Thursday, March 24, 2011

How To Organize Your Finances




Week six in Jennifer Ford Berry's book, "Organize Now!" deals with organizing your finances. Despite an uncontrollable urge to link you directly to Dave Ramsey's website and call it a day, I'll offer you some insight on what we do around here to keep the Pearson family finances in check. Fair warning though... this might sound like a Dave Ramsey infomercial... you know, without the annoying "and if you call in the next 10 minutes" shpeel. LOL!

Seven short years ago, Chuck and I were living in a new town, I was preggo with child numero dos and had recently come out of work due to Anna's medical situation. Coming out of work was something that happened suddenly and not by my choice, so we went from a two-income family to a one-income family without warning, planning, or want-to. Keep in mind we still had the bills of a two-income family and for a time, things were pretty rough. Many months went by when I was literally "stealing from Peter to pay Paul" as the saying goes. Add mounting medical bills to this scenario. It was NO fun, I tell ya. No fun at all.




I had never heard of Dave Ramsey, but was immediately interested in his course "Financial Peace University" by the title alone. Our church was offering classes (by video and workbook) and Chuck and I signed up immediately. We were doing the best we could with what we were going through (which was mostly living off credit cards) but I knew we needed help. Help came in the form of a witty, tell-it-like-it-is, been-there-done-that, knight and shining armor...otherwise known as Dave Ramsey. ;) I hold the man in high regard, can you tell?



If you ever have the opportunity to take this class, I highly recommend it. You can even take it online now. If you want to get the gist of things, buy his book "Total Money Makeover" and heed every.single.word. There is no quick fix to getting out of debt. You have to "plan to work, and then work the plan" as he says. But if you do the work, you WILL reap the benefits.



This is the part where I should tell you how we live debt free and are the poster children for following Dave's advice. Ummm, no. If we had stuck to our guns we would be debt free by now. But we got lazy. And we lost focus. But luckily we've managed to get back on track and have made a plan to be debt free (except for the mortgage) in 5 years. That may sound like an awfully long time, but dear peeps, we're talking about an awful lot of debt. And you know what? It's TOTALLY do-able. Dave can show you how.

If you are so lucky (and smart!) to have not accumulated the debt that we have, Dave's advice is good for you too:


*Do you have an emergency fund? This will keep you from having to rely on those credit cards when the air-conditioning goes out or you need a new set of tires.




*Of course, a budget is crucial (I know, the "B" word. It's so ugly. But essential. Kinda like Spanx after childbearing!). You HAVE to know how much money you have coming in and going out before you can do anything else. This may take a month or more to collect such information, especially if you haven't kept up with things before now.




*Got outstanding debt? Tally your balances and start with the lowest, putting all extra cash toward paying that one bill down. Pay only the minimum payments on the rest. When that bill is paid in full, take the money you were paying on that bill and add it to the minimum payment of the bill with the next lowest balance. Dave calls this the "debt snowball."


Soon, you will see your debt disappear. It's a beautiful thing. Check out his website for all the deets on saving for an emergency fund, budgets, and basic wealth building. He's got it "down pat" as my grandmother used to say. It's fool proof.

The only other advice I can give on organizing your finances is to have a specific day set aside to pay bills. Mine is Monday. I pay the majority of my bills using my bank's online bill paying service and though it takes a few days to process, it's no slower than snail mail. And think of all the money you save in stamps! My apologies to the USPS! I also use automatic bill pay for our hospital bill. The benefit here is that you don't have to worry about the bill getting overlooked because it gets paid every month on the same day. The only thing you have to worry about is making sure there's money in the bank! I see us switching to more automatic bill payments in the future. This is easy when your emergency fund (in a separate savings account) is linked to your checking account through overdraft protection. Just one less thing to have to worry about, you know? Who couldn't use more freed up mental space?


Next week the topic of Berry's book deals with organizing your bill-paying system. I've re-vamped mine recently, so I can't wait to show you. Don't forget to check out House of Grace for tips from Bonnie and the other girls linking up to her party.

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