*The Dave Ramsey 'Baby Steps' Thread*

[ThereYouSeeHer]

Budget time!

15 Practical Budgeting Tips

When laying out your budget each month, make sure to protect your "Four Walls" first!

• Food
• Utilities
• Shelter
• Transportation

Do not fund a lifestyle you cannot afford by using credit cards like they are income. If you are using debt to get through each month, either your actual income needs to increase, something needs to be sold, or expenses need to be cut from somewhere else.

February was only 28 days long, but March has 31 days. Plan to be extra intentional this month.

Your budget will show you the way!

 

[barkley]

Budget time!

15 Practical Budgeting Tips

When laying out your budget each month, make sure to protect your "Four Walls" first!

• Food
• Utilities
• Shelter
• Transportation

Do not fund a lifestyle you cannot afford by using credit cards like they are income. If you are using debt to get through each month, either your actual income needs to increase, something needs to be sold, or expenses need to be cut from somewhere else.

February was only 28 days long, but March has 31 days. Plan to be extra intentional this month.

Your budget will show you the way!

i would add one more 'load bearing' wall to that-prescription medications. far too many, esp. seniors try to cut costs by shorting their prescription drug needs-either not buying them at all or decreasing doses w/o their doctor's permission. this can have tragic results.

 

[ThereYouSeeHer]

Whew. Wrapping up a busy month. The first quarter of the year is always an expensive time because it seems every non-monthly bill becomes due! Insurance premiums, dues, memberships, etc. We have to be so careful with our spending to get through. We've never needed a savings fund for these bills, but with rising costs, it's getting harder to cash flow everything. Will have to consider it in the future.

--No changes in the Baby Steps. Still trying to find room in our budget to finish Step 4 and deal with Step 5.

--Had more college visits this month. Actual college hasn't even started, but all this pre-college stuff is already a budget squeezer! Applications, enrollment deposits, housing deposits, college weekends, orientations, registrations, etc. Still waiting on a financial aid package to help us make a final decision. It's so weird that you have to start the process at some schools before you even know if you can afford to go!

--Navigating senior year costs for graduation packages, parties, events, yearbooks, senior ads, and prom. Yes, even homeschoolers can have these costs (if you've ever seen the Good Luck Charlie episode "Dress Mess", it's hilarious. Amy has her daughter Teddy wear her prom dress from when she was in high school (true story--I did this last year for my child's junior prom!). PJ also attends a homeschooler's prom that turns out to be in her basement. This whole episode hit so close to home, haha!).

--I read Dave and Rachel's "Smart Money Smart Kids" book. Great conversational read. Really good insight, even if someone doesn't have children or their children are grown. It covers Rachel's perspective of having lived the Baby Steps her whole life. Also discusses more emotional topics surrounding money like entitlement, work ethic, gratitude, and contentment.

Other than that, still sticking to our budget, still cash flowing, still moving through life one day and one month at a time!

 

[Robber Baron]

--Had more college visits this month. Actual college hasn't even started, but all this pre-college stuff is already a budget squeezer!

When we started visiting colleges I would always ask if we could get a break on tuition if my daughter already knew everything.

 

[barkley]

The first quarter of the year is always an expensive time because it seems every non-monthly bill becomes due! Insurance premiums, dues, memberships, etc. We have to be so careful with our spending to get through. We've never needed a savings fund for these bills, but with rising costs, it's getting harder to cash flow everything. Will have to consider it in the future.

for us it's always 2nd and 4th quarter-both have property taxes due, one also has auto insurance/bi-annual top off of propane tank while other has auto/home/umbrella/bi-annual top off of propane tank. putting a set amount into a savings account each month to pull from for these makes them less cumbersome for us.

 

[ThereYouSeeHer]

for us it's always 2nd and 4th quarter-both have property taxes due, one also has auto insurance/bi-annual top off of propane tank while other has auto/home/umbrella/bi-annual top off of propane tank. putting a set amount into a savings account each month to pull from for these makes them less cumbersome for us.

Yeah, I was trying to calculate what we would need in a separate fund to cover all these other expenses. I then felt more overwhelmed about a savings fund than just cash flowing! However, I realized we can afford most of these bills, it's just getting harder to pay all of them when they hit at once.

So, really, even just a small amount in another fund would take some of the pressure off. Also, I can look into adjusting due dates on some items, like by pausing memberships or subscriptions and then restarting them in a different, less busy month. Finally, I'll see if I can start cash flowing some of these heavy hitters a bit earlier than usual.

 

[ThereYouSeeHer]

New month, new budget!

Why do I love budgets so much??

Before...
--We would wait until the due date to pay bills with a credit card, which may or may not have gotten paid off at the end of the month.

Now...
--We plan in advance to have bills paid in full when they are received, not wait until they are due. This way, if for some reason we are unable to pay upon receipt, we still have time to stockpile cash and pay by the due date.

Don't let April events like Easter, Passover, Earth Day, Spring Break, school activities, birthdays, or anything else bust your budget! Also, keep a Miscellaneous line item in your budget for unexpected or forgotten expenses.

Enjoying Spring activities feels better when you don't go into debt for them!!

How to Budget for Unexpected Expenses

 

[ThereYouSeeHer]

Time for May budgets! Don't forget to plan for Mother's Day, prom, graduation, and Memorial Day.

It's also National College Decision Day! For many schools, today is the last day for prospective students to guarantee their spot by submitting enrollment and housing deposits. After today, some schools will begin offering seats to other students who were initially waitlisted.

In light of that, let's talk College Budgets!

Traditional costs generally include the standard:

Tuition
Housing (aka Room)
Dining (aka Board)

However, as with most things, extra costs exist around every corner! The following may be billed separately from the charges above:

Semester Fees
Course Fees
Technology Fees
Health Center Fees
Activity Fees
Lab Fees
Material Fees
Online Content Fees
Parking Permit Fees
Security Fees
Books
Transportation
Personal Expenses
...and more!

For example, some classes charge extra Course Fees for specialized equipment (like video cameras) or services (like certifications). If a student takes 5 such classes each semester at $200 per course, that adds $2000 to the overall Annual Tuition. Yikes!

Here's an online calculator to start estimating costs (tuition is pre-loaded for each college you select, but you will need to know the amounts of other categories):

College Savings Calculator

 

[barkley]

Time for May budgets! Don't forget to plan for Mother's Day, prom, graduation, and Memorial Day.

It's also National College Decision Day! For many schools, today is the last day for prospective students to guarantee their spot by submitting enrollment and housing deposits. After today, some schools will begin offering seats to other students who were initially waitlisted.

In light of that, let's talk College Budgets!

Traditional costs generally include the standard:

Tuition
Housing (aka Room)
Dining (aka Board)

However, as with most things, extra costs exist around every corner! The following may be billed separately from the charges above:

Semester Fees
Course Fees
Technology Fees
Health Center Fees
Activity Fees
Lab Fees
Material Fees
Online Content Fees
Parking Permit Fees
Security Fees
Books
Transportation
Personal Expenses
...and more!

For example, some classes charge extra Course Fees for specialized equipment (like video cameras) or services (like certifications). If a student takes 5 such classes each semester at $200 per course, that adds $2000 to the overall Annual Tuition. Yikes!

Here's an online calculator to start estimating costs (tuition is pre-loaded for each college you select, but you will need to know the amounts of other categories):

College Savings Calculator

there are lots of ways to save on college expenses and they should be explored LONG before kids start applying. exploring if college is even a necessity for a given career path or is better delayed (and ideally financed in part or whole by an employer) should also be explored.

i fully believe that far too many have mentally shifted from the concept of a college 'education' to a college 'experience'. the far more costly 'experience' is in no way necessary to earn a degree.

 

[dreamer17555]

there are lots of ways to save on college expenses and they should be explored LONG before kids start applying. exploring if college is even a necessity for a given career path or is better delayed (and ideally financed in part or whole by an employer) should also be explored.

i fully believe that far too many have mentally shifted from the concept of a college 'education' to a college 'experience'. the far more costly 'experience' is in no way necessary to earn a degree.

I agree that college has definitely shifted more into an experience mindset versus purely academic. That being said experiences have value too. It’s hard to quantify how much as that will vastly vary from person to person.

 

[ThereYouSeeHer]

End of April check-in to update our Baby Steps...

Still dragging our feet on BS4, but BS5 has officially started!

Step 1: Done!
Step 2: Done!
Step 3: Done!
Step 4: In progress
Step 5: In progress
Step 6: Done!
Step 7: Anticipated 2030??

Looking forward to May, which has an extra paycheck this month. Yay!

 

[ThereYouSeeHer]

FYI.

The Ramsey $10 Sale is currently going on.

In even bigger news, for the first time ever, you can take the Financial Peace University class with one of the on-air personalities.

I first did FPU in-person in 2009 (which helped us become completely debt-free, house and everything in 2017), and then I took FPU virtually twice in 2022 (to help us continue to stay debt-free after life threw some curveballs).

So, if it interests anyone to be on live Zoom calls with one of the Ramsey personalities, now's your chance!

Take FPU With a Ramsey Personality

 

[RamblingMad]

Our car insurance is up for renewal, and while I'm researching changes we might make, I wanted to drop this article link for anyone who may be interested.

How Much Car Insurance Do I Need?

When it comes to any insurance, it's easy to feel the weight of those premiums in your day-to-day budget. However, Dave's insight has been helpful to grasp the bargain of exchanging hundreds of your own dollars for potentially hundreds of thousands or millions of your insurance company's dollars.

It seems Dave recommends at least $500,000 in combined auto liability insurance. For example, bodily injury liability of $250,000/$500,000 and property damage liability of $100,000, would equal $600,000 of total liability coverage.

Bodily injury liability of $300,000/$300,000 and property damage liability of $100,000 would be a total of $400,000 liability coverage.

Relying on required state minimums may leave you underinsured. As you work through the Baby Steps, it's important to continually reevaluate and increase coverage to protect your growing wealth.

Another way to think about this is adding umbrella insurance. That’s what I do. It’s cheaper that way.

 

[ThereYouSeeHer]

Wrapping up another month!

--No changes in the Baby Steps. With Steps 4 and 5 now competing, we probably won't finish BS4 until 2024.

--We graduated our oldest from homeschool and decided on a four-year college instead of community college. I will probably make another post to detail our thought process and things to look for when choosing one over the other.

--In our goal to get everyone through debt-free, we are committing to help pay for one year of college, with the rest decided on a year-by-year basis. As parents, we are planning on paying anything that is directly billed, like course fees, semester fees, housing, and tuition. At a minimum, our child would be responsible for ongoing living expenses. Depending on student savings and income, we may also require our child to pay for other expenses like a laptop, books, and meals. Since we didn't previously tackle Baby Step 5 and will be cash flowing college, I am thankful all of us together are already able to cover the first semester.

--Speaking of money, when we finally received our financial aid package, it was missing thousands and thousands of free scholarship money. We resent documentation and everything was corrected, but make sure you know what aid you qualify for! If we didn't understand the process, it would have made the difference between affording to go to a four-year college or not.

 

[barkley]

--Speaking of money, when we finally received our financial aid package, it was missing thousands and thousands of free scholarship money. We resent documentation and everything was corrected, but make sure you know what aid you qualify for! If we didn't understand the process, it would have made the difference between affording to go to a four-year college or not.

also-if your student receives any scholarships, esp. from sources outside the college they will be attending, make sure to have them investigate (1) the rules they operate under and (2) if they may be renewable year to year. when my oldest was a senior everyone in his class was focusing on just the college administered or big state or fed scholarships while we had him apply for any and every scholarship he met the qualifications for. as a result-he ended up, while not with the top dollar amount-with the top number of individual scholarships received by any individual student in his graduating class. that said-some scholarships from outside college sources require grade reports to be submitted each grading period before they forward the subsequent academic period's funds. we also learned that many scholarships don't advertise it but are eligible for renewal year after year with little to no paperwork (an abbreviated application with grade reports).

another important item when it comes to scholarships-educate yourself on the tax implications b/c depending on how the scholarship is written up (what it is designated to be usable for), despite what many people believe-portions can be taxable. we live in a college town, used a local cpa for years and she related many a story of parents/students who faced significant penalties for not properly reporting the taxable portions of their student's scholarships (and grants).

 

[DL1WDW2]

Make 2 Lists for a Budget :
My Monthly/ Yearly Cost of Living Budget and
My List of Inflated Expenses I need to learn to live without
Disney will be first item next year …
No more Disney Annual Pass for me after a lifetime of auto renewals.

 

[DL1WDW2]

I always assumed I didn’t own enough to need a million dollar umbrella…
Could you explain how Umbrella Insurance replaces the liability coverage?

 

[ThereYouSeeHer]

another important item when it comes to scholarships-educate yourself on the tax implications b/c depending on how the scholarship is written up (what it is designated to be usable for), despite what many people believe-portions can be taxable.

Exactly. Terminology is so important here. Scholarships for 'qualified education expenses' are usually tax-free, but it generally applies to tuition and fees only. I was surprised that room and board are not considered qualified expenses by the IRS, even if directly billed by the college.

 

[ThereYouSeeHer]

I always assumed I didn’t own enough to need a million dollar umbrella…
Could you explain how Umbrella Insurance replaces the liability coverage?

Sure. Umbrella insurance doesn't necessarily replace liability coverage, it's added on top of your other insurance policies to extend coverage.

For example, say someone was responsible for a multi-car accident that cost $500,000, but their car insurance only covered up to $300,000. Without umbrella insurance, you could be responsible for the remaining $200,000 in damages. If you had an umbrella policy of at least $1million, that policy would generally kick in and pick up the remaining liability.

Usually, insurance companies may require around $300,000 of coverage on any existing home and auto policies before allowing umbrella insurance to be added. However, it is generally cheaper to add umbrella insurance after that amount, then to continue to add increased coverage through your auto and home policies separately.

Here's an article with more information:

Umbrella Insurance

 

[ThereYouSeeHer]

Time for June budgets!

Also, I wanted to talk a bit about Amortization Schedules. Many people, when using debt to purchase something, decide if they can 'afford' it by looking at the monthly payment. Unfortunately, this fails to take into account the true cost of interest and payments over the life of the loan.

For example, if someone took out a $300,000 30-year mortgage with an interest rate of 5.5%, they would end up paying over $600,000 for that house at the end of 30 years. That's basically paying for two houses, but only receiving one! (For this reason, Dave recommends a 15-year mortgage with a monthly payment of no more than 25% of your take-home pay.)

An amortization schedule will show you how much interest and principal you pay with each monthly payment. The key to using these schedules is to find that 'sweet spot' where you will begin paying more towards principal than interest. In the example above, for a loan that starts in June 2023, it would take over 17 years until December 2040 to reach that moment.

This information is particularly helpful during Baby Step 6. The goal is to get to that pivot point as quickly as possible, by throwing any extra money at your debt. Once your monthly payments start paying more towards principal than interest, it will help accelerate your snowball to debt freedom!




source:bankrate