Live Debt Free

Pay off debt. Save. Give. Live your mission.

Reasons To Budget Your Money

by //

You’ve heard all the hype. In fact, you may even be tired of all the hype. “You need to do a budget!” How many times have you heard that? With every (well, almost every) financial expert on the planet saying you should do a budget, why are so many still not? Maybe you’ve just never been given a persuasive argument. Allow me to attempt to convince you.

1) It acts as a blueprint.

Imagine the situation. You and your spouse decide that it’s time to build a house. You don’t really worry how much it’s going to cost and your builder tells you he sort of has an idea in his head what it will look like. Can you imagine the disaster this is going to turn into? What if the house ends up costing $700,000 and you can only afford a $200,000 house? What if the builder puts things in the wrong location and you end up hating everything about it? Not to mention how much time and money will be wasted by not having a plan. No one in their right mind would do that. The problem is most people do this with the monthly budget. Just think, if you make the household average income of around $45,000 per year, you will have 1.8 million dollars pass through your hands from age 25-65. That’s right: 1.8 million dollars! Having a budget will help you get the most out of all of that money. It’s like having a blueprint for your money. Often, not having that blueprint can turn into a financial disaster!

2) It forces communication in your marriage.

When you do a budget, it forces husbands and wives to spend time talking to each other. The only way for a budget to truly work long term is for both spouses to be on the same page. This means that they must share their hopes, dreams, and goals with each other. For example, your wife may say that she wants to put aside money in savings because she wants to take the kids to Disney World in two years. Your husband may say that it is really important to him to put a certain percentage into retirement because he would love to retire at age 55. It’s amazing what you can learn about your spouse simply by doing a budget.

3) Reduces stress.

Stress and worry are often born from the unknown. When you really don’t know if you have enough money to buy something you need, it causes stress. If you don’t really know where all of the money you make seems to disappear to, it causes stress. If you really don’t know how you are going to make it if your spouse loses their job, it causes stress. High levels of stress in marriage is a recipe for disaster. Money fights are often cited as the number one cause of divorce. If couples can get this part of their marriage straight, it will provide a huge step towards a long, happy marriage. The most important ingredient for a couple to reduce stress in finances is to get on a budget. A budget will tell you if you have enough money to buy something. It will take you from wondering where your money is going to you being in control of where it is spent (or saved).

I would love to hear your feedback. There are, perhaps, hundreds of good reasons to do a budget. Let us know what your thoughts are. Also, maybe there are good reasons not to do a budget, I would love to hear those as well.

How To Save For Emergency Repairs

by //

I have an old house (built in the 1920s). I also don’t have brand new appliances and house systems (furnace, plumbing, etc). This means that it is relatively often that something in my house breaks down. Does that ever happen to you? From a financial standpoint, the question then becomes what do we do? How do we afford to fix it? Here are 3 options:

1. Have an emergency fund.

This is my personal favorite. I recommend having an emergency fund of 3-6 months worth of expenses. That way, if a major appliance goes down, then you have the money to pay for it. I realize that an emergency fund of $10,000-$15,000 is not something you end up with overnight. It may take awhile, but if you set it as a goal and put all of your focus and attention on it, it can happen quicker than you think. My wife, Mandy and I had some major furnace repairs right in the middle of winter this past year. Luckily, our emergency fund was used to cover the expenses. It provides a huge level of peace to know that your are not one emergency away from a financial disaster.

2. Wait and save!

This is where a little creativity mixed with some grit comes in. I’ll use an example from Mandy and I’s life to explain what I mean. A couple of years ago, we were saving all of our money towards our health savings account because we had our second child on the way. It was a huge expense coming and there was no escaping it. Right in the middle of that frenzied savings, our dishwasher broke. We literally didn’t have an extra dollar to spare as we were putting away every single one to pay the hospital bill. Instead of paying to have it fixed, we actually did dishes by hand (oh, the humanity!). We did it that way for about two months until we had the money to cover the medical expenses. Sometimes, that is what it takes. Let’s be honest, most people would not sacrifice for a short two months in order to avoid going into debt. Once you make a commitment to avoid debt, however, it makes it the only option.

3. Pay for it with credit.

Unfortunately, this is the option most people choose. The culture has driven into us that fixing or buying a new one when something breaks is just what you do. It doesn’t matter if you have the money or not. In fact, that is exactly what credit is for. The fact is that is how most people end up with $40,000 or more in credit card debt. It starts with an “emergency” you just had to fix. Then another and then another. I have yet to meet anyone whose plan was to get into massive amounts of debt. But the mentality that certain things have to be fixed or replaced immediately, causes us to do stupid things. I know it’s hard, but I highly recommend avoiding this option.

Ultimately, it’s up to you which of the above options you choose. I can just speak from personal experience in my own life and with working with my clients that any option that avoids debt is the best one. If you don’t have an emergency fund, then start one. If something happens before you have one in place, then think of creative ways to work around the problem. It will be well worth it in the end.

How To Get Your Spouse To Stop Spending

by //

How To Get Your Spouse To Stop SpendingYou know you’ve thought it. Maybe you’ve even said it out loud. “My spouse spends too much!” There is a cure, but it is not as simple as having them take a pill (stop it, I know what you’re thinking!)  There is actually a three step method to stop the spending insanity.

1) Have a conversation with your spouse.

This does not mean that you nag your spouse. It does not mean that you berate, belittle, or criticize your spouse. In fact, I will guarantee that will not work. Your spouse may stop their spending for a short time (like a day or an hour), but not long term. You are in a partnership, not a parent/child relationship. Instead, try sitting down together face to face. Make sure the tv, computer, cell phone, etc are all turned off. If you have kids, make sure they are in bed. Basically, get rid of distractions and don’t have this conversation while getting the kids ready for bed. Hold your spouse’s hand in yours and explain to them how you want to do better with money. Here is the important part: tell them WHY you want to do better with money. Do not start with the how or what they “need to start doing”. Explain to them all of your dreams and goals and how you see your financial future TOGETHER. This will set the right tone, put your spouse in a non-defensive mindset, and help you identify and overcome any money anxiety that might exist.

2) Do a written budget.

The only way to truly control spending for both of you is to get on a written plan. You may think that you have a budget in your head, but it is not the same as writing it down. If you sit down together and put a plan on paper before each month begins, it gives you both power over your money. Even if your spouse is not a budgeter, they must have a say in the plan. If your spouse is the type who wants nothing to do with putting a bunch of numbers together, then I suggest you make a plan for the first month. Then, you show your spouse the plan and let them have input. For example, your spouse may say that there needs to be more money for gas. Ask them what category they would suggest lowering in order to increase the gas budget. Once you get the discussion going, it should come to life. WARNING: Attitude is critical in this. There are two ways to say “what category should we lower, honey, in order to increase the gas budget.” You know which is the correct tone, use it. The last thing you want to be is sarcastic or condescending: that will get you the opposite results of what you are aiming for with this process.

3) Put it into action.

Believe it or not, this often is the hardest step of all. You may think that once you have gotten through the first two steps, the hard work is behind you. Wrong! A budget on paper or in your computer is completely worthless if you don’t live by it. That may mean packing a sack lunch when all your friends are going out to eat. Or putting the doughnuts back at the grocery store because you already spent your grocery budget. This is where the true test comes. You may even find out in the process that you spent more than you thought, it wasn’t just your spouse! The key is to stick to the plan and the easiest way to stick to your plan is to know the why you’re doing it. Being debt free, saving for a vacation, or giving money like you’ve never given before can be huge motivators. Find what motivates you and your spouse (you know, the spender) and start putting that plan into action!