Our third week of Financial Peace University was about a cash flow plan. It’s about doing a zero budget. That means that you budget all of your money. All. Of. Your. Money. You plan where everything goes, down to the last penny.
The general budget was easy. Like I’ve said, we’ve done that before. We spend X on the mortgage, Y on utilities, and Z on groceries. When we had that homework, we just had to fill in the sheet from our information on the computer. Easy as that.
A cash flow plan. A zero budget. What? You want me to decide where EVERYTHING is going, at the beginning of the month? Ok, I guess I can do that. Except that meant we didn’t so much budget, but entered in how much we’d spent this month. You see, the general budget was done at the beginning of the month. But the zero budget was done after a few weeks, when we realized our budget might not hold out. So, we tweaked until we had zero money left at the end of the month.
The zero budget wasn’t hard to do. We had tweaked the general budget some to include all of our recurring monthly costs. But, we had never thought to plan out ALL of the money.
What we learned:
- You really can figure out where your money is going if you do a zero budget.
- You can budget for double payments on things instead of just talking about doing it.
- You can decide each month how much money you want to save.
- You get to change your budget each month. We had wondered about that before. We had talked about if we didn’t have any gifts to buy one month. What would we do with that money at the end of the month? The answer, you plan each month!
- You get to change your budget every month!
I’m excited to see how this month pans out. We’ve already realized that we don’t always know about impending costs. Or, maybe we need to think a little harder. For instance, there’s a bachelor party at the end of the month. It’s not in our budget, but we do have blow money* that is there for that specific thing. We’ll know when we sit down to discuss April, that we really need to look at our schedule for the month to see if anything is going on.
What we’ve done to change our financial lives:
- Double our car payments! After months of talking about it, we’ve been motivated to DO it! Looking at our zero budget showed us that we have the money to do it. We just needed to find motivation.
*Blow money – money that has been set aside to blow. Whether it covers an area that goes over, or is used for fun.
Yay! This is so exciting. You are learning so much already and it’s neat to see that you’ve already applied it to your life. My husband and I went through FPU two years ago and it has completely changed our marriage.
If you’re interested, we blogged about our experience. You can read it at http://wordsofwilliams.com/category/money/.
Thanks, Kelsey! I’m really excited about the class and everything we’re learning! I’ll check out your blog, I haven’t made it past your fashion blog and I’m sure I’ll learn some good things from you guys!
We completed ours just this afternoon as most of this week either one or both of us were working and I also had to make a short business trip. Now, we’ll be on track to achieve our goal of $5k saved by the end of May specifically toward a new vehicle for my husband, and will be continuing to add to our Emergency Fund to slowly get it from 4 months of expenses to 6 as that’s what we’re most comfortable with.
We also budgeted for the month of June tonight just because our income will change drastically that month and we wanted to plan ahead as much as possible. Hubby will no longer be substitute teaching for the summer, and it’s also unfortunately the month that a hefty student loan payment will start. But, we figured out what we had to rearrange and not contribute money to for that time period (approx June-August) and to avoid taking money out of savings to cover normal costs.
In the past Hubby has mainly relied on my judgement in regards to savings and debt, and it worked out fine. However, FPU has enabled us to talk about some things we normally may not talk about (and/or halfheartedly plan for… i.e. plan for on paper, but not to this detail or actually follow through!) 🙂 I love it because we both have a voice and it’s gratifying to know that we will accomplish what we need to because we’ve planned ahead as a cohesive unit.
Sara,
That’s awesome that you’ll have your $5k goal by the end of May! You guys are doing awesome!! Your great motivation for us. We’ve got a car payment to get rid of before we can really focus on the next car. I can think of nothing better than to buy a car with CASH! I’m so excited to hear how you feel about the budget and finances this summer. I forgot about the income drop. I hope this class helps you guys work out a simple solution that makes you both feel comfortable with your money, while still living like no one else! I agree, this is opening up conversations that we haven’t had. I told Bryan that if we didn’t get anything out of it, I hoped to have a lot of conversations that we normally wouldn’t have had. Thanks for sharing your thoughts!