year to the Duren Family!
Sally Reply:
January 2nd, 2013 at 2:09 pm
I’m not great at it either, Kay. This method puts it into a good plan of action and makes it something I don’t have to think about so much. It’s just there on paper, and if I stick to it, it takes care of itself! Good luck, let me know how it goes!
Love to the Meadows from us!
January 2nd, 2013 @ 11:49 am
Oh, girl I feel your pain on this. I did his plan years ago and no, it doesn’t mean that I’m sitting on some awesome nest egg of money as I write this, but it is SO worth it to see the balance of that smallest debt go down and be erased. I am getting ready to pay our car off next month (thanks to my 3 kids and the child tax credit!) and then have to start tackling my student loan that has only been paid 1/2 way down in the 10 YEARS I’ve had it. Unfortunately, with everything, there is ALWAYS something that comes up since my husband got injured at work and had surgery, he’ll be out for another 6 months (we’re on workman’s comp, thank goodness, but it’s still a pay cut compared to normal pay). So, the extra money from my tax return that would have been dumped into my student loan, now has to head into savings in case something comes up and we have med bills, for example. (of which we will since I had my gall bladder taken out the DAY BEFORE my husband’s arm surgery in December)
I struggle with being overwhelmed with not only have an emergency savings (we have that), but to have to somehow save up 3-6 months of income + save for college + save for retirement. How do they expect us to do all of that if A. gas continues to rise and B. milk goes up to freakin $6/gallon?!?!?!
Sally Reply:
January 2nd, 2013 at 2:11 pm
I know what you mean. Something ALWAYS comes up. Dave refers to it as “Murphy” (Murphy’s law, of course, heh). As soon as you get started, something will come up to take you down a notch. That’s what the emergency fund is for, and if it gets depleted for anything that is a true emergency, you refill it asap. The thing for us is determining what is an emergency and what isn’t. Unexpected car break down? Emergency. Kids outgrew their clothes? Not an emergency, but something we plan for. It’s a new way of life, for sure.
And yes, cost of living is unreal right now. We spend more on groceries than we ever have before even while we’re working hard to try to cut down our budget.
January 2nd, 2013 @ 12:31 pm
We started the snowball a while back, but didn’t give it our all (ie: a zero-based budget), so we are about to kick it back into high gear. I am so sick and tired of worrying about money!! I tend to make impulse decisions and regret them later, I traded in my 4Runner this summer (why?!!) and got a new to me Honda and essentially doubled the amount owed for no good reason other than I felt like doing it at the time. I think I need therapy for spending addiction!! I hope we both do a great job and get out of debt in 2013!
Sally Reply:
January 2nd, 2013 at 2:13 pm
We are in a similar situation. We traded in both our cars a couple Januarys ago for our larger pilot because it took our car payments down by a couple hundred bucks. Except, that we almost had our 4runner paid off. And now, we will have to tackle our Pilot payment in addition to a new (used) car somewhere down the line. Clearly, we didn’t think it through.
January 2nd, 2013 @ 1:28 pm
I had a friend who actually took the class for this program. I have been really interested in trying this method too. A lot of times local churches offer his classes…maybe something to look into. Thanks for the motivation for me to really start budgeting better as a new college grad with their first job!
Sally Reply:
January 2nd, 2013 at 2:14 pm
Good luck, Leah! Let me know how it goes!
I don’t believe our church offers the class, but I’ll be sure to look into it
January 2nd, 2013 @ 3:39 pm
Enjoyed reading this post. Nathen and I took a Dave Ramsey course 2 years ago (Financial Peace) while we were still in school. We loved the concepts, but were’t able to apply many of them at that time since we were still piling on the student debt without income. We are getting ready to take the course again though as a refresher. Our church offers it every January. We are really looking forward to tackling our debt. It won’t be easy with a little one due in June, but I’m glad to know that there are other young families out there doing the same thing!
Sally Reply:
January 2nd, 2013 at 3:59 pm
Good luck, Juliana! Yes, this is the first time in our life we feel really ready to tackle this, so I’m hoping we can start and keep at it. Let me know how it goes for you!
January 3rd, 2013 @ 9:06 am
I’m right there with you on this one. Buying the new house has taken us from practically no debt to “Holy shit WTF is happening to our bank account.” I actually mentioned the snowball plan to Andy we’re going to sit down this weekend and try and figure everything out. We got this girl.
January 3rd, 2013 @ 11:59 pm
My hubby and I went through a similar program called Crown Financial – its a little more biblical based but essentially the same debt reduction program. My husband listens to Dave Ramsey’s podcast everyday and its quite interesting. Good luck! We’re walking down the same road…trying to decide which sacrifices to make. Dave RAmsey always says on his podcast that we should “live like no one else so later you can live like no one else”. Trying to keep my eyes on the end goal!
January 4th, 2013 @ 10:17 am
Thanks for your honesty in this post. We need to do something too as I was just reduced to a four day work week and we are buying a house. Eek! It will be tough, but I know you and I can accomplish these goals and feel better about our finances. Good luck!
January 6th, 2013 @ 10:19 pm
Do you both have iphones? My husband and I are using the EEBA app free version on the iphone and I’m really liking it so far(granted it’s only been day 2). It links together so you can track as you both spend. Also not sure exactly how you guys budgeted but we each gave each other $100 a month of what ever money. The idea is use this for coffee run/food out movie etc. This way we still have a little fun money and don’t get so stressed about every penny.
January 7th, 2013 @ 10:02 am
My husband and I are starting the Dave plan as well!! I actually just started a post series about this that will start next week!!
January 13th, 2013 @ 11:51 pm
Thank you for posting this! We will be combining our debt in March so this was absolutely so helpful for me!