Friend and freelance writer Les O’Dell shares this diary entry from the second session of Financial Peace University, a 13-week course from national talk-show host Dave Ramsey.
The B Word
Tonight’s lesson was about the hated B word: budget. I’m sure for some people, this was maybe their first exposure to planning where money is to go. My wife and I have budgeted with limited success over the years. Usually, it’s been the case of planning how to spend this week’s paycheck based upon what bills and needs were most pressing. We never had done a whole month’s budget at once before. This should be interesting!
Dave started the night with some basics: checking accounts that are not in balance are messes waiting to happen; overdrafts are signs of sloppy and lazy money habits and ATM withdrawals and debit cards can bust budgets, and, perhaps the biggest ones of all, most people don’t budget because others have used budgets to abuse them, they fear finding out what’s really happening to their money and they feel locked in with a budget.
The night continued with reasons everyone should have a budget or cash flow plan and then progressed into things that (sadly) many people don’t know how to do any more: balance a checkbook.
We were introduced to the envelope system—a spiral-bound series of envelopes that came in our FPU kit. Because our brains actually feel pain when we spend cash (spending with a debit card or check registers less pain and with a credit card almost no pain), Ramsey recommends using cash. For example, instead of swiping plastic or writing a check at the grocery store, put the month’s budget for groceries in an envelope marked food, and spend from that. It forces users to stay on budget—if there’s no money, there’s no buying.
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Forms and more forms
We then began to learn about a variety of forms provided to us by the class: consumer equity sheets (a balance sheet to learn our financial health), a form to list all sources of income, a lump sum payment form to help work non-regular payments into a monthly budget and a very, very detailed monthly cash flow plan.
We also learned the recommended percentages of our income that should go toward things like housing, transportation and clothing. Then we learned how to allocate our spending based upon income, not upon which creditor was screaming the loudest or how much we wanted to buy ourselves something.
At the end of the lesson, we were challenged to go home and make a monthly budget (maybe for the first time ever). We were told that it would be stressful at best and probably downright frightening. We also heard that couples should expect to have some “intense discussions” while working together on their budget. Okay, let’s be honest. Couples should expect to fight on this one.
As we talked among our small groups, we discussed why we each had failed to live on a budget before. Answers ranged from admitted laziness to cases of “life getting in the way”. We discussed our initial reactions to the thought of budgeting (“we’ll try it,” “it will never work for us,” and “I’m excited about it”).
We went home and worked on the months’ budget. There were some surprises and a few discussions, but no fights. We were ready. Bring on the month!
Les O’Dell is a freelance writer living in Carbondale, Ill. His work can be seen in a number of newspapers, magazines, publications and websites. He is co-author of the popular “He Said, She Said” newspaper column. He can be found on the web at www.lesodell.net. Les is not affiliated or endorsed by LPL Financial.