For years, I have always budgeted money to pay bills, but, there was that part of my income that always seemed to disappear in the nebulous "Miscellaneous" category. I have played a game of see-saw with my credit card by running it up and paying it down, running it up and paying it down.
That's when I discovered a radio talk show host named Dave Ramsey and his "Total Money Makeover" Book. There is absolutely no "get rich quick" scheme, but, he doles out a hefty amount of common sense. He draws on his experience of having gone bankrupt to tell you the things that we do that lead down that road.
The Total Money Makeover is divided into a series of Baby Steps.
- Step 1 : get a $1000 emergency fund. Stop using credit.
- Step 2 : pay off all of your debts, except for your mortgage. Pay off the smallest first while paying minimum on the remaining. As you pay off one debt, start tackling the next. If you have to use your emergency fund, stop BS2 and go back to BS1.
- Step 3 : Fully Fund your emergency fund to 3 to 6 month of expenses (not income).
- Step 4 : Invest 15% to retirements. Earlier, he has suggested that you stop all investments until you get to this step. The most important tool you have to getting out of debt is your income, and you are going to need all of it to get back to this step.
- Step 5 : Invest in your kids college fund
- Step 6 : Pay off your Mortgage
Printed at the bottom of each page is the quote "Live like no one else so that later you can live like no one else." December makes the second month that Cindy and I have allocated every dollar in my take home pay to a category. We ended up in November with a budget surplus (which went to Chase Manhattan) because we did not spend everything we had categorized.
Also, there is the angle about being a good steward of the money that God has given to us. I don't consider myself a steward of 10% of my income, but rather all of it. I am learning some common sense skills about money that is helping me to be a better steward. In turn, I am turning into a better giver.