Financial Fitness Workout #2- Creating a Budget

Our Financial Fitness Goal is living without credit cards, loans of any kind.  We want to feel comfortable living within our means and end the feeling like we are living paycheck to paycheck.

Finding your Financial Budget Form is like buying a new pair of tennis shoes.  You don't commit to buying it unless it looks good and is the right fit for you.  If you are unsure of a Financial Budget Form that could fit you, check out my previous blog post, Finding a Budget Form   If one of these forms are not the right fit for you,  you can find other budget forms on Pinterest.

But now that we have our "new pair of shoes." It is now time to look at what type of workout we are going to do?  Walk? Run? Zumba? P90X?  The workout you choose has to be whatever you can financially afford and what you are willing to give up.  If you want to get out of debt quick, it may mean sacrificing a lot of "extras."  If you feel like there just isn't much to give up, then getting out might feel like a walking pace.  

No matter if you choose to walk or run,  IT IS POSSIBLE TO LOSE THAT FINANCIAL WEIGHT!

Let talk about how to create a budget. This is part is hard.  I am not going to lie.  This will give you a wake-up call of how financially unfit you really are.

With your budget form, Write down your income.Then, we start with the MUST HAVES.  These are the items that are not negotiable.   These are the items, for the most part with few exceptions, that are a fixed price.  The cost will not change much.

1. Mortgage/rent
2. Electric/Propane
3. Water/Trash
4. Insurance
5. Car Payment(s)
6. Daycare

Write down how much each one costs per month.  Even if you only pay it quarterly, what would you pay per month?  Subtract those costs from your income.

Next, let's move to the next items that we use to live, but prices can vary.  We can upgrade or downgrade if we need too.

1. Cable
2. Internet
3. Phone Home/Cell
4. Gas for Transportation

Write down how much each one costs per month.  Even if you only pay it quarterly, what would you pay per month?  Subtract those costs from your income.

Debt is next.  Ugh!  Here we want to write down the bare minimum payment of your debt broken down.  Do not clump credits together or student loan payment.  Separate them out.  For example, I have one student loan payment.  But when I look at my summary, I probably have 15 loans that are being paid on in that one payment.  I will explain in a future post as to why I do this.

1. Credit Card 1
2. Credit Card 2
3. Credit Card 3
4. Credit Card 4
5. Student Loan 1
6. Student Loan 2
7. Student Loan 3
8. Etc.

Write down how much each one costs per month.  Even if you only pay it quarterly, what would you pay per month?  Subtract those costs from your income.

FINALLY, the leftover money! Yahoo!  This money you can mix around a bit and decide how you want to spend it.

1. Savings
2. Giving
3. Groceries
4. Fast Food
5. Entertainment
6. Doctor Visits
7. Membership Fees
8. Toiletries
9. Personal Money- His 
10. Personal Money- Hers
11. Home Repairs
12. Car Repairs
13. Buffer Money (The money for things when they unexpectedly pop up)
14. ETC.

Write down how much each one costs per month.  Even if you only pay it quarterly, what would you pay per month?  Subtract those costs from your income.

Are you spending more than what you are a making right now?  If not, good!  You are sitting pretty good.  But if you are, take a look at how much you are spending and cut how much you are spending in some of your negotiable categories or completely eliminate them altogether.

We are not done quite yet.  We have one more category, and that is the Overage.  The Overage is the amount you are going to put towards your debt so you can eliminate your debt quicker.  Obviously the more you put toward your debt, the quicker you can get out of debt. Maybe this overage is $50.  You will put this $50 towards the one debt that is the smallest debt.  Here we are going to do the Snowball Effect.

Remember, our goal is to live within our means and to completely eliminate the use of credit cards.

Our News Years Resolutions is to get Financially Fit- Finding a Budget Form

Becoming financially fit is just as hard as being physically fit.  Getting paid once a month poses as a great challenge when it come budgeting money.  . Our New Years Resolution has to come early because we get paid in the middle of the month.  If we wait until our January pay day, it won't fee like much of a resolution.

The best way to start managing your money is to create a budget.  EveryDollar is a great website to create a budget online.  This is a free tool that allows its users to create a budget.  You are able to put in your own income, create different categories and to set up your budget.  On the side, it shows you percentages of categories to how and where most of you money is being spent.

Every Dollar has an app for iPhones and Androids to help keep track of your spending as your spending.  For example, you go grocery shopping, you can keep track of your spending and will show how much money you have help in that budget.

For a small monthly fee of $8.25 or $99 annually, you can link your bank card to your account.  Shortly after your bank processes them, they will show on your EveryDollar account.  You then can click and drag your spending in your budgets and it will automatically withdrawal from your budgets to show how much you have left.

I use EveryDollar, but I also like to use paper and pencil method as well.   You first want to find a form that is going to work for you.  Here is an example of good starter for creating a budget form.

Clicking on this form will take you to Frugal Fanatic.

For me, this form is not broken down enough.  It does not have debt broken down.  If you are like Ryne and I we have more than one credit card and student loan. We started the Snowball Effect on our debts.  This has helped us pay down on Ryne's student loans to the point where the rest will Federally be forgiven.  I, on the other hand, have a way to go to pay off my student loan debt.

Clicking on this form will take you to Debt of Life

This is a great form to work with and if you click on the form the creator of Debt to Life has offered this free template to use.  You can download it in Excel form and can modify it for personal use.

Not only do I like to keep track of my expenses monthly, but I like to keep track of them annually.  This allows me compare from month-to- month how much I am spending.  Utilities can vary so if you save your forms, you will be able to see how much you spend from year to year.

Clicking on this form will take you to a pdf file created by me.

Snowball Effect- Debt Reiief

My husband and I have been wanting to get out of debt, more so me than him because I sit close to $60,000 in student loan debt and am still taking graduate courses.  We have dabbled with the Dave Ramsey plan of getting out of debt.  The cash budget, is very hard for us.  This is a challenge in it of itself.  We now have two separate bank accounts and one account is our daily living money, and one is strictly just for bills.

Some piece of debt relief that we have done is the snowball effect.  For those of you who unfamiliar with the snowball effect it paying extra on one loan.  When that loan is paid off, you take the what you paid over and the payment from loan that you paid off and put it toward your next loan.

For example:

Loan 1:  $1000
     Minimum payment $50 +$50 over pay means you can have this paid off in 10 month opposed to 20 months.

Loan 2:  $2,000
      Minimum payment $50.  You start paying $50 for 10 months until Loan 1 is paid off.  Then on month 11 you will pay $50 + $100=$150. After 10 more months, this loan will be paid off. This loan should have taken 40 months to pay off, but instead using the snowball effect will take 20 months to pay off.

Loan 3: $3,000
      Minimum payment $50.  You start paying $50 for 20 months until Loan 1 and Loan is paid off.  Then on month 21 you will pay $50 +$150= $200.  After consolidating the payments, it will take 10 more months to pay off. This loan should have taken 60 months to pay off, but instead using the snowball effect will take  a total 30 months to pay off.

This $6,000 of debt should have taken 120 months by paying the minimum  every month to pay off got cut to 30 months.

My husbands student loans are now paid off, now onto focusing on mine!

Tax Refund

What to do with our tax return money? My husband and I have a couple of options as to do with our tax return money.  Both options are and will be a good investment for our furture and both options will get done at some point it is just a matter of what order to do them in.

It's amazing how much more money 1 kid can bring in from our tax return.  Our tax refund doubled from last year.  Now,  Ryne and I have to decide what we are going to do with our money this year. We have two options that we could do.  We could use the money to insulate our basement or we could use the money to pay down Ryne's student loans.  We are stuck in a dilemma.

 If we decide to spray insulate our our basement, it will take a good chunk of our refund.  I have been doing some research and have decided to go with Foam It Green Home Energy Kit.  This would be a $1500 expense.  This will help keep our house cooler in the summer and warmer in the winter.  There is a lot of air leakage coming from our basement therefore this would be a wise investment and cut down our gas and energy costs. This kit is a DYI kit so I can do it when I want too. I am an impatient person and want to do it right now; however, after doing some research, if I get an energy audit, I  could get a 70% rebate. This option would mean I would have to be patient.

Our other option is to paying Ryne's Student Loans. With our full refund, we would be about $600 give or take a few hundred away from being able to but his loans in forbarance.  The last $5000 would be paid off through the Teacher Loan Forgiveness plan.  This would free up $232  and though the Dave Ramsey snowball effect, we could have one of our credit cards paid off in 4-6 months. In the long run, this would defiantly help pay our debt off quicker.

Ryne has taken on two additional coaching position so we will be able to do both. The question is which should we do first?  After talking with my husband, we are going to call the energy company and see when they can do an energy audit.  I think this will help determine which direction we should go in first.