In case you haven't been following this week's series, we've been talking about Budgeting.
Here are links to the past three posts:
Day 1- Click Here
Day 2- Click Here
Day 3- Click Here
Today I'm going to list for you the recommended steps (as described by Dave Ramsey) and then give you some additional ways that we save money in our home.
Dave breaks them down into 7 Steps.
Step 1- Set up an emergency fund with $1,000 dollars in it
Step 2- Pay off all debt
We have paid off all of our debt except for our home. For those of you that may have credit card debt, student loan debt, new furniture debt, etc., the time has come to PAY IT OFF! As I posted earlier, debt only serves to enslave us to the past. Dave says that to do it quickly you should first make a list of all the money that you owe to anyone (except for your home) starting with the smallest balance first. Then you begin working on paying it off first (he calls this your debt snowball). Pay the MINIMUM balances on all of your other debts, but on your smallest debt (regardless of interest rate)- throw every single dollar you have available towards it. Once it's paid off, move on to the next one on your list. Keep paying minimum balances on all the others except for the one with the smallest balance. You will be working with 'gazelle like intensity' towards paying off these debts one by one.
Step 3- Once all of your debts (excluding your home) are paid off, work to save up three to six months of living expenses. He calls this your FULL emergency fund.
Step 4- Begin putting 15% of your household income into Roth IRA's and pre-tax retirement plans. Some people say they want to save for their kid's college savings accounts first but Dave says this is a mistake. You can always get a loan if you have to for their college, but there are NO loans for retirement. Don't invest more than 15% at this time into this account.
Step 5- College Savings Account- Dave recommends figuring out how much you are going to need to save each month at 12% interest for college when you or your kids will attend.
Step 6- Any extra money should be thrown towards your mortgage. Want to build real wealth (according to Dave)? Pay off not only all your debts, but also your home!
Step 7- Build wealth and give. This is your opportunity to bless others and to begin building a legacy for your children and grandchildren.
Think these 7 steps are impossible?
Here's some motivation for you then. http://www.daveramsey.com/articles/article-list/category/lifeandmoney_wedidit_user_generated/
Some other ideas that we have found work in our home:
1- We have a cash rewards credit card. Now for some of you, this would NOT be a good idea. For those of you who can handle using a credit card and paying off the FULL balance each and every month, it could be a great idea. About 5 years ago, we signed up for a cash rewards card with the intention of using it for every purchase and paying off the full balance each month. Since that time, we have never left a balance on it, incurred any interest charges, and we have gotten paid over $1,200 dollars! For us it's a win/win situation.
2- Power and Gas Bills
We have gas heat and a gas water heater, so we typically have pretty high bills for both that and our electricity. Now that we are a one-income family and we budget so strictly every month, I was having difficulty forecasting exactly what our monthly utility bills would be. I called our Power company and our gas company and both agreed to an Equal Payment Plan. They take all the bills from the previous year and figure out what the monthly cost would be. I pay that same amount every month. If I end up using more power or gas, they send me an additional bill at the end of the year. If I use less, they credit it to my account. I just got a $75.00 credit last month because we had used less power than they predicted over the last 6 months.
Also, we installed a programmable thermostat. Marcus was able to install it himself in only a few minutes. It automatically adjusts the temperature for us according to a schedule that we set. For example, if no one is home during the day at your house, you could set the temperature to be higher in the Summer so that you aren't paying to cool a house that no one is in. You can also set it to begin cooling down about 30 minutes before you are set to return home so that it's comfortable when you return. We make the most use out of our programmable thermostat in the winter. We set it to adjust the temperature a little cooler once we're all in bed and under the covers and then we set it to warm it up about 30 minutes before we wake up. Our power and heating bill has reduced significantly since we began using this thermostat.
3- Shop at stores that offer rewards. There are many, many programs out there. One quick example is Bi-Lo. For every $50 you spend (pre-coupon), you get .05 cents per gallon off of your next gas purchase. This may not seem like a fabulous deal to you, but if you're a couponer, it will. I can go in there and get 100.00 worth of items for around 10-15, and rack up .10 cents for 20 gallons of gas. That just saved me another $2.00. Imagine doing that once a week for a year and you just saved yourself over 100.00 on gas!
4- Set up a babysitting co-op with your friends. Find some friends you trust that have kids of similar ages, then take turns babysitting for each other. FREE. PLAYDATE. FREE. DATENIGHT. Win-Win.
5- Re-purpose old items.
6- Sell anything you aren't using. Seriously. Use it or sell it. Do you really need 6 nine by thirteen baking pans? Is it important that you have 3 pair of khaki shorts? Utilize resources such as craigslist, ebay, local yardsales, selling to friends, selling on facebook, and newspaper/Iwana ads. Have old books or movies? Half.com is a great way to sell them quickly. Old textbooks? Get rid of them!
My Daddy used to say "the more stuff you own, the more it owns you." Get rid of what you don't need and hopefully make some money while you're at it. Then use that money towards your debt snowball!
7- Renegotiate any ongoing contracts you have with companies that charge a fee. Call your bank and credit card and ask for a lower interest rate. IT WORKS. Check out the prices of competitors for some of the services you're currently paying for (Satellite, Phone, Cable, Cell phones).
It is possible to live with less. I promise.
I'm going to post tomorrow with some scriptural background on WHY we need to look at our hearts and the motivation we have towards 'stuff'. I'll start next week with the couponing post.
As always, thanks to all who have sent messages and comments. I am so grateful for the life experience you are sharing and also that you are reading what I write.
Love you all!