Makeover Your Money

By Dave Ramsey

No one wants to talk about it and everyone tries to avoid asking about it. Debt. Let’s face it, more people than ever are struggling with it. You may be one of them. They signed up for a credit card to get the free t-shirt on their college campus, and years later that t-shirt has cost them thousands of dollars in debt. They’ve had a student loan so long they’ve started to think it’s a pet. Instead of owning their cars, the car payments own them. If you see someone, or even yourself, in these statements, it’s time for a total money makeover.

Getting Started

I’ve started over twice—once after college and again after a nasty bankruptcy. I can tell you from experience, the first thing you have to do is start an Emergency Fund. I call this “Baby Step 1.” Set aside $1,000 earmarked solely for emergencies. “Why?” you ask. Because if you don’t have an emergency fund, when an emergency strikes you will look to the credit cards for help and go further into debt. With a starter emergency fund in place, you can face the situation without suffering a major setback in your total money makeover.

What’s an emergency? Emergencies include car repairs such as flat tires and dead batteries, a trip to the emergency room (hence the name), your job is down-sized, and the like. The following are not emergencies: a trip to Cancun with your fraternity brothers, new jeans for your date on Saturday night, and Christmas. (It happens every year at the same time. Plan ahead.)

People say “Dave, you need to think more positively.” I am positive emergencies happen. But you will be surprised how your new starter emergency fund acts as a Murphy repel- lent. You know Murphy’s Law—any- thing that can possibly go wrong will. Well, it’s amazing how many emergencies don’t happen when you’re prepared for them. Obviously $1,000 can’t catch all the emergencies, but it can catch the little ones.

Writing it Down

Right now you are thinking one of two things: “I already have more than $1,000 saved, now what?” or “There’s never anything left over at the end of the month, how do I save $1,000?” No matter where you are in the pro- cess, what I am about to tell you is key to your successful total money makeover: sit down and write out a budget for next month and plan to stick to it. If you are married make sure you include your spouse in the process. A budget can make the difference in success and failure.

Leadership guru John Maxwell has the best quote on budgeting I have ever heard. I wish I had said it: “A bud- get is people telling their money what to do instead of wondering where it went.” You have to make your money behave, and a written plan is the whip and chair for the money tamer.

Think of your life as a company, You, Inc. If you handled the company’s finances the way you handle your own finances, would You, Inc. fire you? Zig Ziglar says, “If you aim at nothing you will hit it every time.” You need written goals for your money. You wouldn’t build a house without a blueprint, so why does the average American spend his lifetime income of more than $2 million without a blueprint? Jesus said, “Which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it.”

According to motivational speaker Brian Tracy, a study of Harvard graduates found that after two years, the three percent whom had written goals achieved more financially than the other 97 percent combined.

Sticking to It

Convinced it’s time to start your budget? First, you should know this is not a one-time deal. You must set up a budget every month. Don’t try to have the perfect budget for the perfect month. We never have those. Second, spend every dollar on paper before the month begins. Look at your monthly income and match it up with the month’s bills, savings and debts until you have every income dollar an outgo name.

What do you do if your income varies month to  month?  Many people are self-employed or work on commission. This makes planning expenses difficult because you cannot

always predict your income. Sit down and figure out how much you have to earn each month to cover expenses and prosper in this position. These numbers are imperative to paying bills and are also good for setting your monthly goals.

Be sure to prepare for expenses that aren’t monthly, like car insurance and Christmas. If you don’t have a plan for these items, you’ll have to dig into the emergency fund.

Once you’ve finished your written budget, take the cash from the bank and put the money for food, restaurants, gas, clothing, etc., in labeled envelopes for each fund. Use this cash whenever you are paying for these items. When the envelope is empty stop spending. It’s that simple.

Find an organization or a  group of friends that support your efforts. Having friends to support your efforts make a huge difference when you’re tempted to buy that big screen TV or that fabulous new pair of shoes.

With your beginner emergency fund in place and your budget intact, you are ready to start preparing for the future.

BIBLICAL REFERENCE:
1) Luke 14:28

To find out more about Dave Ramsey’s re- sources to gaining control of your finances, visit www.daveramsey.com.

© 2005 by Dave Ramsey. Used by permission of the author. All rights reserved.