Learning How to Budget – Does Emotion Play a Factor in Finances?
By Alanna Bradley
With end-of-law-school unexpected expenses creeping in –graduation fees, prep courses, the actual BAR exam to name a few, my husband and I thought now is a good time to start making our money work harder – enter New York Times best selling financial author and motivational speaker Dave Ramsey.
We decided to take Ramsey’s Financial Peace University class at a local church. The kit we received at signup included a class workbook, an envelope system, the classes on CD and his book. I decided to read the book first and I will say, there are many redundancies between the classes and the book, which you can buy on its own – all the principles are the same.
The classes do have a nice support group feel to them, which is wonderful for people who desire a sense of community and/or are working on getting out of a large amount of debt, which post a major recession is all too common. I should point out that there is a religious undertone to Dave’s teachings, and while I understand this may be off-putting to some, the principles are good no matter your views.
In the past I always looked at budgets as limiting, spreadsheet prisons that told me I couldn’t have any fun. What I learned is that you can make a line item for anything you want in your budget – you’re just planning on how to spend the money before it’s spent instead of having that moment at the end of the month scratching your head wondering how you spent $500 at restaurants again! This is what Dave refers to as “telling the money where to go.” It’s really simple. Painfully simple. But this isn’t about overcoming the rational side of our brains; it’s more about overcoming our emotions tied to money.
Dave touts a cash envelope system — probably the biggest difference between his teachings and other budget gurus. At first, that sounded horrible since so many things are easier paid electronically – mortgage, utilities, insurance. Truth is you keep those things automated and only use cash for the categories with totals that surprise you at the end of the month, where you tend to overspend.
So we created our budget last month, calculated all of our fixed expenses first and what we wanted to save and divvied up the remaining into agreed upon budgets for fun money, (translation: no questions from your spouse on this amount. Period.); gas, groceries, dining out and clothing – these categories were funded with cash and placed into separate envelopes.
The verdict at the end of month one? I like it, but having the willpower to stick with it is similar to having the willpower to get back into shape after years on the couch. Change is hard. This is admittedly a work in progress, but every month is a fresh start with adjustments to be made. It isn’t an inflexible system, you use your money how you want; you just do so with a plan.
I think the crux is using your money – not borrowing and living within your means are key themes. Dave also works to deal with emotions attached to money and the issues couples can experience in sharing money. As a family, we may not drive this thing all the way home in record time; we don’t really have an aching desire to pay the mortgage off as soon as possible – just being honest here. But I think it actually helped us understand each other better when it comes to spending habits. And, having a pot of cash that we don’t criticize or question the other on is definitely at bonus.
Credit cards can certainly afford us a lifestyle above what our paychecks can afford, but that’s only temporary. Eventually you have to pay that back, and well, to me, that’s less fun than having a budget and rules up front for what I can spend on the things that give me joy. I guess having a budget makes me bona fide adult now. The class is not groundbreaking math, but what I took away from this course is the most complex part of finances is in the emotion tied to money, not the math.