Baby Step 0.4 - Temporarily Stop All Retirement Contributions

Good Monday evening All!  The past few weeks we've begun going through Dave Ramsey's Baby Steps.  So far in Baby Step 0, we've discussed committing to the process.  Last week in Baby Step 0.3 I discussed the importance of a budget and how to create a budget.  Please if you haven't created a budget yet, please do. The first place you can find pennies - or many, many pennies! - is looking in detail where your pennies go each month.  You may be surprised!

The next penny-sized step in Baby Step 0 is to temporarily stop all retirement contributions IF you have debt (not including a mortgage) and/or don't have 3-6 months of expenses saved. 

The key word here is "temporarily".  This will mean different things to different incomes BUT this does not mean different approaches.  We haven't discussed the phrase "gazelle intense" yet, but in essence, it means to do something as quickly as humanly possible.  So DR recommends going gazelle intense on Baby Steps 1, 2 and 3 - saving the initial £1,000 for an emergency fund, paying off all debt, then adding to the initial emergency fund to build a fully-funded emergency fund of 3-6 months of expenses.   Build these "foundations" of your finances as quickly as possible to then be able to then be able to build the "roof" of your finances. DR explains that there's no point in building the roof before you build the foundation of your financial house.
 
What does Martin Lewis from Money Saving Expert say? If you have been auto-enrolled into a workplace pension, you can opt-out.  "Don't be afraid of opting out though if you're having financial difficulties or for other reasons. You can opt out whenever you like - however, you still won't be able to access any money you've already paid into your pension until retirement age.  Even if you do opt out, if you remain at your current place of work for three years, or move jobs, then you'll be automatically enrolled again.  So you'd have to opt out again if you don't want to join."

Although we'll discuss pensions in Baby Step 4, you may want to look ahead about pensions on moneysavingexpert.com, please click on this link.  There's also Pension Wise and The Pensions Advisory Service.

Consider very carefully - even seek professional advise from an independent financial adviser (IFA) - before using any money you've saved in bank accounts or investments - you can't take out money saved in a pension until you've reached the minimum age of 55, so this may not be an option for you if you're under this age.

The key in this Baby Step is to stop the contributions you've been making to retirement just long enough to blitz your way through Baby Steps 1, 2 and 3. Once you've paid off all debt (apart from your mortgage) and have saved 3 to 6 months of expenses in a fully-funded emergency fund, then you will re-commence your retirement savings. 

Again, I am not an expert at pensions or retirement savings, so please do your own research. I hope I've given you some helpful guidance and something to consider to help you in your financial adventure.

BS 0.3 - Create and Follow a Written Budget - Part 2

Good evening All!  I hope you're doing well.  How has it gone writing down all of the expenses you can think of?  Don't worry about whether or not you've written every single item down that you pay towards each month and year, we'll check those over as we create a budget in this blog.  Keep in mind that your budget doesn't necessarily have to be the same each month, so if you think of another category to include, just add it in. Simples.

We're still in Baby Step 0.  The past couple of weeks we've taken a look at committing to never borrowing money again (except maybe for a house), committing to walking this financial adventure with your spouse and the importance of creating and following a budget.  My hope is that you're convinced that a budget is the way you and you're spouse are going to make progress through the Baby Steps.

Let's dive right in. There are many ways of creating a budget: pen and paper, an Excel spreadsheet (this is the way we do it), online and apps.  None of these are wrong; use the method you are comfortable and works for you.  You may end up trying a different method after you've tried a first!

Although I haven't used it myself, others highly recommend using Dave Ramsey's FREE budgeting tool called Every Dollar. This is an easy to use web-based budget planner, but unfortunately, the app is not available in the UK. 

No matter which method you use, follow these steps to create a budget:

First - Write down all income streams.  This includes your and your spouse's (if you're married) take-home pay - the amount that gets deposited into your bank account.  Be sure to add in any second jobs, pension income and benefits.  Add it all up. 

Second - List all of your expenses.  Hopefully you've already started this last week, but if not, take the time to look at your bank accounts for deductions, credit card statements for purchases you've made over the past few months and any receipts you've saved for ideas.  Again, this doesn't have to be perfect, but needs to be as close to reality as possible.  I'll give you more ideas in a sec.

Third - Group Expenses. Once you know what your regular expenses are, group them together into categories: Home, Vehicles, Insurance, Giving, Retirement and Other. If you're using an online budget or app, these categories may be named something similar.  If you have debt to repay, you'll want to create a category with all of the company's you owe money to and list the minimum payments next to each of these.

I'd like to give you more ideas of expenses for each of the categories by giving you insight to our budget.

•  Home: 
• Mortgage (or rent)
• Utilites - gas and electricity (you'll want to divide yours if they're supplied by different companies)
• Water
• Cable TV
• Line Rental
• TV Licence
• Council Tax
• Neighbourhood maintenance
• Boiler Service
• Window Cleaner
• House Expenditures - we save each month for upkeep, small pieces of furniture, decorations, landscaping, lighting - not that we spend towards these things each month!
• Vehicles:
• Tax Disks - we have 3 paid-for vehicles (2 cars and a motorcycle)
• MOTs - for each of the vehicles 
• Breakdown service
• Vehicle servicing
• New vehicle purchase - because we're committed to not incurring debt, we save money each month for a new vehicle.  This is an important category that you may want to consider adding after becoming debt free (BS2) and having saved 3-6 months of expenses (BS3)
• Insurance:
• Car insurance - for each vehicle
• Home insurance
• Life insurance
• Travel insurance
• Giving/Tithes: I don't feel comfortable discussing publicly who we donate to, but we do on a monthly basis and this is part of our budget.
• Retirement Savings: this is in addition to pension contributions through work
• University Savings: yes, we're saving now for our daughters' education. This comes in BS5, which we'll discuss when we get there in the Baby Steps series.
• Other: 
• National Trust Membership
• Bank account fee
• Travel/Holiday
• Mobile phones 
• Gym
• Health
• Hair cuts
• Association of Project Management (Hubby's)
• Guest Bed (we're saving for a new guest bed to buy in the next year)
• Disney World 
• School - field trips, PTA fundraisers, school pictures, teachers' gifts
• Babysitting
• Girls' Commission - similar to allowance
• Clothing
• Christmas
• Birthdays
• Gifts for Others
• Fuel
• Groceries
• Restaurants
• Play
• Other - unexpected expenses, like post office and parking

For the items that are annual expenses, I divide the annual amount by 12 (months). and this the monthly amount that is budgeted. For example, MOTs - a MOT for one of our cars is £45. So each month, we budget £3.75. (£45/12 = £3.75). 

Step 4 - Assign Amounts - For each of your items, list the expense.  This may be a real eye opener!

Step 5 - Subtract Expenses from Income to Equal Zero - This is known as a "Zero-Based Budget", whereby you want every single penny allocated to each of the items.  Subtract the amounts from your income and - voila! - you know how much you either have still to allocate (if the difference is positive) or how much you need to cut back by (if the difference is negative).  Ideally you want £0 left... every single penny has a job to do.

Step 6 - Track Your Spending - Pretty much every day, I update my budget for anything we've spent that day. It only takes a minute or two and makes me feel a sense of control over my finances.

For more information on budgeting, you can visit other's websites:
Money Saving Expert: https://www.moneysavingexpert.com/banking/Budget-planning
Citizens Advice: https://www.citizensadvice.org.uk/debt-and-money/budgeting/budgeting/work-out-your-budget/
Money Advice Service: https://www.moneyadviceservice.org.uk/en/categories/budgeting-and-managing-money

If you have further budgeting questions, please don't hesitate to contact me and I'll do my best to help. 

BS 0.3 - Create and Follow a Written Budget

Hi Everyone!  A special hi! to everyone who started following Finding the Pennies this week.  I am so excited you're here; I hope you are, too!

Winning with your finances isn't easy.  It takes work, determination and a money-saving mindset.  By having a plan in place, we can all take steps - no matter the size - to take control of our finances.  The plan I started to share last week is one we've - my husband and I - have been following for a few years - and it's working so well for us, that I want to share it with all of you.  The control we have over our finances can be attributed to God's grace as well as following a budget - or a written plan for money before a penny is spent.

The 3rd step under Baby Step 0 is to create and follow a written budget.  Just to recap what we've already looked at over the past week.  Baby Step 0 - to commit - is an unofficial but important step in taking control of your finances.  BS 0.1 is to commit to never borrowing money again. BS 0.2 is to commit to working with your spouse on this life-long financial "adventure".  Now we're going to take a look at creating and following a budget.

Perhaps you're thinking, "Lauren, I don't have time to create a budget, let alone to actually track every penny I spend." Admittedly, creating a budget takes a small commitment of time - like maybe an hour or two - but by visiting your budget on a daily or even weekly basis, it doesn't take too much time at all.  Be honest with yourself... what do you spend your "down time" doing?  Watching telly?  Facebooking?  Surfing the internet?  Staying on track with your budget is worth every second of your time.

"Ok, Lauren.  Why is it worth my time?"  You work hard for your money!  *Sing it with me!* You work hard for your money so you better treat it right! (I've slightly changed the lyrics.)  I can't understand why we would work hard and then just spend money irresponsibly and not save for the future.  It's important to know what money you have coming in and how much money is going out.  Without a budget how do you know this?  How do you know that you'll have enough money to last you until the next time you're paid?  Isn't it worth a few minutes of your time a few times a week to give yourself peace of mind?
 
My hope is that you and your spouse (or your accountability partner if you're single) have discussed your (plural) goals.  By intentionally putting aside (saving) money by including your goals in your budget every single time you're paid, you will be able to:

• Get out and stay out of debt (Baby Step 2)
• Fund a fully-funded emergency fund (Baby Step 3)
• Pay for a holiday in advance (Baby Step 3b)
• Put a down payment on a house (Baby Step 3b)
• Purchase a new piece of furniture (Baby Step 3b)
• Purchase a new-to-you (aka "used") car (Baby Step 3b)
• Save for retirement (Baby Step 4)

There's no better way to get control of your finances than by creating a budget and following it.  I get VERY excited talking about budgeting and VERY excited talking about ways of saving money. That's what this blog is all about.  I want to help you to achieve your goals. I want to help you to be able to make it to the end of the month with money left in the bank.  I want to help you to learn ways of cutting back, good 'ol fashioned "living within your means", and stretching every penny.  Let's get excited about our finances, Friends!

If you have tried to follow a budget, but you lose motivation after a few days or weeks, let's pick ourselves up and dust ourselves off and get back to it!   You may pretty successfully follow a budget, but admit that something isn't quite right or that some expense creeps up on you that you forgot about it.  Let's improve your budget!  Perhaps you've never followed a budget, but are satisfied with the fact that there's money left in the bank... that's alright, but you could be doing much better!

Tomorrow evening I'm going to share with you ways of creating a budget - yes, there are plenty of ways - and you can choose which way best suits you.  I will also give you loads of ideas for categories to include.  Your budget won't be the exact same month to month nor does it have to be perfect from the get go!  You will learn where to adjust your budget for different times of the year and think ahead to recurring annual expenses.

A year ago I wrote a similar blog to this one: The Importance of Budgeting.  I encourage you to find a few extra minutes to read it for more insight on budgeting and to look at the categories to include in a budget, which I'll discuss tomorrow evening.

Until then, get out a sheet of paper and write down every expense you can think of that you pay on a monthly and annual basis and the approximate or exact amount you pay.  Just make a list. Don't worry about categorizing it, just write it down.  Until tomorrow, take care. xo

BS 0.2 - Get Spouse on "Same Page"

If you're like me, you're ready for Spring!  All the snow and bitter cold this past week has me yearning for warmer temperatures and sunnier days.  Oh well... let's turn our attention again to accomplishing our financial goals and the Baby Steps we started following last week.  In case you haven't read the first two blogs on the Baby Steps, take a few minutes to read through them. 

We're starting with the "unofficial" Baby Step 0, which is to commit. First, commit to never borrowing money again (except to buy a house), and second, commit to talking to your spouse and getting on the same page in terms of your goals and how you're going to accomplish them.

Why is this important?  Some believe that, even though they are married, finances are still separate.  Debts are separate, incomes are separate, bills are separate.  In a marriage, however, two become one. "That is why a man leaves his father and mother and is united to his wife, and they become one flesh" Gen. 2:24.  Therefore, there is no "his" and "hers" with finances - it's our fiances... our income... our debt... our budget... our financial dream... our life together.

I love this quote from DR, "Marriages are either growing together or growing apart... when we're sharing our goals, we're sharing our lives."

An important point that Dave Ramsey points out is that, ladies, if your family is struggling financially, your husband's self-esteem is suffering, and even more so if he is self-employed. Gentlemen, if your family is struggling financially, your wife is feeling afraid and insecure.
The main thing that men get from money is esteem, and the main thing for women is security. It is important to know this and recognise this as you go through your life-long financial "adventure" together.  Make sure you discuss your thoughts and feelings when times are tough, like when unexpected big expenses, job losses, or when dreams are dashed.

Start here: give each other a hug. You're in this together.  For better or worse, for richer or poorer. Next, make a list of everything you can sell to put towards building an emergency fund or paying off debt (we'll discuss these steps in BS 1 and 2).  Make a plan of how your going to get your finances in order and start working and living towards your dreams together.  Hint: take a look at the overview of the Baby Steps; you can probably take a guess at which Baby Step you're in, or where you need to start.  Once you have a plan in place and take ACTION, men, your self-esteem will strengthen, and ladies, your feeling of security will increase.

The following questions will help you to begin to understand each other's thoughts surrounding some of the issues in each question... by the way, you don't have to have the answers to all of these or know how you're going to accomplish them at this point.

Questions to consider:
*Do both partners need or want to work? Is part-time possible, or is full-time necessary?
*How soon do we want to purchase a house? A new car?  Our next holiday? A new piece of furniture?
*Do I need to get permission for every penny I spend or is there some leniency?  What if I want to buy something for myself (that no one else in the family benefits from)?
*How soon do you want to pay off debt? And the car loan? And the mortgage?
*Do we want to help financially support our children through university? If so, how much? Some of it or all of it?
*How do we see ourselves living in retirement?
*What changes do we need to make to make this happen?

What if you're not married?  If you're single, find someone who will act as a mentor, someone you can trust to work with you and encourage you.  This may be a friend or family member, someone from your church or maybe even me. I am more than willing to help in any way I can; please just let me know.

You may be wondering about how my husband and I handle our finances, and I'd be glad to tell you.  Our finances are completely combined.  At the start of every month, we compare budgets for the upcoming month.  We talk very openly about our expenditures, concerns and goals.  If one of us wants to buy something, we discuss it first, no matter the cost.  We agree on our short- and our long-term goals: to buy a new-to-us 7-seater/ mini-van (in American) with cash, to take a family holiday to Disney World paid for in advance, to pay for most or all of our daughters' university, to pay off our mortgage as soon as we can - which is many years away - all while giving generously.

Has it always been this way?   From very early on in our relationship, we discussed finances and money, but we agree, that we have improved greatly over the years in the way we budget and decide how and when to spend money.  Because personal finance and saving money are my interests, Jeff usually goes along with the suggestion that I have, though we always discuss things before we do them. Is there room for improvement? Always, but I believe we're working together really well to accomplish our financial goals.

It is not only great for your finances, but also great for your marriage, to be working together to accomplish your financial goals, too.