The Emergency Fund: Why I didn't listen to Dave Ramsey

Quite awhile ago, my husband started listening to Dave Ramsey. We got his book Financial Peace and read it. And set up ourselves a plan.

A pseudo-DR plan.

One of the biggest disagreements I had with DR and his baby steps was the Emergency Fund step. He advises you set up a $1,000 emergency fund, then stop there. After that you pay off all your debts and then work on a 3-6 month emergency fund.

This didn't sit right with me. Ever. Only $1,000? I did the math and that would not cover our bills for one month if just one of us were to stop working for whatever reason. Not one month. That would have meant using credit cards and accruing more debt, and we already had more than we could handle.

Now, I am a Wardle Woman. When we make up our minds about something, our minds are made up. I made up my mind that we would not have a $1000 emergency fund, then work on paying off all our debt. After calculating with our current salaries, it would take us 3 years to pay off all our debts. And only having $1000 in the bank, and not working on building our retirement for that long, made me EXTREMELY uncomfortable.

I felt very strongly about this. Very, VERY Strongly. No matter how I reasoned, and no matter how my husband reasoned, I could not sleep well at night knowing we had only $1000 to take care of us. I just couldn't do it.

In my experience, if I feel that uncomfortable about something, it means I need to do something to change it. You can call it whatever you want, "gut instinct", "intuition", but for me I usually feel that this is the Spirit prompting me to take certain action.

So, I told my husband I was still going to contribute to our emergency fund until it was $5,000. We could get by for about 3 months, longer if we were super careful, on that amount of money.

We reached a milestone of $2,000 in our emergency fund at the beginning of the year. I started to feel a lot less stressed and worried about our finances at this point. I felt like we were on the right track to keep us afloat for a month or two if something were to happen. At this point my disaster list consisted entirely of job loss. It would tide us over long enough to find a new job.

I kid you not, less than a week after reaching this milestone my car broke. Broke in a big way. Broke in a $2,000 repair bill way.

And I was so relieved that we had the cash on hand to pay for it. I was glad, that despite my husband's hesitations, I had put aside as much as I could after tithing (which always gets paid first) and paying bills (including extra credit card and student loan payments) into an emergency fund. I was glad I had IGNORED (sort of) DAVE RAMSEY.

At that point in our paying off debt journey, a $2,000 credit card charge would have put us right back where we started out at. Even if our emergency fund had been at $1,000 and we had to charge the other half, it would have been a major setback.

When it happened all I could keep saying and thinking was, "Isn't it great that Heavenly Father let me know that we needed more? That He kept this from happening until after we had what we needed to take care of it? Isn't it great!"

Since then, I have continued to ignore good ol' Dave Ramsey's advice about the emergency fund limit, and contributing to retirement (I recently read an article saying that most Millenials don't even have retirement and don't plan on having any. I do not want to be a 70 year old working the grocery bagging line).

Now, I'm not saying you shouldn't listen to DR. We listened to him. I think my husband still does, but I got tired of hearing him answer the same questions, the same way, over and over and over again. If you are listening to him, and following what he recommends, 90% of his radio show would not be happening.

Anyway. I appreciate what Dave Ramsey is doing for the people who listen to him. I appreciate that he has facilitated a very open financial relationship between myself and my husband. Because of him we BOTH know what are finances are like, where we are, and what needs to be done in order to get where we need to be.

But that doesn't mean we are following his advice verbatim. We are taking the concepts he advises, and adapting them as our situation dictates. And, honestly, as we are being led by the Spirit to adapt them.

When you do that, it allows Heavenly Father to see to your needs as you are able to take care of your own family. I am still working on that $5,000 goal, but for different reasons now. And if I feel like we need to save up more, you bet I am going to listen to that prompting because I know it's one way that Heavenly Father is keeping an eye out for our little family.

Finance Friday: MTurk

Hey, so I totally missed Fiber Friday last week. For good reason though, I had a shawl blocking, but my dad also happened to be in the same state as me. So he and I got to sort of hang out and introduce the future in-laws. Fiber Friday should be back next week, hopefully it will be a good one ;)

Do you love Amazon? Do you have an Amazon wishlist a mile long, but an empty wallet? Here's a solution-ish. While I'm yet to see great returns from this, it has helped here and there with some extra dollars.

There's this place called Amazon Mechanical Turk, found at mturk.com . It's run by Amazon, and will link to your Amazon Payments account.

So what is it? Well, it's surveys and tasks. I stick mostly with the surveys because some of the 'tasks' are sketchy like "Download this program and test it". Ummmm.... viruses and hard drive malfunctions anyone?

A lot of the surveys I take seem to be preliminary research for graduate students getting ready for their thesis and such. Some are really short, like 5-10 minutes. But some are over an hour long. (I'm yet to actually take the entire hour to complete the survey though, I'm a fast reader.) And often have quality control questions in them to make sure you are actually paying attention.

The only downfall to this is you have to 'qualify' in order to get higher paying tasks. For the first few months I used this, I could only qualify for tasks that paid $.01- $.50. But, it does add up over time. And when you do start to qualify, you can make a few bucks per completed task.

Then, as you shop on Amazon, during checkout it will ask if you want to use your Payment Account balance, letting you know how much is in there, for your purchase. So, you don't have to charge your card or bank account if you have enough.

If you want the cash, I know that you can cash out the balance, as long as it's over $1.00. Personally I like to set a goal and work to it before withdrawing so it really makes a difference if/when I do withdraw.

This is a great way to get some extra cash during commercial breaks, or during your lunch breaks, even for an hour or two on weekends!

Good luck and happy earnings!

A Challenge

Some of you are young, like me. Some of you may be getting some extra cash over the holidays from extended family members as your holiday gift. I would like to offer you a challenge when it comes to this money.

Put it in savings.

Yep. Don't spend it. Well, don't spend it right away that is. The official challenge is to put it in your savings account, and wait. Wait to spend it for at least one month. Just try it out.

And I'm thinking that one month will pass and you'll totally forget that you're allowed to spend that money now, because Hey, it looks pretty good in that savings account. And you realize that it added quite nicely to your emergency fund.

If you're really daring, put it into retirement or investments, where after a month you really can't take it out. All it's really doing is adding to your net worth and ability to retire comfortably, or pay all cash on that house in a few years.

Financial Advice from Thomas S. Monson

“I urge you to live within your means. One cannot spend more than one earns and remain solvent. I promise you that you will then be happier than you would be if you were constantly worrying about how to make the next payment on nonessential debt.” 
                                                                        —Thomas S. Monson                                                                             "True to the Faith"

Dave Ramsey Talking in an Understanable Way

Okay. I had the good intentions to do a regular post each Friday and Sunday, but life (aka Grad School) got in the way there. But I'm back (hopefully)!

Since my last post, I think it was Oddly Enough about selling Box Tops for Education on Ebay. (It really works, at least it did for me), I've been trying to squeeze in some financially based reading. I've seen Dave Ramsey mentioned over and over, and I found a decent deal on one of his books, so the next few Finance Friday posts may be a little Ramsey heavy.

I will admit I don't watch his tv show, because, well.... it's annoying. But the book I'm currently reading is very user friendly and easy to understand.

Today's Financial Gem:
" (Make) a decision about looking good versus being good. Looking good is when your broke friends are impressed by what you drive, and being good is having more money than they have."

Thank you, Dave Ramsey!

Oddly Enough....

So, over a year ago, I was looking for ways to make some extra money online. I found a guy who claimed that you could save your Box Tops for Education, and caps with codes from Coca-Cola, and sell them on Ebay.

I was a bit skeptical, but also a bit desperate. So I decided to give it a try and started to save all the Box Tops for Education I could find. Once I got about 100, I took a deep breath, and posted it on Ebay.

And it sold. Generally they sell for the same amount they would be worth to a school. So, 100 box tops = $10.

Ten bucks back on my regular groceries. By selling a piece of cardboard/paper on Ebay. I'm yet to try the Coke rewards, but am saving up the caps from my bottles to try that one too.

So, if you need a few extra bucks, don't have children or have children who go to a school that doesn't use Box Tops for Education. Start saving them up and get selling!

Car Free Friday! (Or Saturday)

When it comes to saving money, I like to look at big things and little things. In the past week, I've filled up my gas tank twice. Once on Friday, and then again on Tuesday. In the three days between gas prices went up 11 cents per gallon. And over the course of a month that can add up to a couple of dollars.($3.96 for me if I fill up three times a month, that's more than it costs for me to get some dinner at Taco Bell.)

I'm into saving dollars and cents here and there, because over time they will add up to something amazing (like the down payment on a house).

Now this got me thinking about life back in Utah. At USU there was a campaign for "Car Free Fridays" in hope of making a difference in the air quality in Cache Valley, especially during those winter inversion months.

It was ridiculously easy for me to go car free in Logan, I mean, I lived a mile and a half away from campus where I both worked and studied. I could bike, or use one of the two free public transit systems that operated in my neighborhood.  I only really NEEDED a car on Sundays to get to church down the hill.

While it really is a small financial difference, I still have a designated car free day where I am now. It's Saturday. And on weeks like this week, Fall Break, I make it a point to try to have more than one car-free day. Less driving means less gas consumption, and less wear and tear on the car, so car bills are slightly lower.

 So, my tip for this week is for you to look at your week, figure out which day you really could get by with not using your car. This may mean rearranging times when you shop or run certain errands (I shop on my way home from work one night instead of doing it Saturdays), or running errands closer to home so you can walk or bike, but you can do it.

It might also help if you set up a reward for yourself for not driving that one day a week. I exchange that day for driving out to Knit Night.

Remember, it's those pennies that count when it comes to savings!

Two Words

Manager's Special

(Just because it's a little dented, or the box is bent a little doesn't mean it's going to kill you when you eat it. And only paying 50% or less of the retail price? You will be saving like crazy!)

Your Quarterly Checkup

Now, before you can get into things like setting financial goals and such, you need to know where you stand. I am big believer that you can’t check up on your finances every now and then, you need to do it on a regular basis, several times a year. Personally, I do it quarterly. Aside from the first time you do this, it will only take maybe 15 minutes of your time, once every three months. 

I do mine the last day of March, June, September, and December. I like December most because it rolls around in time for you to make a Financial Goal for the Year. Basically what you are doing on these days is you are calculating your Net Worth. Your Net Worth is how much money you have that is not tied up in debts. I look to see if it would be possible for me to pay off all my debts and still have something left over.  

Here’s how I go about it. There’s this wonderful program called Excel. I opened up a spreadsheet, and use one page for debts, one page for my bank, retirement, and investment accounts. This sheet also has a spot for my Disaster Cash (which we will talk about in another post). The final sheet I use for my ‘hard assets’. These are things like your bedroom set, how much could you reasonably sell it for if you needed the cash? Anything that you own outright, and could sell if you really needed the money. Do not include your house or cars if you are still making payments on them! Those balances, the part you still owe, should go on your debt sheet. 

On my sheet, column A lists the different accounts or assets. On your asset sheet it would be things like, “Savings” “Checking” “401k”, etc. On columns C, E, G, I, and K, I have the date of each check up. I start mine with the last one from the previous year, so mine are Dec. 31, 2012, March 2013, June 2013, September 2013, and December 2013. This way I can see my progress over the course of a full year, I can see how much I’ve improved (or still need to work on) since last year.

First, you calculate how much debt you have. And I mean total debt, not just what your monthly payment is. If you have a student loan for $5,000 but your monthly payment is $20, then you put the $5,000 into the calculator, not the $20. Any credit card balances, student loan balances, mortgage amounts, etc. as they are the day you are doing this. If a payment hasn’t cleared, don’t calculate that in! If your student loan balance is $3,523.12, enter $3,523.12, not $3,473.12 because you are going to make a $50 payment tomorrow. 

If you own your home or car, and are no longer making payments on them, they go on your assets sheet, not here.  Make use of those little automatic calculations that Excel does for you.
Make sure at the bottom of each column you have a total debt amount. You will use this later!

Next calculate your money! On another sheet of the Excel spreadsheet, list all of your bank accounts, retirement funds, emergency funds, Disaster Cash, and I include my investment account here as well. Again, enter the totals for the specific day you are filling out. Look at the current account balances and insert them into the sheet. Don’t put in your next paycheck unless the paycheck has already deposited! A hard thing with this one, is that sometimes my investment account doesn’t update because the stock market info isn’t available or it’s a weekend. I just check back each day, a couple times a day sometimes, and once a total shows up, I enter it in. 

Again, get a total dollar amount for all of your accounts added together.

Finally, this is the one that took me the longest, BUT only the first time I made the spreadsheet, sit down and calculate your ‘hard assets’. These are all of the things you could sell should you desperately need the money. Things would include furniture, appliances, books, etc. Be sure you are realistic in your estimations, in fact, estimate low. Think yard sales, where people price things but then buyers come along and haggle them down. My list includes items like my headboard, my sewing machines, tv, antique desk, and dvds. If you own your home or car, include them on this list! Again get a grand total dollar amount. 

Then what you do is you add your hard asset dollar amount to your bank account amounts. Then you subtract your debt amounts from this number. If you end up with a negative number, no worries you’ll just have to set some goals and build some assets!

If you have a positive number, congratulations! You have a positive net worth and are doing pretty good financially. 

I'm off to get started on my 3rd quarter total, and see what needs to be done between now and the New Year ;)

In the next few weeks we’ll cover some things you can do to help you set financial goals, keep track of those goals, and even start saving some money!

Getting a Picture of Your Financial Situation: Mint.com

"You can't hit a target you can't see." 

Brian Tracy

I'd like to add that you can't pick a target unless you know where you're standing. 

So, before I get into things like making smart financial choices, saving money, and all that sort of thing, we need to get you to a point where you know exactly where you stand financially. Over the next couple of weeks I'll share some different ways to keep track of your finances, because different people operate different ways. What works for me, might not be so great or useful for you, and vice versa. Feel free to add anything you have tried that works for you because you never know what will work for what person.

This week is a very brief, but helpful post to introduce you to a useful online tool. (Most of you probably have heard of it already, and may even be using it.)It's a website called Mint.com. 

What Mint.com does is it links up all of your accounts that you have online access to. Credit cards, loans, savings, stocks, etc. And it adds everything up and gives you a total "Net Worth" (or how much money you actually have after taking into account all your debt). 

Mint also keeps track of things like unusual spending, unexplained fees, when bills are due, and low balances in accounts. Now this can be useful, but honestly I find it annoying at times. Mint doesn't understand the automatic identity protection program I use and that it's not a 'fee' charged to my card for using my card. It also lets me know that my bank accounts have 'low' balances when they reach something like $200, which for a starving grad school student really isn't a 'low' balance.

What I like most about Mint is it has tools to help you calculate how much you need to save for retirement. It also has a tool that shows how long it will take to pay off a debt and allows you to enter in different payment amounts. It even calculates how much you'll save on interest with each payment option you try out. 

My favorite however, is that Mint allows you to set financial goals for savings (like the retirement one), and links to an account. I set up a "House" account for a down payment on a house. Mint calculates how much I would need for a down payment, then keeps track of where I'm at on progressing toward that goal. 

And I'm all about setting and reaching goals, and I think that's the best part of Mint, it gives you a visual look at how you are progressing on goals, and what you need to do in order to meet them. 

(We WILL talk about setting financial goals later. Right now just focus on figuring out where you stand now, so you can set better goals later.)

Friday... A Regular Post?

I stalk blogs. I just do. I want to be a better blogger and so I stalk people who blog to see what they do that I might be able to do something similar. But in my own way because I don't think it would be nice to blatantly copy someone, unless it's a really really good idea.

So, maybe, just maybe I might start doing a weekly tip post on Fridays. Maybe.

We're gonna give it a try okay?

I have a hobby of sorts. It spawns from the same motivation that David Bach gives in his book, "Smart Women Finish Rich". Every woman has a right to be educated about finances. That way if she never gets married, or is somehow left single later in life, she does not flounder financially. She knows what's what, how to manage money, what a retirement account is, how to make investments, and how to calculate things like mortgages and how much to save.

My little tidbit for today? Well, a lot of financial advice things that I've seen in the past say that you should try to be saving at least 10% of your income in some sort of retirement fund. However, for women, you should be saving 12-15% of your income. Why?

Because, on average women live longer than men by 5 years. So if as a woman, you are saving 10%, for the last five of years of your life, what are you living on? Not much, that's for sure.

So, how do we go about saving this money? Well, we can get into that over the next few weeks, I guess. Rally, women! We can be financially educated!