why + how we tithe

tithingheader-01 It's been a little while since I shared anything about our financial journey, but I have a few posts lined up and am excited to dive back into it! One thing that I get asked about a lot and really wanted to address was tithing. As you probably know by now (or maybe you don't if you're new here - hi!), Matt and I took Dave Ramsey's Financial Peace University course very early on in our marriage. We got married in July of 2013 and started FPU in September that same year. It was probably the very best thing we could've done for ourselves and our marriage. I'm so grateful for whoever suggested it! So, we've been tithing from basically the start of our marriage, and I'm very grateful for that. I know that getting yourself and your spouse on board with something like tithing can be veryyyyyyy hard, so I'm super blessed that we tackled that really early on, before any other habits had started to form. But, it wasn't a super easy decision right away for us. I grew up in a faith-filled home, and always learned about giving your "time, talent and treasure" to the church. I knew that you were supposed to give 10% of your income back to God. But, I never practiced that growing up (my parents did, but I didn't with my own money) or when I started making money after graduation, and I didn't really get what the big deal was. I always sort of assumed that once I was "making it" and had real money to give, I would. What good would my piddly $40 tithe do, anyway? FPU completely changed my mindset about all that.

There are so many Bible verses about tithing, and we covered a lot of them in the FPU course. Ultimately, what it came down to for Matt and I was embracing the reality that our money does not belong to us. It's on loan to us from God, so it made sense to us to give back to God a portion of it, right off the top, before anything else, the way he asks us to. In the Dave Ramsey budgeting system, tithing is the very first line on the budget form for a reason. You give before you do anything else. Before your mortgage. Before putting gas in your car or food on your table. It sounds scary (and sometimes it is!) but it's a very symbolic thing to us. God has given us so much, so it's important to us that first and foremost, we give our best back to him. Not the leftovers. And, in turn, we've never gone without food, been unable to pay our mortgage or put gas in our car. I don't want to trivialize those very real issues that people face, or make a blanket statement that if you tithe, you'll never know financial hardship. I don't think that's true at all. What I do know to be true is that tithing first and foremost helps us put our priorities in order, so that we can see our money through the lens of the Gospel and practice Godly wisdom in how to spend our dollars. Because we tithe, we have less money to blow on things, or even save or pay down debt. Saving and paying debt are good, important things. But for us, nothing is more important that honoring God with our money. And the reality is that He asks us to tithe, so we tithe. And because we give our money to God and His church first, I really believe He is helping us form wise habits and see our money differently, so we are better able to budget and plan responsibly. There is NO WAY we could do this budgeting and living frugally thing out of our own strength. It is truly only through God's grace and our constant prayer that He molds us into better stewards of the gifts that He's given us that we've been able to make any headway on our financial goals.

So, how do we tithe? In short, we give 10% of our take-home pay each month away. Until this past May, we were giving all 10% to our local church parish. I was under the impression that your 10% tithing obligation was supposed to go to your church, and then any giving to charity was supposed to be above and beyond that. That kind of bummed me out, because we aren't in a position of having much extra to give to charity, and there are so many charities I wanted to support! I was chatting with my mom about it and she informed me that really, you only need to give 5% to your local church, and the remaining 5% can go to charity. At least, that's what a priest had told her in the past. Matt and I decided that model worked better for our family, so starting in May we made the switch.

5% of our take-home pay goes to our local church parish that we attend every Sunday. We feel strongly that tithing to our local church is important, and sowing into the community there matters. The church meets a lot of need right here in our own community, and we feel good supporting that. We personally don't have it set up to auto-deduct from our account, though. This is for two reasons. One, Matt gets paid every two weeks, so there is never a set day of the month that is payday. It always changes. That makes it hard to ensure that the auto-deduct comes out at the right time. Second, our income fluctuates from month to month, depending on if Matt works overtime. So the amount that we tithe each month can change, too. We will either write an old-fashioned check and drop it in the collection plate at Mass, or I'll use our church's online giving platform and tithe with our debit card if we're going to miss Mass for travel or go to another church that weekend. So far, it's worked out great. I try to either write the check or donate online first after Matt's paycheck hits our account before paying anything else or pulling out cash for our envelopes, but even if it doesn't end up being the actual first thing that gets paid, it IS first on our budget form so we never spend that money we've earmarked for our tithe elsewhere. In two years of tithing, we've never reduced our tithe to cover other budget mistakes (all by the grace of God - because we've definitely done this with other budget categories!) Something about writing it down very first on the budget form is helpful for us.

We give another 5% to charity. Currently, we give to three charities: Rancho del Nino San Humberto (an orphanage in Mexico I visited in May), Priyam Global (a non-profit started by a friend of mine), and Elpis Ministries, an organization in Uganda where we sponsor a child (that I heard about after The Archibald Project worked with them this spring). All three of these donations are set up to auto-deduct, which has made our giving a little trickier. They all come out on specific dates, so depending on when those dates fall within the pay periods of our budget, we determine how much we need to give to our church that pay period. It requires a little extra math on our part now, but we love being able to support a couple worthy causes and organizations that are personal to us! And, sometimes this means we tithe a tiny bit more than 5% to charity, and a tiny bit less than 5% to our church, depending on if our income is a little more or a little less than we planned. Since our charity contributions are set amounts, we don't get to adjust them from month to month based on our income. I think God understands, though.

The bottom line: if we didn't tithe FIRST, I don't think we would at all. What people say about tithing before anything else is true: you don't even miss it. Our tithes currently add up to right around $300. I'm sure we'd quickly find a way to use that $300 in other areas in our budget...more date nights, more spending money, more clothes. You'll always find a way to spend your money, right? But the practice of tithing keeps us very grounded in the reality that none of this money belongs to us anyway, and has helped us to cultivate contentment in our hearts, which is a huge heart issue I'm working through right now.

I'd love to hear your thoughts on tithing, or your system on how your family gives! I know this is a sensitive subject and people feel very strongly about money + the bible, so please be considerate, kind and gracious in your comments. This is the system that works best for us and our family, and I understand it may not work for everyone! XO!

overcoming budget mistakes

budgetfailheader-01 I'll be honest, when I posted that first blog post about our quest for financial freedom, I freaked out a little. Now it was out there. What if we messed up and went off our system? People thought I was this budgeting and living frugally guru, and if we screwed up, I'd basically be a big fraud. Well, newsflash, we're all a lot more narcissistic than we like to think (thank you, social media!) and no one is sitting around wondering how Matt and I are doing on our monthly budget, I guarantee it. Even still, we messed up big time in March. And I worried, a lot, about how to post about it, or if I should post about it at all. I have a lot more posts in my head in this financial freedom series, but none of them included how to come back after a serious budget setback. I wasn't sure where this fit in.

But the more I thought about it, the more I realized I want to own our mistakes as much as our victories. Mistakes are where the learning happens, as hard as they can be sometimes. So here's the story of our Massive March Budget Mistake. Actually, there's really no story. We sat down at the end of February and wrote a budget for March. And then, we didn't stick to it. We strayed so far off the budget, in fact, that when we looked at our bank statement at the end of March, we realized we spent almost SIX HUNDRED DOLLARS that was not in our budget. The hardest part to swallow? There wasn't a single substantial purchase in any of that spending. We don't have a beautiful crib or bassinet, a garden brimming with spring flowers or even a new TV or gadget to show for it. It was all the little purchases that added up. A $5 Amazon movie rental when we were bored on a Friday (multiply by that times three--oops.) Dairy Queen on the first nice spring day. Panera and Qdoba and Chick-Fil-A when we didn't feel like cooking. It never feels like much, when we're swiping the debit card here and there. "Oh, it's only $11. It's no big deal." It's only when you look back at the bigger picture--once all that money is long gone--that the pattern is revealed, and you can grasp how big of a deal it REALLY is.

So, we blew $600 in March. I cried, a lot. And then we sat on the couch and had a come-to-Jesus meeting about our spending. We identified why it happened, and how we can do better moving forward. I came up with a list of a few things you can do if you, too, find yourself reeling after a month of off-the-rails spending. It's discouraging, to be sure. You might feel like the biggest moron out there, if you're anything like me. Because the truth is, I know the information. I know how to be a good steward of my money. I just didn't do it. It's like Dave Ramsey says, "Personal finance is only 20% head knowledge and 80% behavior." 80% behavior! That means that even if we have the best knowledge in the world, we have to work every day to control our behavior, which is the biggest influence on where our money goes.

Here are my five best suggestions to overcome a major budget mistake. To clarify, this is the kind of situation where you willfully and deliberately spent money that was not part of your budget. I'm not talking about something like an emergency, which of course needs to be dealt with, budget or no budget. It should also be mentioned that if you blew $600 on a tv that wasn't in your budget, the best way to rectify that is to return the tv if you're able, and get back on with your budgeted life. What I'm talking about here is frivolous spending like eating out, renting movies, getting drinks with friends when you know your budget doesn't allow for it, buying tickets to that concert, etc.

  1. Talk about the why. If you're married, sit down with your spouse with the bank statement and look for patterns. Why did you spend so much? Was the spending mostly eating out? Is one of you feeling too much pressure to constantly cook gourmet meals, and the pressure is too much so by 6pm you just want fast food? How can you fix that together? Is the spending mostly on entertainment: movies, concerts, restaurants? Brainstorm a list of fun things you can do on nights and weekends for free! Was one person responsible for most of the spending? In our situation, a good chunk of that unbudgeted spending included on clothes for me, which I bought even though my clothes allowance was done, because I was feeling insecure and sad. Other purchases included impulse buys at the grocery store--things like ice cream and chips, stuff I rarely eat--because I was dealing with some of my tougher pregnancy emotions with food. These are underlying issues that can be figured out and worked through once you sit down and talk about them. It's scary and hard to own up to these things, but super important to get any traction and make progress on your goals. You have to know what's holding you back. If you're single, it's still important to sit down with the bank statement and identify those patterns. Find someone who can help keep you accountable. Maybe it's a best friend you can reach out to for accountability. If you're eating out too much but you really need that night away from your apartment to do something fun, see if you guys can swap cooking dinner for each other, or taking the dogs for a walk one evening. It really IS possible to have a fun, full life without breaking the bank.
  2. Add up the total of what you spent. This is a HARD pill to swallow. I felt so defeated when we did this. But it was important! The final number was sobering. In fact, we did the math a few more times because we couldn't believe it was really that much. It was kind of like a shock tactic. Seeing that number in ink made it very real. Our spending had been out of control, and we could NOT stay on that same track if we wanted to meet the financial goals we set for ourselves this year. It was definitely a turning point moment.
  3. Make a list of how you would have rather spent that money. Brainstorming this list was super hard, because we were sad that we'd wasted all that money. But at the same time, it was motivating, because it showed us that we ARE capable of affording a lot of the things on our list, we just have to be diligent. We actually wrote our list out and keep it nearby as a reminder. In fact, the photo at the top of the post is our list, stuck to our fridge! We could have taken a super nice staycation babymoon here in Indianapolis, staying a night at a fancy hotel, going out to a really nice dinner, gotten a couples massage. We could have bought a super top-of-the-line cloth diaper system with all the trimmings. It was almost enough for us to fully fence our yard, something we so badly want to do this summer. The list goes on and on. Talking through what we would have rather done with that money allowed us to get back in line with our goals. This was especially helpful for me, because it helped me see that I what I REALLY want is a pretty nursery and the money to print some photo books of recent trips WAY more than I want Qdoba on a given day. That reminder was important.
  4. Make a plan for moving forward. Fittingly enough, I read the book 7: An Experiemental Mutiny Against Excess (which I talked about here) shortly after this budget failure, and it was exactly the kick in the pants I needed to make our plan for moving forward. For our plan, we decided to adopt Jen Hatmaker's spending experiment, and we are only spending money in seven places this month: the grocery store (for grocery items only), the gas station (for gasoline only, no fountain drinks!), online bill pay, church tithing, adding to our savings accounts, my barre membership and our essential oils order. We wrote out our April budget to reflect this. So far we are on day 7 and it's going great! I mean, it's CRAZY hard. I want Chick-Fil-A so badly and I'm sad that on Matt's day off tomorrow we won't be having our regular Panera date. But, that's what got us into trouble in the first place. We did have one fail over the weekend at Lowe's. We had a gift card but had lost the receipt, but we were both sure the balance was $60. We had already started a garden project that was half done in the front yard (picture completely torn up grass and a half constructed flower bed) and wanted to get the materials to finish that bed. We decided before walking in that we would ONLY spend what we had on the gift card. I kept track on the calculator on my phone. And when we got up to the register, the total was $60 and change. Swiped the gift card...it only had $30 on it. What we should have done was check the card balance before doing our shopping but, lesson learned.  It's been our only unbudgeted spending in a week, which after last month, is a huge win! And already, in week one of this month, we've transferred almost $800 to savings! That was the other part of our plan; instead of waiting until the end of the month to transfer any "extra" money to savings, we're going to transfer it as it comes in. For instance, in the past, if we had $400 leftover at the end of the first pay period, we'd roll it over to the second pay period. By the end of the month, we'd have budgeted to put a few hundred dollars into savings. But we realized in March that what was happening was we were dipping into that "extra" savings money since it was still in our checking account, and the amount to transfer at the end of the month was far less than we planned. So, now we're taking it out of our checking account as soon as it comes in. Right now, there is literally not a dime extra in our checking account. This check and balance is super important for us because if the money is accessible by debit card, our discipline is clearly not strong enough to handle it right now. And it felt GREAT to color in a bit more of our savings wall after we transferred that money last night :)
  5. Forgive yourself, and move on. This might be the hardest part. I dwell on mistakes a lot, and I'm still sad thinking about everything we could have done with the money from last month. But the reality is that it's done and gone, and we can't get it back. Forgiving yourself, forgiving your spouse, and praying for the wisdom to make better choices in the future is all you can do. Mistakes are going to come--some bigger than others--and the ability to forgive yourself and channel those mistakes into a productive path forward is what counts!

Have you ever had any super huge budget fails? Any tips for doing better after some out-of-control spending? I'd love to know! We are certainly no experts, as evidenced by this :) XO!

Financial freedom: budgeting for baby

budgetforbaby-01 When you don't make a ton of money and live on a fairly tight budget, the news of a baby on the way, while thrilling and joyful, can also cause a lot of stress and worry. How will we pay for it all? Aren't babies so expensive? We'll never manage. I've had all those feelings (times one billion!), wasted WAY too much time on those dumb "baby cost calculators" and ultimately it's stolen a lot of joy from what can and should be a very joyful season. So if you're there too, or if you too live on a budget and wonder how on earth you'll ever be financially ready to have a baby, I want to encourage you! I don't think it has to be as overwhelming and expensive as Pinterest makes it seem. I might be pretty naive (probably) but Matt and I are finally at a place where we feel mostly calm about how we are going to include a baby into our world, financially speaking.

Here are six things we're doing to financially prepare for the baby joining our family in September:

  1. Planning + saving for our out-of-pocket medical expenses // Per my parents' insurance policy, which I'm still on, our out-of-pocket expenses shouldn't be more than $5,500. We're responsible for 100% of costs up to $2,500. Once we hit that, then we pay 30% of bills (insurance pays the remaining 70%) up to an additional maximum of $3,000. So, total, we shouldn't pay more than $5,500 to have this baby. We're totally committed to doing it debt-free, so we do not want to be paying off a hospital bill for months after the baby is born. That is just a personal choice we have made given our priorities and commitment to living debt-free. So that means we are hustling to get at least $5,500 in our savings account as quickly as possible. Especially since we are responsible for ALL bills up to $2,500--that's going to happen quickly and although we haven't received a bill yet, we have had two appointments, including one ultrasound, so I'm sure those bills will start rolling in. Thankfully, we have $1400 in our savings account right now, which should cover the first couple bills.
  2. Viewing our "emergency fund" as our "baby fund" // This is more of a psychology thing, I think, but it's been really helpful. Dave Ramsey suggests in this article to pause whatever baby step you're on when you find out you have a baby on the way, and funnel all your efforts into saving, saving, saving until mom + baby are home safe from the hospital. At first, when we were calculating everything, I was super discouraged because on paper, it looked like we were going to drain our emergency fund to have the baby. And it was discouraging because it felt like all our months of hard work to save up an emergency fund would be over because we'd have to use it all to pay for the medical cost of the baby, which in my mind, doesn't really qualify as an emergency since we have 9 months to prepare. But now we are looking at our savings goals as a "baby savings" instead of an "emergency savings." Our goal is still to save $10,000 this year, but we know now that it's likely that over half of that number will go straight to paying to have the baby. But now that feels okay, because it's what we're planning on. The remaining $5,000 of our goal will be kept in our savings account as our emergency fund. It's no longer realistic for us to think we'll have a fully funded, 6-month emergency fund by the end of this year--it's just not possible with our salaries and the cost of having the baby. But, $5,000 does cover 2 months, which is a great start. Here's how I calculated that amount:
    • Add up all your bills for a typical month. I did NOT include things like our spending money, money for date night, our budgeted Christmas saving, or any extras. If one or both of us loses our job, we are going into super strict spending freeze mode, and things like dates and spending money and budgeting for Christmas simply get cut out, and we do without. So add up your expenses that are non-negotiable, like rent or mortgage, groceries (but no eating out), utilities, required minimum debt payments, pet food, and gas. Our monthly expenses for these things is $2,249. So $5,000 covers two months of bills for us, which buys us some time.
    • Multiply that number by 3. Boom, there's your goal for a 3-month emergency fund. That means you can have no income for 3 whole months and still pay your bills, drive to job interviews, and eat. The likelihood of us not having any income for 3 months is low, because one or both of us would go find something to pay us an income in that time frame. For us, 3 months of expenses is $6,747.
    • Multiply that number by 6 and you've got a fully-funded, 6-month emergency fund. This means no income for 6 whole months, and you're still going to eat, pay your rent and keep your lights on. I view the 6-month emergency fund as a TRUE emergency plan--if one or both of us were to get seriously hurt and couldn't work for 6 months, or something like that. We do have life insurance, but not disability insurance, so a 6-month emergency fund is definitely our goal in case something terrible were to happen and we weren't able to make an income for that time frame. For us, a fully funded 6-month emergency fund is right around $13,500. Our goal is to have this complete by mid-2016, which isn't too bad for 3 years of marriage, paying off a student loan, buying a house and having a baby. We are hopeful!
  3. Not buying baby things // We haven't bought a single thing for the baby yet. Granted, I'm only 11 weeks and we don't know the gender yet, so I think a lot of the baby-stuff-buying happens once you know if you have a little lady or a little gent on the way, but we're still planning to not spend much on baby stuff. We are trying to keep it simple, and since it's our first baby (and first grandchild on my side!) we know we'll be gifted a ton of stuff. Which brings me to my next point...
  4. Register for everything // We are using BabyList to create our baby registry, and it's amazing. It's a universal wish list that lets you register for items from anywhere. Etsy, Amazon, Target, any store under the sun. You can even register for gift cards, babysitting help, meal help, and I put a maternity photo session and a newborn photo session on there as well. We did a honeymoon registry in lieu of a traditional registry for our wedding, and I'm a big proponent of spending money on experiences instead of stuff. So, to be honest, creating a baby registry has been a little hard for me, because I feel a little weird asking people to buy us everything we need for this baby. But my mom and friends assure me that it's what you do, and people love to gift you exactly what you want, so I'm swallowing my silly anxiety over it and putting everything we want on there. In the event that we don't receive something we really need (like a carseat, stroller or crib), we'll use some of the money we're saving in that baby fund to purchase it. But I also put a caveat on this, because I know from my own experience, registering can get crazy. You find yourself adding all kinds of adorable but probably unnecessary things to the registry. Sit down, make a list of what is TRULY important (this and this are great registry round-ups for moms who like the simple life) and then add those things.
  5. Opt out of unnecessary tests // We haven't totally decided yet, but we're leaning towards opting out of the genetic testing that can be done to determine birth defects and possible things like Down Syndrome. The first reason is that we are going to love and treasure this baby regardless of what they look like or what their abilities are, so the results of such tests aren't going to change our attitudes one bit, expect maybe to cause us to stress out and steal some joy from the remainder of the pregnancy. And secondly, those tests aren't covered by insurance (not mine, anyway) and can cost hundreds of dollars. So we're likely going to skip them.
  6. Budget for everything // Our grocery budget has changed since finding out I'm pregnant, because my food tastes and appetite has changed. February was a crazy month and we went off the rails a little because I was so nauseous, had food aversions and was just trying to keep up. We ate out a ton and totally blew our grocery budget. Thankfully, that has evened out, but I'm still way hungrier than usual. So we made a realistic plan for March and upped our grocery budget a bit to account for that. We also accounted for a tiny bit of maternity clothing shopping, because my clothes were just not fitting. I'm planning to buy several things second-hand and am buying mostly basics, like sports bras, bras and plain leggings, to last me awhile.

So, there you have it! Overall our budget hasn't changed too much from month to month. We've just gotten even more focused on saving because now we KNOW we have several thousand dollars that will HAVE to get paid within the next 7 months, so there's really no negotiating that our saving NEEDS to happen. And I won't lie, there was definitely a ton of hand-wringing and tears in the first few weeks as we tried to figure out how we were going to afford Baby K. It felt impossible, and overwhelming, and I was wondering how on earth God thought this was a good time. And then I felt guilty for feeling overwhelmed, like somehow that made me a bad mom. Hormones are crazy. But the more we focused on giving thanks for this miracle, and the more we worked it all out on paper with as realistic numbers as we can get, the more the puzzle pieces fitted together. Yes, I can't go splurge on adorable gender-neutral onesies or nursery decor, which I so want to do. I have to be even more strict with the budget, because we truly have NO room for unbudgeted spending any more. But I also truly believe that a lot of times we (myself included) make the whole having-a-baby thing seem a lot more overwhelming, complicated and expensive than it needs to be. Sure, this baby won't have Pottery Barn and Land of Nod everything. They probably won't have 100% organic cotton onesies. I'm going to be sporting secondhand maternity jeans. But in the grand scheme of things, those things don't matter so much to me. They aren't even going to remember what kind of crib they slept in or the thread count of the onesies they spit up all over. What's truly incredible is that God wants us to be parents, right now, in our current circumstances. And that's truly awesome.

Our budgeting system

budgetingbanner-01 Happy Wednesday! I'm excited to share our budgeting system today, along with our actual, real-life February budget with our actual, real-life numbers. I'll be honest, I'm pretty afraid to hit publish on this post. I've been trying to figure out why I'm afraid....maybe it's that people will think what I call "living on less" is actually living like royalty (and to most people around the world, it is)...or maybe that people will think "wow, they make even less than I thought." But really, neither of these things matter, because I deeply love our life and I am proud of our decision to "live like no one else so we can live like no one else." I wholeheartedly believe it will pay off and the blessing that have come from living this way are already so rich. Our marriage is stronger, our communication is better, our faith has increased. It's truly a win-win. So why even bother sharing? I know that I often find blogs or articles that touch on these principles, but rarely does anyone actually divulge their real-life household budget and how they prioritize and spend. So if even one person benefits from this, it will have been so worth it!

Okay! Let's jump in.

First of all, we use the Dave Ramsey budgeting system. Every month (towards the end of the month, around the 25th or so) we print out these forms and sit down at our kitchen table with them, a pencil and a calculator. The whole idea is that you create a "zero-based budget," which means that if you bring in $5,000 in income in a month, you write out where ALL $5,000 will go on the budget form. At the end of the budget form, your leftover between your income and your expenses should be zero. "Expenses" includes everything though, not just bills. It includes your emergency fund savings, savings for a trip or special event, gifts, etc. You want to "spend" every dollar on paper before it ever hits your account, otherwise that money is just going to disappear. The first form we do is the Monthly Cash Flow Plan, which just lists out all our expenses for that month. How much are we going to spend on groceries, savings, clothing, etc.

After we do the Monthly Cash Flow Plan, we complete another form called the "Allocated Spending Plan." It doesn't look like that form is available on Dave's site to the public, but you could easily replicate it on your own or in a spreadsheet (a photo of our sheets for February is further down). It simply allocates your income depending on your paydays. So you write down when your paydays are throughout the month at the top of each column, how much your paycheck will be on each payday, and then go down the "expense" rows spending every dollar until there is none left. So the Monthly Cash Flow Plan lists out WHAT you're going to spend, and the Allocated Spending Plan lists out WHEN you're going to spend, based on your paydays. For instance, we might have an income of $4,000 for the month, but we don't get that lump sum on the first of the month. One payday might be $2,000 and one payday might be $200, and they come every couple weeks, so the Allocated Spending Plan becomes super important. If we run out of food on the 17th, but our payday isn't until the 19th, we don't go to the grocery store until the 19th. This is the HUGE difference between operating with "real money" (cash and/or a debit card) and operating with credit. With a credit card, you just go to the store on the 17th, knowing (or thinking) you'll get paid on the 19th and can pay off those groceries you put on your credit card. But the thing is, until that paycheck is IN your account, it's not guaranteed. I don't know how many times I've used my business credit card to buy things I thought I needed right then, but didn't have the real money for, thinking "well, so-and-so has to pay their invoice by the 15th so I'll have the money in plenty of time to pay off my credit card balance." These things are not guaranteed, people take too long to pay their invoices or send your money, and meanwhile you're still on the hook for paying the credit card company for the money you borrowed from them. We've found that we can save ourselves a world of stress and frustration by only spending according to what we actually have. However, if you do get paid your whole monthly salary in one lump sum at the beginning of the month, the Allocated Spending Plan isn't really relevant for you.

Okay, real-life numbers time! Here's our Monthly Cash Flow Plan for February. Our income this month between Matt's and I's jobs will be $4,072. That's actually not typical, as it includes Matt's last paycheck from his previous job, along with his new paychecks from his new job. Our income will be around $3,200 monthly, on average (so just shy of $40k per year). But even that is a very recent development with Matt's new job and my job with TAP (last year we brought in around $20,000.) We have been budgeting this way for over a year, and it was ROUGH for the first several months. Matt works in EMS and for awhile he was working 48 hours a week at that job, which meant that 40 hours were at one pay grade, and 8 hours were at a second pay grade. Then he also had a second job on top of that, and the second job's payday was never the same as the first one. I was nannying, which was kind of steady income, but could also change from week to week. It was so hard to budget and it felt like so much guesswork. Nowawadays, Matt has one job that gives him a paycheck every two weeks and I draw a paycheck from my part-time job working for The Archibald Project that comes at the beginning of the month. Up until now, I have never paid myself a salary from my business. I "paid" myself in the form of Starbucks, Target trips, clothes. Basically anything Matt and I's budget couldn't accommodate, became a "draw" from my business. Thanks to some great coaching from Will Ray, I have hereby stopped that habit and am paying myself a set amount each month. It's SUPER low right now as I get systems in place and work to get my business profitable, but for the first time ever, my business is paying me a salary on the 1st of each month starting in February, and I'm thrilled! Okay, numbers time. Here's our February budget:

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Okay, now I want to share a bit about each category on the above sheet...

TITHING: I know I might get a lot of questions on this, but yes, we tithe. 10%, every month. That's a really big element of Dave Ramsey's Financial Peace University course and to be honest, not one I was super jazzed about in the beginning. I figured we'd tithe down the road, when we're established (read: richer.) We were thinking about houses and kids and student loans--did we really need to tithe? Couldn't we tithe like, 3%? It kind of felt like an unfair burden. But I really had a heart change during FPU class and when I took it to heart that ALL our money--ALL of it is truly God's, and when I took it to heart that we are stewards of His money and it doesn't belong to us, it suddenly didn't seem so earth-shattering to give 10% back to His church. And I'm totally not going to get on my soapbox and tell you how you should tithe, because I didn't want to tithe at all in the beginning and it was a deeply personal decision and change in my heart that I know God brought about that got me to a point of being willing. All I will say is that God has never failed to provide provision, and so far we haven't thought back about the money we've tithed and wished we'd had it. So if you're feeling stressed or pressured to tithe, pray! Pray for a heart change. Pray that you would trust the Lord's provision. The majority of our tithe just goes to our church, but we also support a friend of mine who is a missionary at $25/month, and we include that in the 10%, and we feel okay about that. So this month, we needed to tithe $400 (we use round numbers to make it easy), so we will give $375 to our church and $25 goes to my friend.

SAVING: Because we drained our emergency fund this month (January) on a major plumbing repair, we are focusing on getting it back to $1,000 in February, so we put all our extra money after all our other categories towards it.

HOUSING: Pretty straightforward. Our mortgage is $726/month, which is less than our rent was.

UTILITIES: Utilities has been a little tricky because we bought our house in October and headed straight into winter--and with a 110 year old house with gas everything our utilities have been all over the place. We had a super high gas bill in December, around $130 for our January bill, so we've been keeping our heat much lower and are hoping our gas is around $110 for February . Our water and sewer bills are combined in that $70 line that says "water." We don't pay for trash or recycling. My business pays for internet since I am the one using 98% of it working from home. My business also pays for my phone, and Matt doesn't pay for his (he's on his parents' plan.) We don't have cable, and I think our Netflix must be tied to my mom's account (my whole family shares it) because we don't pay for it.

FOOD: I have no idea if $300/month is a lot or a little for two people for the whole month. It roughly works out to $10/day for the two of us which seems pretty okay. I'm going to do another whole post on how we stretch that grocery budget, what we buy, etc. I think we eat very well and buy organic, free-range, etc. as much as possible. The $50 for "restaurants" is our date money. We just added that started January 1st. Last year we had no date money. The $50 could be for one nice dinner, or 3 small dates, or 10 McDonalds dates :)

TRANSPORTATION: Starting in February we will be paying for my gas out of our personal budget. Before February, it's been paid for by my business account, but since I work from home now, that doesn't make sense because nowadays, most the time if I'm driving somewhere, it's personal and not business related. And I'm working super hard to get my business profitable, which means cutting out unnecessary expenses. Matt does have a credit card that he uses strictly for gas. We do not use it for anything else, ever. He keeps it for the rewards, and it was our compromise when we went through FPU and cut up the rest of our cards :) We get $100 back from him using it every quarter or so, and he can only put up to $250 on it per our budget, and we pay off that $250 at the end of every month.

MEDICAL/HEALTH: I have a doctor appointment coming up in February, and I estimate my co-pay to be $50. We don't take any regular medications and we just lump vitamins in with our grocery budget since I'll usually pick anything we need up at the grocery store.

INSURANCE: Per Dave Ramsey's suggestion, we did sign up for a life insurance policy for me lsat year. Matt gets life insurance included with his job for free because he works for the city (or state? I'm not sure.) We also have an identity theft policy that would pay for an assigned caseworker to deal with the entire mess if our identity were to get stolen. They mention in FPU that it takes an average of 60 hours to clean up an identity theft mess, and I do not have 60 hours to use in that way, so it's worth it for us. Our homeowner's and auto insurance is combined (I forget how much goes toward each but together it's $118) and that will come out of our personal account starting in February. I'm not sure why it's been coming out of my business account for so long but again, trying to get that business profitable means switching around where expenses are coming from. Currently I am still on my parents' health insurance, and don't pay for it monthly. I pay for any medicine and doctor co-pays (and super expensive emergency room visits, like we had last year.) I'm very grateful for my parents for this gift. Matt will start paying for health insurance (including medical, dental and vision) in March, but up until now he has also been on his parents' and not had to pay monthly.

PERSONAL: We truly don't spend much money on ourselves these days, and that's okay with me. I'll probably budget a small amount in March or April for some spring wardrobe pieces, but other than that, we mostly just have our date night money and our little bit of personal spending and that's that! The "Christmas" line is because we decided in December we'd like to have a budget of $600 for Christmas this year, and we decided to save for it throughout the year. That equals $50/month, but we skipped January because we put that towards our plumbing, so we're saving $100 in February to make up for it. We each get $20 for personal spending (down from $30 in 2014, but we're trying to save every little bit.) We normally spend $50/month on the dog's food, but he desperately needs a bath, so we're budgeting to get him one in February. We were originally planning to have a house budget of $200 or so per month in 2015 to pay for things like home improvement and decorating, but have since decided to nix that and throw it all at savings. However, we did commit to finishing our laundry room and it's half done, so we decided to still spend our "house money" in February then nix that category starting in March. And starting in February, I'm renewing my barre studio membership, which is $99 for unlimited classes.

We don't have anything budgeted for recreation or debt (since we don't have any debt) so there's nothing for those last two categories. So there you have it! We'll bring in $4,072 and we "spend" all $4,072 on paper before that first paycheck ever hits our account. We know exactly what we have to work with, so when opportunities or temptations arise, we can act accordingly. If a friend wants to go to lunch and a movie, I am free to say yes, but knowing that it will likely use my entire spending money for the whole month. Or, I could go on 4 coffee dates. I could buy the $10 book for book club, but that's half my monthly money. Or, I can get it for free at the library. I'm free to make those decisions. What I'm not free to do is go drop $200 at Anthropologie or Pottery Barn (I mean, I'm still technically free to do this) which I'm grateful for, because those are the things that cause huge rifts and fights in marriage, anyway.

I also understand that we have been VERY blessed by our parents. All the little things add up, and the fact that we've not had to pay for Matt's cell phone or health insurance for either of us for our first 18 months of marriage is huge. Having a business that foots the internet and my cell phone bill is huge. We are incredibly blessed. But I firmly believe that you can make your money work for you regardless of your circumstances. It's all about choices, and YOU make those.

Just for fun and clarity, here's our Allocated Spending Plan, that shows how we spend each of those categories based on payday. Thankfully I get my TAP paycheck on the first of the month, so we do a majority of our bills then (mortgage, groceries, etc.) But, you'll notice we don't get our spending money until the 7th. And Scout will need food on the 1st, but he can't get a bath until the 7th. And I can't renew my barre membership until the 13th.

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And just to show how you can do long-term budgeting quickly, here's what we did for the rest of the year through September. I made a list of every month of the year and jotted down any special events or birthdays or things we know will require extra money for travel or gifts. Then, I took our basic monthly expenses (bills, spending, but no money towards savings) and added what I thought we'd spend on those extras to come up with the expenses for that month. Our income (ideally) is going to stay around the same through June (it spikes in April because Matt's working a special overtime gig and I have a nannying job), then increase as I hope to be paying myself a higher salary from my business, so I subtracted each month's projected expenses from the projected income and the difference is what we'll be able to save each month. Now, we have an idea of how long it will realistically take us to reach our emergency fund savings goals. This will fluctuate, because life is life, but it's nice to have and refer to.

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Ooookay! There you have it. How we budget, with the real-life numbers. Was it helpful? Overwhelming? Do you have questions? Ask away in the comments and I'll do my best to answer as much as I can!

xoxo!!

 

financial freedom // the baby steps

financialfreedombanner-01 Just over a year ago, Matt and I graduated from the Dave Ramsey Financial Peace University. We took the course through our church, and it was an absolute game-changer for us. We were newly married (only a few months out from our wedding day), living on a VERY small income, and super overwhelmed by thinking about how we could live the life we wanted, without having six-figure incomes. How could we travel, and buy a house, and fix up a house, and have kids, and pay for their college, and have adventures? When do we start saving for retirement, how do we factor in insurance? It can be super overwhelming. Dave Ramsey truly revolutionized our thoughts on money, answered all those questions, improved our spending habits, and our communication skills as we worked toward total unity when it came to our finances.

We definitely aren't perfect when it comes to money (who is?) and we've made a LOT of poor choices and mistakes even after taking the course and learning how to properly manage our money. The truth is, we fall short of our goals--a lot. We blow the budget time and time again, sometimes by $5 and sometimes by $100 (and sometimes more.) But Dave Ramsey's FPU gave us the tools to succeed with our money and life that life we've always imagined--regardless of the fact that we will never be making hundreds of thousands of dollars as a household.

It's really been on my heart to start sharing about our journey with money publicly, because I think there's a lot of pressure for us, young twenty-something "professionals" especially, to keep up this certain image and lifestyle. I know that I was personally SO burnt out by trying to act like we had more than we did, like we could do more than we could. The feeling of trying to act rich, feeling pressured to buy with credit and afford shopping trips and nice cars and being mad when we couldn't do those things--it was exhausting. Thankfully, we've found a better way, and I want you to know that YOU can, too. You can have a beautiful, full life filled with adventure and rich experiences and NOT make a super high income. So I want to candidly share--with actual numbers and as much detail as Matt and I decide is wise to put on the internet--to show you what is possible. I am not an expert. This is not endorsed by Dave Ramsey in any way. I took one class and have failed a lot. I'm not going to pretend to know much of anything, but I want to share where we've been and what works for us and how we're working towards true financial freedom. I am passionate about living a simple but FULL life, and that it's possible no matter your circumstances. Are you in? I hope you'll follow along and that this series helps you in some way! Selfishly, I'm hoping that sharing about our progress helps keep me accountable and motivated because even though I've read the Bible verses and believe that I need to be a good steward with my money, I still want the brand-new car and the Anthropologie shopping trips. I like things. I like pretty things and I like to surround myself with things that inspire me. I want my home to be in a magazine. That's the truth. I am a spender, and it's a constant battle to curb that tendency (and the pride!) and stick to our budget, but that's a conversation for another day :)

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I'm not going to tell you everything we covered in the FPU class, because I want you to take one for yourself! It will be the best $100 you EVER spend, and a lot of churches offer scholarships if you can't afford the class materials. You can find a list of all the locations that offer FPU right here.

But, I will share this, because it's readily available to the public on Dave Ramsey's website. The basis for our journey with financial freedom is the 7 Baby Steps. We started at Baby Step #1, and are working all the way up to Baby Step #7. The key is to work through them one at a time. You get super-focused on the step you're on, and once it's complete, you move to the next one. Here they are:

  1. Save $1,000 as an emergency fund | The idea is to get this as quickly as possible. Cut out all non-essential spending, have a garage sale, whatever you can do to get a thousand bucks in the bank as quickly as possible. We were able to get this together pretty quickly, so we crossed this step off. (Although, we just paid for a very expensive plumbing repair at our new house that drained our e-fund all the way down to $0--so actually, I suppose we have to do this over again--but it's in our budget to refund it back to $1,000 in February and start building on it in March.)
  2. Pay off all debt using the debt snowball | We started our marriage with roughly $16,000 of student loan debt. I realize that is a MUCH lower number than many people have, and Matt and I were both extremely blessed by having the majority of our school paid for by our parents. That student loan debt was from one semester I spent studying abroad. I am so glad I did the study abroad program...but living on a student loan messed me up a lot in terms of how I thought of money, and I never want to live on borrowed money again (like I did in England for three months on that loan!) We were able to pay this off last September, so we are now "debt-free" except for our mortgage. We have no credit card debt, no car payments, and we never want to have them again. When we buy a new car later this year, we will be paying cash.
  3. Build up your 3-6 month emergency fund | This is the step that Matt and I are currently on. For us, 6 months of expenses is a little less than $10,000. That means that if neither one of us made ANY money for six whole months, we could pay ALL our bills (including our mortgage, gas, food, dog food, utilities, etc.) In general, Dave suggests 3 months to start out if you don't have kids or any dependents, and definitely 6 months if you have dependents. We don't have kids yet, but 6 months feels more comfortable to us than 3. Eventually, we'd like to build that up even more, but our goal for 2015 is to bank $10,000 for emergencies. This is different than saving for Christmas, or vacation. Those savings are in addition to the e-fund savings. Christmas is not an emergency (although I reaaaaaally wanted to dip into our e-fund for Christmas this past year--but thankfully my husband is the voice of reason and reminded me that that was not in line with our goals. I love him.)
  4. Save for retirement | Matt has a small Roth IRA that was started for him a long time ago, and will be able to have a retirement account with his new job he just started. We're looking at starting to save for retirement in 2016, assuming our e-fund is fully funded. Sometimes I stress that we should be doing #3 and #4 at the same time--but Dave Ramsey has had huge success with his system, so we've decided to just follow his wisdom and not start retirement saving until our emergency fund is fully funded.
  5. College funding for children | Once we have kids, we'll start a college savings for them. Since my college was paid for by my parents (and Matt's too) it's really important to us that we give the same gift to our kids. People have such different philosophies on this--and everyone does what they feel is right for them and their kids. But having practically no student loan debt when we started our life together was HUGE. It was one of the reasons we felt like we could get married so young and begin our life together--we weren't drowning in debt and feeling that pressure. I would love to continue that legacy for our kids.
  6. Pay off your home early | Dave suggests a 15-year fixed-rate mortgage. We did a 30-year fixed-rate mortgage instead...which maybe wasn't the smartest, but we did it knowing that we would pay it off early. We are hoping to pay it off in at least 15 years, if not much less.
  7. Build wealth and give | This is the fun part--where you get to give SUPER generously. I can't wait to leave $100 tips at restaurants for unsuspecting servers and things like that. There are so many Bible verses about how we are supposed to use our money and so much of it comes back to giving. When you believe that the money doesn't belong to you, but belongs to God, it changes your whole perspective. We remind ourselves of that often so that we loosen our grip on our dollars and use it in ways that can glorify God.

So, there you go! We are walking through those steps with tons of other people across the country and globe and it is truly transforming every aspect of our life. From my capsule wardrobe, to my thoughts on crafting an intentional home, to thinking up creative, meaningful and cheap date nights, our walk towards Financial Freedom has been hard and trying but also a huge gift. I'm super pumped for 2015 and building up that 6-month emergency fund and the peace that will come with having that money tucked safely away, so when the plumbing breaks or the washer goes out or the car needs a major repair--it's not a hand-wringing oh-my-gosh-what-are-we-going-to-do situation.

What about you? Are there any Dave Ramsey-ers out there? Having a community when it comes to things like this is SO helpful I've found. Another helpful thing we've done is paint a chalkboard wall in our kitchen and draw out this chart for our emergency fund savings. It is SO motivating to see it each and everyday. It's at zero right now, because we just drained our emergency fund for that plumbing repair (womp wompppp) BUT we'll be putting $1,000 back into it in February, and saving $400-$700 per month after that. Any bonuses, tax refunds, Christmas and birthday money and things like that will all go straight to the e-fund until it's fully funded. I'm so excited to fill up the chart...and throw a big party when we get to the end :)

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Next week, I'll be talking about our budget and sharing actual numbers, and how our household runs from month to month. Can't wait!

xoxo,

Val