Step One: Listen to Suze Orman

Step Two: There is none needed after step one.

Does that seem a little harsh? I don't think that it does. It actually took me several days to calm down enough to write this post. Last Friday I was watching the Today show while folding laundry. It's the one time I actually watch TV. Anyways, on comes Suze looking like she just rolled out of bed with a hoodie on and her hair not done. I usually don't judge people by their looks but come on, your on national TV. Matt proceeded asked her about what couples should do with their money so that they don't end up like Jon and Kate (I guess Jon emptied their bank accounts before he moved out). What is her wise advise?



Don't trust your spouse from the beginning. The preacher didn't REALLY mean "and now you are one". And if you are a stay at home wife you must feel like a little child asking her daddy for her allowance. How in the world does any of this advise make for a strong marriage? I can tell you right now that if we didn't have joint accounts on everything along with 100% open communication about our finances I would not feel comfortable staying home with my kids. I also would never fully trust my spouse. How could I if he doesn't fully trust me?

On top of all of that depending on what state you live in your death could cause even more financial stress then the emotional stress of losing a spouse. Right now we are "walking" with a widow from our church who is suffering. She lost her husband last month unexpectedly. Because they had bought off on bad advise like Suze's she didn't know what type of financial stuff was going on in her husbands life. It turns out that he had a mountain of credit card debt that she didn't know about. She didn't even know he had the cards.

Right now you are probably thinking so what? She isn't liable for his debt. You are right, but his estate is. Their home as well as their paid for cars where all in his name since they could qualify for better rates that way. Now she is looking at losing everything they had work for. Along with the home they raised their 12 kids in.

If they had joint accounts she would have known what was going on. She would have said "No thanks honey, I don't NEED a new coat this winter." She would have made different decisions. He would have been held responsible for his actions as well. Living two seperate financial lives in marriage only caused their family extreme pain and suffering after his death. She lost her husband and her whole world. She is now faced with moving out of state to live with one of her children because she has no home.

If that is what you want your future to be then go ahead and take Suze's advise. Have separate accounts and just one "monthly shared bills" account. For me and my household... We will serve the Lord. We will be one in marriage. We will make all of our financial decisions together in an open and honest way. We will give, spend and save while keeping in mind that we are called to be good stewards of all God gave us. Because really, it's not ours to begin with! Why hide it from our spouses when we are called to do just the opposite?

And by the way, if you work for the Today Show I'd like for you to know that was the last time I will watch your morning show so long as she is a guest on your program. I'm sure that some of your competitors have better experts on their show. I mean really, can't you do better then a never been married lady in a hoodie, with bedhead giving out serious marriage financial advise?

You can view the follow up post based on the comments below at this link.

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"Opportunity cost is the value of the next best alternative foregone as the result of making a decision." as defined by wikipedia.org

Do you ever think about your own personal finances with an opportunity cost mindset? Even if you did now what the term was called I'm guessing you did. If you create a budget at the beginning of every month you decide what you will do and not do with your money for the month. This is the same thing. If you go to make a purchase and you say to yourself "If I buy X then I will not have the funds to pay for Y". That my friend is analyzing the opportunity cost of your purchase.


We have had to do a lot more opportunity cost analyzing lately because of buying a fixer upper house two years ago. All of the funds we have put into the house has meant that some other want or need has been sacrificed. By installing a new well, boiler, remodeling the kitchen and bathroom, updating electrical and phone along with gearing up for a new roof we have had to make a lot of tough decisions and sacrifices. There are lots of things we would love to do with our money other then spend it on our houses mechanical needs however we had to make a decision. Which was more important, a house with running water, heat and no roof leaks or a trip to France, cool paint colors on the walls along with a new couch? I know that we gave up a lot of wants over the past two years because of our needs. This was tough and we sometimes whine about our plight in life. However, we are grown ups. We made the decision to buy a fixer upper really cheap and then over time spend the money we saved fixing it. I know we made a very wise investment that will pay off for us in the end, but right now I really love to be in the south of France to see it's spring beauty. So for now I just keep reminding myself that it was worth the opportunity cost of running water to miss out on a spring time trip to the south of France.

What are some of the hard opportunity cost decisions that you have had to make lately?


photo from about.com

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I think that Murphy is finally moved out! Yay! We do have some more clean up from when he moved in (like the roof still needs replaced) but for the most things are back to normal. For the most part April was calm and there was no large budget busters. It was the break we needed for our sanity.

April's Budget Recap:

• We did awesome sticking with our budget
  
• We had extra funds left in the home repair and babysitter envelopes
  
• Garage sale make us just over $450 which was divided equally between the kids clothes envelope and the garden remodeling fund
  
• One last straggler medical bill came in and will be added to the May budget
  

May Budget:

• Doubled the amount we are saving for the roof this month (moved over the energy bill savings)
  
• Girls need tons of summer clothes but didn't add it to the budget since we have the money from the garage sale
  
• Budgeted for a vet visit
  
• Budgeted extra for a Mother Day's surprise and the Mr.'s birthday
  

2009 Financial Goals:

• Save for new roof (100% of funds by June) (Purchased shingles on sale and continuing to save for the rest)
  
• Start putting money in Roth again after roof is fully funded (Starting in July)
  
• Continue to save for kids' college in 529s (Started)
  
• Continue to do company matching 401k (Started)
  
• Fully fund Roth and 529s by late summer (Hard to achieve on current income)
  
• Start aggressively saving for a new car (Put on hold b/c of boiler & medical bills)

How did your month go financially speaking? Better or worse then expected?

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If you read our monthly budget update from last month you know that Murphy had struck our household big time. We weathered it just fine and was glad the month was behind us. The reality it seems is that February would not be much better. We spent most of the month sick! We made three ER visits, one CAT scan and one MRI. We are know waiting to hear the results of the MRI to see what, if anything needs to be done. Our daughter has her first appointment with an Allergist on Monday and I'm sure we will be making more visits to figure out what is triggering her allergic reactions.

With all the medical expenses we have had so far this year we will be paying for this next stretch 100% out of pocket until we spend $1000 then it will go to 80/20 split. To see more details check out the breakdown below.


February's Budget Recap:

• We ended up fighting the insurance company the whole month to get the rest of our money reimbursed from truck repairs after the wreck. It should be in the mail but we have had to absorb the cost for over a month now.
  
• The money ran out before the end of the month. We had to make things stretch the last week of the month.
  
• Property tax assessment came in and we need to increase our monthly savings for our annual payment.
  

March Budget:

• We budgeted for $400 in health expenses.
  
• Increased take home pay this month by changing the Mr.'s deductions at work.
  
• Put money in the house repair category to update our 1964 thermostats with new programmable ones.
• I accidentally paid our electric bill in Feb. instead of waiting until March so we don't budget for electric this month.
  

2009 Financial Goals:

• Save for new roof (100% of funds by late spring) (Started)
  
• Start putting money in Roth again after roof is fully funded
  
• Continue to save for kids' college in 529s (Started)
  
• Continue to do company matching 401k (Started)
  
• Fully fund Roth and 529s by late summer
• Start aggressively saving for a new car (Applied tax return)
  

Did you have a rough financial month? Did you have a better month then us?

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January was a month full of unexpected things. My brother's wedding was canceled just a couple weeks before hand. I wrecked our truck when I hit an icy patch on the interstate. My grandfather died. There were also some other little unexpected things as well.

It almost felt like Murphy moved in this month! Lucky for us, we have already got our financial act together. We had the cushion we needed in the budget to hand these blows.

January's Budget Recap:

• We did have just over 1k in unexpected "emergency" expenses.
  
• We were able to weather the financial storm w/out wrecking our budget.
• The money we wanted to set aside in the car replacement fund was used instead to help cover the insurance deductible.
• Under budget on food and gas.
  

February Budget:

• Our oldest daughter has outgrown almost all of her shoes so this month I'll be hitting the outlet looking for some good sales on shoes for her.
  
• We budgeted extra for our date night this month.
• Apply tax refund to a new larger deep freeze and the rest goes into the car replacement fund.
  
• Take home pay decreased because of increase in health insurance premium.
  

2009 Financial Goals:

• Save for new roof (100% of funds by late spring) (Started)
  
• Start putting money in Roth again after roof is fully funded
  
• Continue to save for kids' college in 529s (Started)
  
• Continue to do company matching 401k (Started)
  
• Fully fund Roth and 529s by late summer
• Start aggressively saving for a new car (Applying tax return)
  

Did Murphy move into your house? How did you fair in January? If you are like me your glad it's over!

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Most people dread January since it is the month all the large Christmas bills come due. There is nothing quite like the buzz kill of maxed out credit cards, blizzards and the lack of sunlight that is January for most families.

However, we are no orderinary family December was wonderful and so will January. No credit card hangovers for us this year! Here is the recap of December and our lovely plans for January.


December's Budget Recap:

• We had a perfect month! I'm sure it will never happen again in my life, but I can actually say that we kicked butt in Dec. 2008.
• Our Anniversary vacation funds were more then adequate for the trip. The extra was pooled with the Christmas money we received from family and re-budgeted that way.
• It was hard to not blow the budget on Christmas gifts for the kids, but work really hard to not do it. In the end I was glad I didn't spend the money since everyone else broke the bank on our kids.
• Paid our property tax bill with the money we sit aside every month for it.
  

January Budget:

• With the fall of gas prices I have a ton of extra gas cards left from previous months. We are actually budgeting $0 for gas this month! The money that would have been in this line item was transfer to the car replacement fund line item.
  
• Last month I sent in the paperwork to start the monthly withdrawal of funds for our kids' college savings accounts. That should kick in this month and was added to the budget. We had stopped this temporary to pay for our baby's medical bills.
  
• We also budgeted for a date night that includes funds for dinner out, a movie and a babysitter! I know, we are sooo extravigant!
  

2009 Financial Goals:

• Save for new roof (100% of funds by late spring)
• Start putting money in Roth again (starting in late spring after roof)
• Continue to save for kids' college in 529s
• Continue to do company matching 401k
• Fully fund Roth and 529s by late summer
• Start agressively saving for a new car
  

Did you go over budget in December? Are you dreading the January credit card buzz kill? Or are you still riding high like us?

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The Budget - The budget is like our snowblower. A little front-end preparation will ensure that it is ready when you need it. And you will need it. When the stom comes, the budget will hep youclear away the mess you're in, and give you a clear path to follow.

The Emergency Fund - Maybe yours is only partially funded so you've got a towrope or a bag of salt in the trunk. But the real e-fund is that 4x4 pickup in the driveway (purchased used, of course). When things get really bad, when all else fails, it's there for you and can walk you through as though nothing happened.

Being Debt-Free - The unexpected benefit here is that you have the time and energy to deal with it all. To not be so stressed out and making decisions indespiration is invaluable. To have peace about your finances causes you to look at purchases and situations differently than you would have if you still had outstanding liabilities.

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Honestly, the month of November was a blur! It has not been the easiest month personally because my grandfather has cancer and any day will be his last. I've been making lots of trips back and forth to "home" with the baby in tow. It's a three hour drive each way but worth every minute of it to see my grandfather and be there for my mom and grandma as they live through this experience on a daily basis taking care of him in his own house.

On to the budget... November's funds were kind of crazy. We started out by blowing through all but a couple hundred in the first week and half! But then we had almost one hundred left at the end of the month. Weird huh?


November's Budget Recap:

• Food - bulk food and meat for two months bought at the beginning of the month meant we had about $20-$25 to fill in the gaps for the month (ie. milk and yogurt)
  
• Cell Phone Bill- We always have lots of extra minutes at the end of the month, but this month with all the calls to home (and received from home) we blew through the minutes and then some. We were WAY over budget on that bill.
  
• We were under budget on gas because we planned for prices to go up.
• Had to cut Mr's new jeans out of the budget.
  
• Used the date night funds and beer funds as intended. It was a nice treat!
  

Overall we did good this month. After the first week we did have to re adjust sightly but after that we stayed right on track.

December's Budget:
Here is what we are doing in December.

• Add line item for daughter's commissions (aka, chore money)
  
• Added extra for the gifts for the 5 family member's with birthday's this month
  
• Adding some extra towards Christmas gifts
• Surprise Doctor Bill- Why a surprise? Because we maxed out our out of pocket expense portion back in March. One of the three doctors our baby saw last month at the special clinic doesn't take our insurance so it was considered out-of-network. We were not expecting this since all the other doctors were covered by insurance. That ate up just shy of $100 of this month's funds.

'08 Budget Goals:

• Fully fund retirement- partially funded via work 401k, not adding to Roth until after the new roof funds are fully saved
• Fund college savings again. - adding this month
• Save for new roof- continuing and should be have enough funds by spring

How well does your budget work? What are your problem areas?

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Black Friday has come and gone. Cyber Monday is upon us. The shopping frenzy continues. At Thanksgiving, my aunt was talking about catching a couple of hours of sleep and then packing up at midnight to head to the mall. A little crazy? Sure. But it's all in good fun.

The real question is:

Is your little outburst of shopping frenzy putting you in the red? People really go nuts over this stuff. I don't think it is as bad as it used to be, but I also don't think that the deals are as good, nor the products as high-quality as they used to be.

The Mrs. hit the Black Friday sales at JoAnn's (surprised?) and spent around $60. Since my paycheck had hit, it came out of December's budget. We'd talked about budgeting some for Black Friday shopping, but without knowing what would be on sale, we hesitated. Even still, our budget remains in the black.

What did you spend on shopping this year? Did you bust the budget? Let us know in the comments, and consider watching What Would Jesus Buy:)

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We're about to get a bit more personal here at Not the Jet Set. We talk a lot about budgeting, and made it quite clear how important it is. But how are we doing? The Mrs. is a budgeting ninja, but does it always work out perfect? Do the months march along to our beat with no slip ups, no trip ups, no overdrafts, no empty envelopes?

Nope.

Sorry to report: We are not perfect. Yes, life happens to us, just the same as anyone else. With all the provisions in place - budget, cash envelopes, debit card, emergency fund - it is still possible to end up with too much month left at the end of the money.

So we're going to start something new here. A glimpse into our finances - our monthly budget. We'll start with a review of the previous month and then look at the coming month. Every month, we tithe, we pay our mortgage, pay our utilities, budget for necessities like food and clothing. We also put away a monthly amount towards irregular bills like insurance and property taxes, and save for retirement. But then there is the rest. Where does it go?

So lets dive right into our October Recap:


October's Budget Recap:

• Food ran out early - fruit season (1/4 of food budget went to apples alone)
• Spent hair cut and eating out money on groceries, no groceries in last week
  
• A new line item for beer was added and used wisely
• We were under budget on gas because we over budgeted for our 6 hr each way trip to the doctor (long story)
  
• Added a new date night line item and we went way over budget on that as well which robbed the dog's shots for the month.

As you can see, a tad too much month left at the end of the money. It happens. We survived.

November's Budget:
Here is what we are doing in Nov.

• Budgeted for new jeans for Mr.
• Charity dinner is part of tithe this month
• Re-budgeted for the dog's shots
• Adding some extra towards Christmas gifts
• Finding room for the fees for Mr.'s winter basketball league
  

'08 Budget Goals:

• Fully fund retirement- partially funded via work 401k, not adding to Roth until after the new roof funds are fully saved
• Fund college savings again. - adding this month
• Save for new roof- continuing and should be have enough funds by spring

How well does your budget work? What are your problem areas?

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We've stated our position on Dave Ramsey on this blog and in the comments of many others (some of which make for great debates). We've already addressed the fools who somehow think that not only is Dave bad at math, but that they've been able to correctly run the numbers that Dave has failed to over the course of nearly 2 decades of financial counciling - Give me a break. So nothing new there.

What I've been seeing a lot of, not just now, but for quite some time, is this assumption that the people on Dave's plan are also bad - even terrible - at math.

I think I know the answer, and I'm pretty sure I can prove it after the jump.


First, let's frame up the discussion with a couple of recent quotes (note that I've heard this sentiment a lot from bloggers and commenters alike):

Kevin, from No Debt Plan:

I don’t buy the psychological argument. Again, I’m not saying his system hasn’t worked — not at all. I’m saying it could be better. And if he wants take the psychological argument then he should also accept that if his audience can’t handle credit…

LivingAlmostLarge goes a step further in saying

Second, debt payoff sure if it works for you great. Problem Kevin is these people are seriously bad with math. They have no idea how to balance a check book, etc. They are probably dealing with late fees, overdraft, etc. They need to keep it simple stupid or KISS. So it works.

What is fun to note right off the bat, is that neither of these two critics of the system can deny that it works. At least we can agree on something! It would be tough to deny how incredibly successful Dave's system has been over the past 15+ years. What's fun is that so much has happened in those 15 years, and yet his advice is pretty much the same as it was then. Still works today.

But are the people on Dave's plan, or even just folks who have debt / credit card debt, really bad (or "seriously bad") at math? Do they really lack the basic math skills to balance a checkbook. I'm going to say no.

What is involved here math-wise? Adding. Subtracting. Not even long-division.

The math couldn't be more basic. Sure, there's more to it - reconciling the register for outstanding withdrawals or deposits, including electronic transfers along with the analog ones... - but that's really all that there is to the math. Are the folks in question incapable of totaling the +'s and -'s, subtracting one from the other, and comparing it to the number from the bank? I really doubt it. Did they not know to carry the tens column ("carry the 'one' ") over when adding? Likely not. Especially since any normal human would do so with the aid of a calculator.

Is it even a problem with math that has these folks in debt in general? Again, I'm going to say no.

If you listen to The Dave Ramsey Show, or watch it I guess - we don't have cable - how many times do callers deeply in debt struggle to understand Dave when he talks about not spending more than you make? I don't listen all the time, but I've never heard it come up. how about understanding that net worth equals what you own minus what you owe? No, people pretty much get that one too. The fact is, most Americans have the math skills to be successful at personal finance. Adding, subtracting, percentages - what is that? 4th, 5th grade level math?

Now, are the people in question actually doing this? Are they tracking their finances and balancing their checkbooks each month? Many are not. So what is the problem then? If not math, then what is the stumbling block?

"Personal Finance is 80% behavior, and 20% head knowledge." - Dave Ramsey

This is when you find out what that statement really means.

What is happening is that those not balancing their checkbooks are skipping it because they are in the habit of not doing it. I would bet that they did it a handful of times at first, found no errors and thought, "this is pointless". They got too busy, forgot about it, thought their spouse was doing it... whatever. It's not the math, it is their behavior that is the problem. It's putting the NFL / NBA / NHL / MLB seasons ahead of their finances (or American Idol / Survivor / Big Brother / America's Got Talent / The Biggest Loser). It's putting the bank statement on the stack of mail and thinking, "oh, yeah, I'll do that later. After I..." It's becoming so overwhelmed with chauffeuring the kids around town, caring for an ailing family member, going here, doing that, groceries, cleaning, diaper changing, and when am I supposed to have time to do this???! I'm not condoning any of those, but they happen - life happens.

Thus, if you take Dave's FPU course, or read his Total Money Makeover book, or attend one of his Live! events, or listen / watch his show - Dave isn't running people through multiplication tables, story problems, or basic math drills to get them up to speed on their math skills. People can do the math. Dave spends a lot of time working on behaviors and sorting through the psychology of the situation. That's where the real problems lye. He's getting their priorities straight. He's getting spouses on the same page and talking about money. And on and on and on.

How can I be so sure? I know I'm right, because as stated before, people possess the basic math skills to be successful at personal finance. Dave focuses on the other 80% of what is going on. By doing so, Dave's system, as we first stated and agreed upon, works. It flat out works. It works every time you do what is taught - bear market, bull market, recession, "recession", disaster ridden, war-time or peace.

People go in with the same math skills that they started with, what has changed is their behaviors.

Note: I'm not mad at Kevin or LAL. It's ok to have a difference of opinion and Kevin and I have been engaged in friendly debate on this topic. They just happened to state their opinions at a time when I felt that this needed to be said. No had feelings guys!

To the folks that have been through Dave's program: Were you bad at math? Or bad about sitting down and doing the math?

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When we started on the Baby Steps all those years ago, one thing we resisted was switching to cash only. Our debit cards were so convenient, so easy. How could we give that up? Plus, when I had cash in my wallet, it had a tendency to disappear - a Coke here, lunch out there, a new shirt there, another Coke.... how could that be a better way?

I've been reading more and more lately about envelope systems, and people seem to be quite confused about what it is, how it works, and that it does work. At least I hope they're confused, otherwise why make such dumb comments?

Well, we toughed it out on debit cards for quite a while, and though we were able to monitor our spending quite closely, it was still just too easy to bust the budget and overspend - even by a little. The biggest problem was that you didn't know what you had left unless you went and did all the math before hand - which no one does. Mostly you'd end up doing it after the fact, just to find that you'd inadvertently overspent. Eventually we knew we had to do something different.

While listening to Dave one day, he was discussing the envelope system and how they did it. Initially they were strictly cash. But as they got better about their spending, they limited the cash to just a few categories. That made a lot of sense to us, and since we were not doing that bad on spending, we took the half-plunge. We tried cash on just a few categories and found it worked quite well. We still used debit for gas, still payed utilities online, but things like eating out, clothing, and spending money were all cash. And what a difference that made.

Sometime later, when we thought we had our spending down to a science, we went back to plastic. I think it was more laziness than anything. If we could succeed without that extra step of drawing cash out each month, then why not? Well, we couldn't. Cash was just a better way, for certain categories. Before going over just how we do our envelopes, I'll give a quick framework for the envelope system:

1. We are done with debt - we don't need it, and that includes credit cards.
2. Debit cards, while not incurring debt, can still enable overspending, which is the root of the problem at hand.
3. Sticking a wad of cash in your wallet does not constitute "switching to cash". That's like embarking on a cross-country trip with no map or directions. You are set up to fail, maybe not catastrophically, but you're not in a position to win. This is about behavior change - you can't go about your day the way you used to and get the same result.
   
4. This can be done, even when there is more than one of you doing some of the spending, but it will take time to find the right formula for you.

So knowing all of that, here is the system that we have laid out and currently use.

1. Budget - It all starts here. What are we spending this month and where? If we are traveling, then the restaurant category will be a bit higher, and groceries a bit lower. If you have your budgeting down, then envelopes should go smooth.
   
2. Cash - What will we need cash for? For us, we do groceries, restaurants, home improvement, and clothing as well as baby sitter money, and petty cash as needed. We chose these as they are the easiest to overspend on, or ones that we just need cash for - the babysitter doesn't have a card swipe!
   
3. Withdrawal - Once that paycheck hits, the Mrs. makes a withdrawal and sorts the cash into their envelopes. These days, she's using a small accordion file, that keeps it all neatly organized.
4. Distribute - One she has the cash, I get my allotment. Since she does the grocery shopping, and most of the shopping in general, I don't carry much cash.... since I don't need much cash. I usually just have a bit of cash for a couple lunches out. I only carry what I'll need. Money we won't need that day stays at home.
   
5. Spending - Cash envelopes are sometimes seen as being more difficult, but that is due to overlooking their simplicity. It's easy to know what you have left, in any category, at any time with no guesswork, no reconciling, no fancy software. Open the envelope and count. That is what you have left. When it's gone, it's gone. When you have extra, reward yourself.
   

It's really not tough, and only serves to increase discipline as opposed to plastic, which has nothing to do with discipline. But it's only as good as your budget, so make sure you get that working right. Sure we still use our debit cards for things like gas, hair cuts, vet bills, and on-line shopping. Those are places where we don't tend to overspend, and using cash would really have no benefit. Utility bills, medical bills, insurance premiums, and the mortgage are either paid online or with a check.

Last, the most absurd objection to using cash is that it's "a burden to carry cash" / "too dangerous and I could get mugged". Seriously? Some cheese with that whine? How on Earth is cash difficult? If having a plan, budgeting, and not shopping on a whim is a burden, then yes, guilty as charged. And dangerous? If you're going to get mugged, then you are going to get mugged - no matter what is in your wallet. Maybe worry more about not making yourself a target? Nobody said you have to carry all of the cash all of the time either. You know when you are going grocery shopping. Otherwise, don't take the grocery envelope. Now stop making excuses, and take control!

Have you ever tried cash envelopes? With or without a plan?

How are your envelopes set up?

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So what are the common threads here?

• Planned expenses and revenues // a financial plan // plan of operation // schedule of planned financial activity // detailed plan of income and expenses
• Money allocated // intended expenditures // planned expenses and revenues // saving and spending money // financial operation // financial activity // income and expenses expected // future investments and expenses
  

Planned money. Plan of income and expenses. Planned financial activity. So it is fair to say, that a budget is: a plan for your finances - both incoming and outgoing. The word "plan", implies that this is being done beforehand - as in not after the fact. Architects draw up plans before they even think about breaking ground. A driver wouldn't set out on a cross-country trip without first plotting the course. You don't set out to accomplish a goal without first making a plan to get there.

"So why do I need a budget? My finances are fine." I'm glad you asked. Just as that architect won't bring in the construction crews before the plans are done, you shouldn't start the month without your plan in place. Even though that architect has been erecting buildings for many years, even the best architects can miss things. It's easy to make a mistake or two with such a large project, and with no plan, even easier for the supporting teams to overlook details or misunderstand instructions. The plans keep everyone in line, keep everything on schedule, and keep everyone honest. The family budget will do the same thing for your incomes and outgoes. You and your spouse will have discussed and agreed upon how the family income will be appropriated - giving, spending, saving - and have it on paper before the month begins. During the month, when questions or expenses come, all one has to do is look at the budget. For singles, a budget is just as important, as there is no spousal accountability to help keep you in line. The end result is a reflection of the initial plan. That architect will tell you that the building is, at best, as good as the plans drawn up.

Great buildings don't happen by accident.

Now some of the noise we've seen/heard surrounding budgets:

• "they are difficult and tedious to maintain" - Only if you are doing it wrong. Unless money is disappearing and you have no idea where it is going, then you have no need to track every purchase and document it. If that is the case, then you need to switch to cash envelopes. Once you make the budget and agree to it, there is nothing more to do to it unless something changes. Only then do you need to adjust the budget, which is nothing more than consciously taking money from one category to fund a more important one.
  
• "they are too rigid" - A budget is only as rigid as you are. Like I said, you don't need to keep track of every purchase. The point of a budget is not to set it in stone and then beat your spouse with it. The point is to spend your money on purpose, on previously agreed upon expenditures. Maybe you're spending $600 per month on clothing, and $160 per month on dining out. Fine. Just be honest about it, and know where your money is going, instead of wondering where it went.
  
• "nobody sticks to them" / "they don't work" - Here is a Dr. Phil response to that: They won't work if you don't do it. As we were taught about budgeting in FPU, it won't work the first time out. An likely not the second or third. But if you genuinely try it each and every month, you'll get better and better. By that third or fourth month, you'll start to get the hang of it. It's just like in basketball: You'll miss 100% of the shots that you don't take.
  
• "my credit card automatically makes my budget for me" - It's nice how credit card companies find these extra, free services that they so graciously give to their members because they love them so much. Problem is - most of them are worthless. A big one a while back was this "service" of categorizing your monthly purchases to see where you are spending your money. As if all those charges labeled "Starbucks" was some great mystery. "Was that food gas or clothing?" The worst part is that some folks mistake this for a budget. "I can see where I am over spending and make adjustments for next month." That's great to know that you overspent, after the fact! This is not a budget, this is what's called an account statement. They just happened to categorize it for you.
  

Probably the best and the last word we have for you on budgets is from Financial Guru, Dave Ramsey. He says, if you were hired as an accountant for a company called Me and You, and you kept books for Me and You the way you do now - Would you fire you?

• Do you budget?
• What do you use for budgeting (pen and paper, Excel, Quicken, online)?
• How does budgeting make you feel about your money?
  

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It was late last year when I ran across this post on the Consumerist. "The Best Personal Finance Ideas of The year". Could be interesting - but are they really new ideas? I was definitely pulled in when I saw that the top pick was the concept of the debt-snowflake. So what is debt-snowflaking?

Chris Walters, from the Consumerist, summarized it as "the act of finding lots of little ways to supplement your standard income, so that you can add mass to your "debt snowball" to make it more effective." That sounded awfully familiar, but I thought it would be worth a read to get a better feel for the concept.

The I've Paid For This Twice Already blog is credited with popularizing the concept and even offers a primer on the topic. Its a simple concept and a good one. Not so sure about the "new" part.

Nearly four years ago, we were introduced to Dave Ramsey and his personal finance advice. We got on the ball, on a plan, and almost two years ago, we completed our debt-snowball. We read Dave's books, listened to his radio show as often as we could, attended a Live! event, and even taught FPU for a while. It was pretty safe to say that we were in-tune with his message and engaged in his method. Those unfamiliar with Dave are quick to associate him with the debt-snowball, or paying off debt, or cutting up credit cards in dramatic fashion. Those are all correct, but that is only a small part of the picture. If you don't read the books or take the class or listen to the radio show - a lot - then you are missing quite a bit.

I had mostly forgot about snowflaking until March of this year, when I started seeing more about it. More and more people blogging about snowflaking. The Austin-American Statesman even picked up on it. Then I find that paidtwice has even spun it of into it's own site. People are getting excited about snowflaking and some are actually doing it. It's a pretty cool thing when you can have a positive affect on someone else's financial future.

To paidtwice's credit, she is admittedly unfamiliar with a lot of Dave's teachings and have not read his books. Thats ok. But, Gazelle Intensity, one of Dave's terms, is not a "role play". It's a mindset. It is a way of life. On Dave's plan, it becomes your modus operandi when you are getting out of debt. Gather Little By Little has it right - the gazelle is not about speed, but rather direction. Running 100 mph in the wrong direction will not get you to your goal. The other part of the phrase, Intensity, can best be summed up when Dave talks about it in reference to.... the debt-snowball. You'll hear stuff like, "Get an extra job, or three." "Put the dog on ebay." "Sell so much stuff, the kids think they're next." His take on the debt-snowball is usually accurately represented as listing your debts smallest to largest and paying minimum payments on all but the smallest. But the part people often forget - or just don't know about - is the most important. You attack the smallest debt with gazelle intensity. You scrape together every dollar you can get your hands on and throw it at that smallest debt until you knock it out. Sound familiar?

They did at least give it a fun name in 'snowflaking'. But really - who cares what you call it? What is really important is that people are doing this. I'll give kudos to paidtwice, as she has found a way to get people excited about paying off debt and has been quite successful in getting the message out. Dave Ramsey often admits, "I didn't invent this stuff, I just found a good way to package it."

**Update** Welcome Carnival Of Money Stories readers! Learn more about us here, and be sure to check out our latest posts.

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I've mentioned this a couple of times before - and considering the age of this site, that's really saying something. What to do with irregular income? Even if you are not living on a monthly budget - and you should be - you can still do this. Overtime pay, a bonus check, garage sale profits, inheritance money, tax refund, birthday money... This money is coming in, but what will you do with it?

As you may have found already, if you don't tell your money what to do, you'll always wonder what happened to it. You'll have blown through this extra income so fast, your head will spin and just when you regain your balance, your spouse will say, "Why don't we take that tax refund and do X?". I don't know what 'X' will be, but it won't be a fun conversation when the two of you realize that money is long gone.

Much like a budget, an irregular income spending plan (IISP) is a shared set of goals. If we had extra money, what would we do first? What would we do second? If we still had money left over, what would we do next? A simple spreadsheet will do nicely. What you are making is a prioritized list of expenditures with the cost and running total. I might look like this:



It need not be any more complicated than that, but you can add as much detail as you need. Four important things to note:

1. You should have some needs and some wants. Enjoy your money, but be sure your priorities are in order.
2. You and your spouse need to agree on the priorities. You may think that buying a table saw should be job 1, but since you haven't taken your wife out to a nice meal in 6 months, she may think otherwise.
3. You should always have more items in the hopper than irregular income can cover. Who has ~$13k in irregular income?!? You might! You might not. If you do, then you should have a plan for it. If not, then you can move the remaining items up and work on new ones to fill the hopper. Worst case: a rich relative dies and leaves you more money than you could have imagined and it totally blows away your IISP. This is a good problem to have.
4. You'll notice my use of the pronoun "we", and mention discussions with your spouse. This is more important for married couples than you could ever imagine, and probably warrants its own article. If you are not on the same page as your spouse, what a peace offering this could be. Sit down with your husband or wife and talk to them about doing this. Talk about how important this is to you and about how you want to do it together - and mean it.

With th above example, lets say your annual bonus check is $2000. With that, you can quickly see that you'll be able to add to the Emergency Fund, Take the wife out to a nice dinner, and paint the house. The left over $250 can go into savings with the 'Irregular Income' earmark. Not bad, but that laptop still seems forever away, and the table saw, well don't even mention dad's table saw. Dad will get his saw, he just needs to be patient and maybe make his case to move it up the list. Or maybe Dad should get out there and earn some extra income to make this happen.
Anyone else have experience doing this? We've done it for 2 or 3 years now and find it works quite well.

**UPDATE** Welcome CoPF readers! If you are new to Not the Jet Set, the please check out our latest posts as well as a bit about this site. Thanks for reading!

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