The subject of being debt free

[Jozee]

Autoimmunity- the envelope system is fantastic. you asked for an explanation.

When you make your budget you put money in separate envelopes for separate items in your budget.
For instance...If you have $100 per week budgeted for groceries you'd put a hundred dollars in an envelope. You put it in there in small bills like 5's or 10's. That way if you need a gallon of milk you take out just the $5 (and leave the rest at home) go to the store and buy just the milk. It keeps you from spending more than you meant to.

If you have $50 budgeted for "eating meals out", you'd put that money in an envelope too and use it the same way. The point is if you have a budget every dollar should be accounted for. When it's gone it's gone.

When we were using the envelope system 2 years ago we saved up enough for a down payment on our home in 6 months. It's so simple. I don't know why we ever stopped doing it. We are going back on it now.

[irish]

Lucy, I am really impressed girl---I didn't know that is what you did. I would love to be able to work with people who are having problems financially. I don't know any fancy stuff--just the old common sense stuff.

Dave Ramsey it quite the guy. He can be really funny and has lots of good suggestions. The one thing he tells people to do is to work on paying off the biggest credit card debt first. I thought that sounded backwards. He explained that it is hard, but once you get that big sucker paid off it is so much easier to chip away at the smaller credit card debt.

We have had credit cards for years mainly because we were forced to as hubby traveled and had to use credit cards for meals and motel. He was reimbursed by his company for those. However, if you don't have a credit card it is really hard to get a credit rating. We seldom use the cards and really get sick of all the companies calling to bug us about our credit card debt and taking out cards with their company. Thanks but no thanks.

This is the advice I gave our youngest son when he got his first card at the age of about 16. He came and asked me for any advice I had on how to use the card. I told him "Put the card in your top dresser drawer and don't use it except for emergencies or Christman and never charge more than 100$. Then pay the 100$ back before you charge anything else.

He has turned into a very good money manager and I think he knows where every penney goes. The thing that I found the most helpful when I was young and starting out was to know how much was coming in after taxes. I always write that amount at the top of the page in my notebook. I don't do any fancy bookwork I just list across the top line 4 items. My grocery store name, the pharmacy name, Aldies and Walmart. Every time I write a check or spend money at that place I write it down. I also have an amount that I have calculated for groceries per month and for Walmart. Pharmacy can be hard to figure and Aldies is included in the grocery bill and I don't get there much.

The next thing I do is list the expenses on the left side of the page (vertically) and what is paid each month as gas, phone, etc. When this is paid I cross it out. You get the idea. I have a miscellaneous column and a medical column plus a line for credit card which isn't used every month. At the bottom of the page I list the bills that relate to the big items like health insurance, house insurance, car insurance,etc.

I also figure how much I have and estimate how much is available or left after paying the bills. Sometimes there has to be a little shifting around on the use of the money. Some people like to have a more specific miscellaneous section so they can list gas, eating out, etc.

When you write down everything possible you will just about faint to see how much money you are really spending. It is just mind boggling. The main idea is that you pay cash except in emergencies and if you want something and don't have the money you don't buy it. Credit cards are not allowed cause they may make you happy at the moment but when the bills start coming so do the tears.

Dave Ramsey says that food and shelter and taking care of the kids should come first. He is rich now and he always drives old cars. He says that buying new cars is just a waste of money cause they depreciate so fast.

I don't know for sure about the envelopes, but I think that my DIL has an envelope for each bill that is due each month plus one for groceries. I think there can be however many envelopes you need for whatever you need. However, when the money is gone out of the envelope you have nothing left to spend. The only way you can spend more on a specific item is if you have cash left over from another envelope that can be transfered.

I think this helps a person see the money and know where it goes, etc. I wonder about the bills that need to be paid by check and know that some people on Ramseys program pay on line. Comment sure are welcome about this. Irish

[Bucky]

Interesting thread.  

It has always been my common sense philosophy, don't spend more than you have.  Duh!

In my 50 some years here on this earth, I have seen both extremes.  People who have to have every last new thing that comes along and those who recycle, and reuse what they have to make it last longer.  

Growing up, our family was just like any other.  Dad worked long hours, Mom stayed home with the kids.  It was not uncommon in the '50's - 70's for clothes to be handed down from siblings, cousins or neighbors.  There were "from scratch" meals cooked at home - in fact, McDonalds wasn't EVEN around yet or alot of the fast food places or restaurants we have today!!    Shocking as that might seem to the young folk of today.  They did have places like the A & W that had "carhops" - the girls that brought your food to your car on a tray that fit on the window of your car while on skates.  

A vast majority of homes had gardens.  If you had an abundance of tomatoes, beans, cucumbers, etc. you would take them to your neighbors.  Canning from your garden was a way of life too.  These same canned goods would see you through the snowy winters.

I don't know the exact dollar amount my parents made when us four kids were growing up - but, I know it wasn't much.  Yet, we had everything we "needed".  My Dad still lives in the same house they bought in 1957.  And . . . at almost 84 yrs. old, Dad is still working!

Back then, it wasn't uncommon to see the guys all gathered around the hood of a car or truck as they tinkered with fixing it.  Everyone fixed their own stuff.  Today, there are too many electronic gadgets and whatnot's, that they HAVE to be fixed at the dealership.  And with that - comes a BIG bill with labor charges and parts!  The equipment of earlier years were made of real material - metal, bolts, screws, etc. - not the cheap, fragile plastic of today.

Most homes didn't have whole house air conditioning.  If you were lucky, you had a box fan or a little tabletop oscillating fan.  Or, you sat there and fanned yourself with a folded up piece of paper.  Think how much it costs to run the AC in our homes now!  

To heat the homes, most had either a fireplace or coal for heating.  How easy it is for us today to just walk over to the wall and turn the thermostat up higher to crank on the central heating in our homes.  At home, Mom took a red marker and put it at 68 degrees - you were not allowed to go above that.  Even today, I have this "invisible" marker at 68 degrees in my own home and I don't very often go above it.

The part about this thread that has me wondering - is with the cash part.  I know people who go to the grocery store and pay cash.  People who go to the gas station and pay cash.  But . . . most of our utilities, etc. are paid by check.  In fact, on the envelopes of these said bills, it says, "do not send cash".  I would think there would have to be some way to keep a "receipt" of payment when paying cash.

I don't understand how they can do the "envelope" method for these expenses.  

Each month, on my pocket calendar that I keep in my purse, I write down the "fixed" expenses - truck payment, propane, insurance, etc.  As I pay these bills for the month, I put a check mark next to that item.  We "plan" on these fixed expenses per month.  We do have a few credit cards - but, we pay them in full each month.  One card in particular that we charge almost everything to, that pays us back based on our charges.  This is "free" money for us as we just use that balance to pay down our bill.

I am the bill payer and financial adviser in our family.  Sad to say, my husband has no clue to our finances.  I could rob that man blind and he would have no clue!    I am the one who sits with the calculator, pressing numbers to see if there is enough to pay the bills.  Through our married life, I look back at the times we should have been socking away money instead of spending it - because we had it.  We do have a little savings - but not nearly what we should have at this point in our lives.  A major health issue would do us in.  With my hubby having diabetes and me having Sjogren's - there's a good possibility for health problems.

To be continued in next post . . . . . .

[Bucky]

Continuing . . . .

Within the last 12 months, I have sat down and figured out where we stand in the financial realm of things.  I had left my job in Dec. 2008 and returned to being a stay-at-home-mom (my first love, yay!).  My husband lost the income he was receiving from being a freelance photographer as a hobby in 2010.  Double whammy - no paycheck from me, and a loss of $4,000 from his hobby.  No wonder we were robbing from the savings account to pay the monthly bills.  I had to return to work last year to keep us afloat. 

It's tough when you see friends and family going on expensive vacations, when you compare yourself to the Jones' and see what they have.  But . . . we are content with what we have.  We have more than we "need".  For that, we are grateful.

I am a recycler - love my garage sales.     In fact, right now, I am off to work in the garage as I am having a sale of my own this week to bring in some money for us. 

Looking forward to reading more thoughts on this thread.  I have an idea - which I will share later.           

Bucky

[Joe S.]

When our kids were young, they wanted to have cable TV and see everything new in the theater. I saved money for months from our budget so we could get a VCR. When we got it I dropped the Cable TV. Boy did that help our budget. We received local channels over the air. We started to go to the video store to rent videos.

I added up the cost of going to a movie. It ruffly equaled the cost of purchasing one video per week. So our Movie nights were at home and we collected a supply of videos.

Our oldest daughter does not have a TV in her home. They do have 5 computers and use the DVD player to to watch a rented video on movie night. My youngest has satellite They watch recorded children's programs on the occasion that the kids have to be inside or low activity level.

Most people have high speed internet. So new options have sprung up to reduce the costs of home entertainment. Some friends have switched to net flix and free services.

Others watch YouTube for their home entertainment.

[irish]

Bucky, A very well said post. You hit a lot of subjects about the past. Remember the "fans" that were made of paper that we had to fan ourselves at church or other public places? Don't know if they even make them anymore. Not the multifolded ones but the flat card board like ones.

Times have sure changed and I think things were more fun in the old days!!! Irish

[hikerknees]

Bucky, you hit a nerve with the comment about your husband not knowing about your finances, I have a coworker who was nearing retirement when her husband died (of cancer, so this could have been avoided) and she found he had multiple mortgages on the house and even the car was leased.  She didn't know and now doesn't know when/if she can retire.  So all of us need to know the state of our finances, no matter how capable our partners are!

[Meld256]

Good point made, hikerknees.  We all need to know the state of our finances, and what to do about things if needed.  I've heard of so many cases as you mentioned, and it always surprises my husband and I.  Even though I pay most of the bills, he knows exactly what we have, too, and we make decisions together.

This came up with my MIL and FIL a few years ago.  She took care of the finances.  He was very ill with cancer, and she had a stroke.  Thank goodness she could still tell us where things were and what needed done, even from the hospital, because he had no clue and was too sick to take care of it anyway.  After that, they made sure that my husband and his brother had some financial info. if anything happened again.

Same with my parents; they never told us where things were until they moved to an assisted living facility. And after experiencing all this we've made sure our children know where to find our banking information, list of monthly expenses, insurance, etc. in case we are ill and unable to care for things.  Actually, we need to set up a financial Power of Attorney for one of them in the case that we both are incapable of doing it. 
I think this discussion has "kick-started" my thinking...a few years ago I talked about a will, a POA and a living will.  Suppose I should get on the ball...

[Daisy1234]

Hikerknees, I couldn't agree more.  Our financial situation is in good shape, but my husband and I had to sacrifice for many years (no vacations, lived on a tight budget with minimal luxuries, even was still on dial up internet service until less than a year ago) in order to finally become debt free which we accomplished last year.  It is and always has been a team effort.  

However, my sister who has been married for 27 years has always left the financial management of her home and basically her life up to her husband.  For years I would suggest to my sister that she should learn about what was going on with her finances, but she would always resist saying that her husband was taking care of things just fine.  She didn't even have a credit rating at 48 years old because she never had her own credit card or a car loan in her own name.  

Well a year ago, the other shoe dropped big time.  She found out by accident that her finances were in a terrible mess and that they were on the verge of bankruptcy and all of the time she thought things were going along just fine.  It turns out that sometime over the last 5 years, her husband had taken out $150,000 against their house on top of their mortgage and both of the cars were financed to the max.  He also had run up a line of credit to $15,000 and the credit cards were also maxed out.  He never explained where all of the money went to either.  She thinks he lost it in the stock market but I'm not sure I agree with that.

Also the children's college fund which she thought was supposed to be about $25,000 was in fact only $2,000 and that there were no savings in the bank.  How's that for a wake-up call?

Now, she's had to go back to work despite having many health challenges and they are living on a very tight budget and had to consolidate all of the outstanding debt back onto their mortgage.  Their mortgage is now hundreds of thousands of dollars over what they paid for their house when they bought it 15 years ago.  They will likely never pay off their mortgage before they die now and there will be no money for college for their children.

She's learned her lesson the hard way.  

[hikerknees]

Oh Daisy I am so sorry for your sister, and for you having to see her in such pain!  The lesson really is that none of us are guaranteed a cushie life, whether it is financially, health wise or with our relationships (I'm sure there are others) and she got hit with a triple whammy.  I hope her kids can take a lesson from this--my parents were never able to get ahead financially so help with college was never an issue.  I worked during the summers from the age of 10 and paid my own way with savings, loans and scholarships (there are a lot out there).  It taught me a thriftiness that has never left me.
I don't have kids but my friends' kids are getting state lottery money--they are in college but not learning what they need to most--to manage money!

[irish]

Daisy, It is such a shame that your sister had to go through this, but you are right, both spouses should have a handle on the finances. I have done ours all the time because of my hubby traveling. Sometimes I would beg him to do it but he always says I am doing just fine.

I don't mind doing it I guess cause then I know what I can spend, etc. I can't imagine what it would be like to not know about the money situation. I would be a wreck every time I wrote a check thinking I was spending more than we could afford.

So many people just have no money training when they are growing up and have no clue on how to manage money. I have tried to always leave the statements and other papers on the kitchen table for hubby to read when he eats breakfast. That way he knows the score and if he doesn't like it he can change the game. HaHa!!

Seriously though, your poor sister is probably wishing she had paid more attention now. Having to go back to work after being out of the job market for a long time can be really difficult---especially with bad health. Irish

[Meld256]

Daisy,

I agree! It needs to be a team effort and we've always taken care of things together. We laugh, because some years we've been broke together and sometimes had a little more together.

I'm sorry to hear of your sister's situation. What an awful shock to her! So sorry she is going through this now.
My husband and I made a rule for one another years ago; if either of us wants to spend more than $50, we talk to one another first.
I have a neice whose given over the household finances to her husband, who is a great guy but buys every new electronic gadget that comes out.  They each have a laptop, an Ipad, new cell phones, etc.  It scares me, frankly. They both have received big raises lately and have even more disposable income. They eat out a lot (and not cheap places), just bought a new car, spend on clothes like crazy, and are looking to buy a newer home. Makes me and my husband very nervous for them.  Her grandma has talked to them about this, but they will not change til they have to.  We all need to learn our own lessons...

[kimbo]

My husband and I began the budget and envelope system about 25 years ago and have had the system taught also within our church to young families.
I found it amazing when I realized my oldest daughter had envelopes taped to her door in her bedroom, with her budget plan, when she started her first job.
You know they say "caught not taught", both our daughters caught what they saw.
When my oldest daughter realized her husband was not exercising good money sense in the 1st couple years of marriage, she took over, funny, now I observe she handed the reins back and he is budgeting to perfection. They will save for their next vehicle to pay cash, they live debt free.
My younger daughter also, they keep a healthy savings and use the same envelope budget system they saw us using as children.
We buy used everything. In 32 years of marriage we have never had a new car, only a couple of cars less than 10 years old.
Furniture and appliances I purchase all used. Clothes, mostly consignment, and thrift shop bought.
Sometimes I will take a couple years waiting for the perfect deal. I needed a new frig. I got it finally for $300 a 3 year old whirlpool with ice and filtered water in the door, my first really fancy one this year.
My living room; couch, love seat, auto- man and room rug all very beautiful for $350.
Because I have always shopped second hand, when I price new stuff, I walk away thinking. ?NO WAY?.
I had been searching for a recliner love seat for the past couple years. Search and searched. My husband had me in Sam's and wanted to just buy a recliner there. I wanted double so we could recline together.
Finally found the deal I had been waiting for, used double rocker recliner Lazy-boy for $200.
I think most people think it's easier to purchase and pay out. You get it now and pay a long time for what doesn't feel of any value went it is finally paid off. And then start the viscous circle all over.
My husband does our budgeting, but I know what is going on. Most bills are paid electronically.
We have some credit debt we need to get paid off, because a motorcycle accident in 07, there has been insurance issues for physical injuries, we have had to pay big medical bills while waiting for an insurance company to pay up. We had no clue it would take this long to settle.
This has caused us to live tightly trying to pay those medical bills while waiting for insurance settlement.

Reading this whole thread has caused me to zone in on future look of finances.
Thanks Ladies

[hikerknees]

My hubby has a rule that we keep a year's worth of income in available savings.  I always thought he was too conservative, then I got Sjogren's.  Now I think he's an angel.  Well, I always thought that, but I do appreciate him more every day for his caution and good planning.  I still work, but know that it is not a sure thing, and it would take a long time if I have to go on disability.

[Bucky]

If you have been on these boards for the last few years, you will know that I love my garage sales.     A really good way to make some fast cash (with no taxes withheld) is to hold a garage sale.  Sell some of the things you/family no longer use or want.  This week I had a 2-day sale and made $218.  Last fall, I had a sale and made $485.  Between both sales it totals $703 . . . nothing to sneeze at!

I think with the current economy, more and more people are holding garage sales.  Tomorrow, there is a town-wide sale with 60+ homes participating!     (guess where I'm going bright and early in the morning  )

Bucky