Last time I talked about setting a budget, so today I am going to talk about setting your goals and how having a budget can help you achieve those goals.
Since my husband and I have been together our finances have kind of been the elephant in the room. You know that big thing that's always there and no one really wants to talk about? Yeah, that thing.
Something that we never really learned growing up is how to make a budget and more importantly how to live WITHIN our means. I really think that this has been an epidemic in our country and not just my generation but our parents as well. If you go back to my grandparents generation (depression era babies, my Gran is like 85) People didn't borrow money, there was a stigma attached to it. When people bought their homes, they paid CASH! Cold hard cash, thus they never spent more then they could afford. However sometime after WWII our country has moved away from this mentality, now we have loans for everything; our homes, our cars, even our clothing and entertainment (credit cards and store cards ARE loans people!)
Dave Ramsey has a saying, "Live like no one else so you can live like no one else" It might sound odd but that's the point. If you live your life unlike everyone else, those people who are keeping up with the Jones and going broke doing it you will be able to live the live of your dreams later. Instead of getting a credit card or taking out a loan for what you want right now, save up for it! My dad always says this and he's right. He also says that by the time you have enough money you may not want it anymore.
So we have decided that we are no longer going to borrow money and take on debts. I know that we will be taking out a loan to buy our home, but we have looked long and hard at what we are paying for rent and what we want to pay for a mortgage to come up with numbers that we can afford. We can buy a $90,000 home at a monthly payment of $500 verses our $755 a month rental payment on a two bedroom apartment. (Makes sense to buy hu?)
As a family/Couple we sat down ans had it out (not fighting honest!) We really just had what my Grandma would call " A come to Jesus" talk, an honest talk about the cold hard truth of our situation and what we wanted to do about it. FYI: This part is about as much fun as setting up a budget. :/ Also it is very important that you sit down together for EVERY check and go over the budget. Make sure that you assign every dollar so that you don't waste your money.
Here are our goals for the next 2 years: (i am sure that at some point we will revise this but these are our concrete goals for the future.)
1.) Reduce our expenses
2.) Get an emergency fund of $1,000 (per Dave Ramsey's method)
3.) Pay off debts: Medical, Credit Cards, & School (we do not plan to pay off the car before buying a home)
4.) Save for a home (down payment of 20% and closing costs) *note you can ask the seller to pay closing costs but don't assume that they will, better to be prepared.
I know that an emergency fund of $1,000 is not much, this is just a starting point! Once you have started paying off your debts then you want to come back and get a minimum of 3 months of your living expenses saved up in the event that you get laid off or sick and can't work etc.
Since starting on the budget that I posted last time we have really seen a difference. I know that my husband worked some extra hours as well so that helped us pretty much pay off a good portion of the medical bills that I had. HOWEVER, as Murphy's Law would have it...my car died. Boo :( Like I said GET AN EMERGENCY FUND!
