Electronic Envelope budgeting

Janell and I have tried different ways to manage our budget throughout our marriage. The different things I have done with excel to organize our budget have evolved to what we now use.
Our current system is pretty much a virtual envelope system. We use excel to break down the amount of money in our checking account to different categories. Each category receives certain dollar amounts credited to the total after each paycheck. When we spend the money from the different categories the balance is then decreased. The goal is to only spend money that has been allocated to the category.
This system has certainly helped us have a fresh look on our finances. It supports our desire to live within our means. We are able to better stick to our budget. Ultimately, it is vital for everyone to find the budgeting system that works for them and use it!

Just Say No!

After work today, my wife told me about the few things she purchased from a yard sale this afternoon. One great find was a used national bestseller, "Financial Peace Revisited" by Dave Ramsey.

Although it has been a while since I have posted, I could not help but post about a simple thought from the beginning of chapter 2. In elementary school I was taught to "Just say no to drugs." In college I was taught to "Just say no" when my schedule was already too full for anything else.

Dave Ramsey indicates that the nation's situation at the time was a reflection of our inability to "just say no" to ourselves! What is it that makes it so difficult to stop the impulse purchases when we cannot afford them? One possible answer could be a lack of vision for the future. I assert that cultivating the ability to "just say no" to ourselves when we really don't need something will certainly allow us to be better prepared for the future when our money is needed elsewhere as money just doesn't grow on trees.

Investing our Time wisely

I know I touched on the wise use of time in my last post, but this principle is really something that I need to work on.

When I think of a financial investment I often think about what the potential return is going to be. This varies based on the risk involved with the investment.

For some reason, it is easy to forget that our use of time is really an investment. What return am I going to get from my chosen use of time? Some returns come right away while others don't become apparent for some time.

What is the return for using my time to complain?
What is the return for using my time to show gratitude?
What is the return for using my time to learn new things?
What is the return for spending time playing cars with my son?
What is the return for doing date nights with my wife?
What is the return for giving service to others?
What is the return for spending time to ponder or meditate?
What is the return for . . .

Regular financial returns come when we diligently invest in that which brings good returns.
Likewise, we get regular returns in other measure when we consistently do that which brings the reward. In other words, we reap what we sow.

Opportunity Cost and the use of Time

Again I want to reference my Personal Finance textbook mentioned in my previous text.

"Have you ever noticed that you always give up something when you make choices?" That is opportunity cost. There is a cost in what we give up when we make choices. Therefore, our choices should be such that we get the most desirable result. The value of what we get from our choices should be greater than the value of what we give up.

In financial decisions, something is given up in order to receive a "more desirable" result. Some people might give up the use of 10% of their income now in order to have it set aside for retirement. Others may give up having money set aside for a big vacation in order to go out to eat on a regular basis.

Regardless of demographics everyone has a preference on how to use time and money. Opportunities are passed by in order to use our time and money the way we want. Hopefully we make the decisions that bring us the short and long term consequences we desire.

To finish the post I extend the following invitation from the textbook:

"Select your use of time [and money] to meet your needs, achieve your goals, and satisfy your personal values."

Goal Setting

I recently started reviewing some of the things I learned from my Personal Finance class at Snow College. The following tidbits come from my textbook from the class.

"If you don't know where you're going, you might end up somewhere else and not even know it."

--Goal setting is central to financial decision making

Financial goals should be:

1. Realistic . . . don't set goals that you cannot achieve with your income and life situation.

2. Specific and measurable . . .Having specific, measurable goals helps us create a plan to acheive the goals.

3. Have a time frame. . . This helps us avoid procrastination in working toward the goals.

4. Indicate the type of Action to be taken . . . Without action Goal setting is of no use.

1 in 84 homes in America have received . . .

On a recent conference call at work we heard a crazy statistic.

-1 in 84 homes in America have received a forclosure notice.

What? Why so many?

First off, why are so many homes in foreclosure? Some homebuyers stretched themselves too thin. Others didn't understand the terms of the Mortgage they signed (you mean I'm supposed to read and understand the legal contract I enter into?). Many homeowners don't think about property tax increases, homeowners insurance rate hikes, repair and maintenance costs. The last broad category I want to include is those that were hit so hard by declining home values that they owe more than the home is worth.

While thinking of homeownership as an investment is good, it is vital that the borrower does their due diligence. My brother-in-law spoke of going through the "worst case scenario" before making their home purchase. I believe that too many people only go through the "best case scenario" and forget that life doesn't always turn out how exactly as planned.

Don't let the loan officer convince you to borrow the maximum amount you can qualify for. That is why so many people are upside down in their mortgages. Borrowing less than you could afford will allow you to still enjoy life with the extra cash flow.

My point is not to scare anyone out of buying a house. I only hope that more Americans, including myself, will truly seek to understand what costs are associated with buying a home before the purchase is made.

Prepare for the future

This morning I had a bit of a paradigm shift. Some financial experts seem to focus a lot on building wealth. Although that focus can be a good one, my mind shifted a bit on how I want to look at it.

Instead of focusing on a desire to be wealthy I believe that it is better to focus on being prepared financially for the future. Being prepared financially truly is a key to the future.

I want to be prepared for. . . when the car breaks down. . . . buying our 1st house . . . . going on regular dates with my wife. . . . taking vacactions . . . . furthering my education and learning. . . . unexpected illness . . . .retirement . . missions. . . charitable goals. . . etc.

So, some great preparedness questions to ask oneself are:

"What do I need to be financially preparing for?"

"How am I going to be financially prepared for . . . .?"

"What should I be doing differently to be better prepared for . . . ?

My favorite line from the Disney Movie, The Lion King, is "Be Prepared!"