Turn the Debt Around (Love to see that Budget)

“You can’t out-earn your stupidity.” – Dave Ramsey

If you’re following the story, I left off by saying that our debt was growing unaddressed due to fear and depression, and I was putting on a good face and saying how everything would eventually be alright. I really believed that. Mainly I figured that eventually a salary raise would come along, or one of the patents Dave’d been working on would be sold, and we just wouldn’t have to worry about it anymore.

One day my husband surprised me by saying, “I have been avoiding looking at our debt long enough. Let’s peel off the band-aid and start getting somewhere on it. I know it’s going to take years but at least we can start trying to make some progress.”

I was amazed. “Are you sure? You’re not going to get upset and stop talking to me for a week?”

“No, I’m serious. Let’s just see where we are and make a plan.”

So we sat down, added up all the bills, and it was a big number.  He took it like a man. And the next thing he said was, “Looks like I’m getting a second job.” And so began the IHOP era of our lives. That was also the last day we ever used a credit card.

We still didn’t really know what exactly we were doing, we just knew that we’d be throwing the extra money onto the credit cards. I knew we had to try our hand at budgeting, but my experience with what I’d called budgeting was more like a “Where the heck did all that money go?” and trying to find out what we spent money on last month.

Believe it or not, even though I’m a spreadsheet nerd (always have been) and not only majored in accounting and passed the CPA exam, but also worked in the financial industry for six years, I had never balanced my own checkbook. I started to realize that even my training had only served to help me embrace debt more. Much of the work that I’d done in the industry had been specifically to encourage borrowing on margin and figuring out new “products” for our clients to allow them to borrow more and more. I was in for a lot of shocks to my system.

That previous summer, at a Vacation Bible School-type program at church, I had made a new friend who was pregnant and due around the same time I was. As the moms sat around and chatted, she mentioned that since she, too, lived pretty far from church, she had had to budget extra money into the gas account so she could drive down daily for the program that week. I remember thinking to myself, “Pshaw, that’s crazy! It’s *gas,* not buying a car! Why would you need to get to that level of detail?” But sure enough, that very conversation came to mind when we made the decision to be more purposeful with our money. I knew she might be able to give me a few pointers as to how to be that detailed with budgeting. So I asked her, and she and her husband generously loaned us their whole Financial Peace University course on CD so Dave and I could listen to it together.

I’m not sure if Dave Ramsey is a controversial character or not. I’ve seen some people try to slam him, and I certainly disagree with him on many areas, but for my money that guy has it DOWN when you’re talking about getting out of debt. Lots of financial experts talk the math (rates of return, using credit card rewards, etc) but most of personal finance is behavior, and that is what he teaches how to overcome.  We listened to the CDs (which are very enjoyable – he is funny and convincing) and learned how to actually make a budget, as well as got nice and motivated to really cut down our lifestyle and generate a little extra income to kickstart our “debt snowball.”

Being on a budget for the first time in my life was a wonderful experience. I think you can know something in your head, but that isn’t the same as experiencing it to really impact you on a different level. For me, budgeting was something like Newton must have felt when the apple hit him on the head. All the formulae and the practicum sort of collided into one huge lightbulb over my head. Some of the really basic things I learned that I’m almost embarrassed to be proud of:

When you’ve spent all the money you have, there isn’t any more. Debt was giving me the illusion of having more income than we really had. Whether we could afford something used to be based on whether we thought we could pay it off in a few months (if nothing more urgent came along). If the bank account was nearly empty, that’s okay, we can pull out this credit card (and hey! we get miles/cash back for it too!) and worry about it later. Now that I could see what a budget did, it really hit home to me that cash really is king and when the money’s gone, it’s gone. Once you step over that line you aren’t spending your own money anymore – you’re putting yourself into slavery.

On a budget, you can either buy this OR that, but not both. You can’t spend the same dollar on two $1 items. It’s like the law of impenetrability of matter. I know, it sounds so dumb that an accounting major would have trouble with this concept, but I really did! And never realized it until I was forced to make spending choices based on what we actually earned. If I had $100 in my grocery budget, and I made the mental tally (or sometimes I actually toted a calculator around the store!) of my grocery cart, once I got to the $100 mark I had to stop shopping or put something back.

Budgeting made it possible to apply my true priorities to my money, rather than letting convenience and laziness choose the order of the day. When I knew exactly how much money we had to spend on each category, it was so clear to me that I could either buy a new trash can right now or  deal with my broken-lidded trash can for another few years and put that extra $15 onto the debt snowball. When faced with that kind of choice in broad daylight, it’s so much easier to make the decision that will bring me closer to my goal. It’s right in line with Christ’s lesson to be faithful in the small things (St. Matthew 25:23).

Using “credit” now (or otherwise using money un-purposefully) is making your future decisions for you. Put another way, you’re using today’s priorities to govern tomorrow’s living. As anyone knows, priorities can be a moving target as life takes you through its twists and turns. As a young member of the workforce, my priorities included looking good, impressing others, being respected, etc. I did not consider the future; instead, I spent my money on frivolous things, none of which has any bearing on my life today (other than a sigh every now and then from a friend or sibling who remembers my former wardrobe). What I would give to exchange one of those $50 shirts for a few hours of babysitting today.  But it’s too late: I locked myself into my old priorities and later regretted it.

Going into debt now assumes you will not change either your state in life, or your wishes or desires.  You’re giving yourself a lower limit on the salary you’ll be able to accept, limiting your job options to things that might not be where your heart is, but where the money is. You’re possibly changing your marriage and family timeline based on when you will be able to afford to maintain a family. Etc., etc.

Freedom is not possible without limits. This is true from a spiritual perspective as well as a financial one. Obviously as a Christian I believe that true freedom is freedom to obey God’s law. Anything else is slavery to the flesh and the devil.

In a similar way, the fact that I know exactly how I will spend the money coming in this month, means I can allocate a reasonable amount to each line item and then feel absolutely no guilt when I spend it. So if I have $3.49 left in my grocery cart tally before reaching this week’s budget, then those mushrooms are going in there and no worries! If I allocate $20 per month for my “blow money” category (just personal, whatever stuff), then I can buy a book I want, or get some special treat for my after-kids bedtime snack, or buy a spontaneous present for someone. I don’t have to feel deprived, I just have to choose carefully. The fact that I know my limits to the penny is so freeing I can’t even describe the level of peace that it has created in me.

Gone was the spending guilt over big and little things, and gone was the retaliatory spending. And if something went over budget (as it’s sure to sometimes, especially the first few months as we got the hang of it and remembered all kinds of line items) it was so freeing to just go to the budget and say, “OK, well, we can take some of the money out of here, and wait another month for this.”   And at the end of the day we know that even if we are spending $100 on a cookout party this month, it’s not at the expense of something else that we wanted to do. I also never have to worry about overdraft fees. Talk about freedom!

My next post is going back to the personal narrative of what getting out of debt has looked like for our family, how it’s changed our marriage, and my thoughts on how living on a budget affects children. So stay tuned!


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5 Responses to Turn the Debt Around (Love to see that Budget)

  1. Pingback: Stupid with Zeroes | Socks on the Line

  2. I have really enjoyed these articles and look forward to the next one. One of the only helpful tidbits that came out of our pre-marital counseling (alas) was that the pastor made us draw up a workable budget based on our miniscule salary. Another friend told us about the cash-in-envelopes system, and while we’re not without some spending problems the combination of these two things has kept us out of a world of credit hurt. We’ve had to make some adjustments along the way (you are totally right about how nice it is to have a bit of discretionary spending money), but we essentially use the same system we started out with five years ago. Based on our experience alone, I think that every engaged couple should be forced to make a budget and stick with it!

  3. Erin says:

    Thank you so much for sharing this! I’ve enjoyed reading it and look forward to the next one. 🙂 Tim loves Dave Ramsey, though he doesn’t agree with everything he says either.

  4. Katherine Lauer says:

    Wonderful! You make such fabulous points. I like how you describe our putting ourselves into slavery and that we are making choices based on personal preferences, assuming they won’t change.

  5. JDunk says:

    This is all really interesting and helpful to me as a young graduate student (who has taken on a significant student loan debt) looking toward the next part of my life, which I hope will include things like marriage and family. Thanks so much for sharing!

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