Our Financial Plan

I admit I am so frugal I have trouble spending a free gift certificate so having conservitive financial practices is not hard for me.

It has been two years since we have taken the Dave Ramsey Financial Peace class.  Five years since we have become debt free.  Eleven years since we started paying down our debts faster than the minimum payments.  We have had large incomes, and small, job losses, failures, and stupid decisions.  Overall, and most important we have gone from many money 'conversations' to few.  Even though we are now in one of the lowest incomes, highest spending times of our life our financial relationship is at it's best.

Over the years we have used Quicken, MS money, Donor Manager, Dave Ramsey software, DR paper forms, Crown Financial software, Crown paper forms, and our own forms.  The last two years we have been using a self made simple one page paper budget each month with good success.  A second quarterly paper form tracks our sinking funds and investing.  There is one other form, which we have not used since 2006, tracked how much debt we had, principle, interest, and number of payments remaining for each account.  Each of these forms are in excel, printable and readable on one page.

Going from having debt and not caring to a connoisseur of debt reduction programs I have now come come to rest at simplicity.  Most programs are way too complex esp for someone wanting to change.  My advice if you want to change your money habits start with this little simple workbook called The Household Money Organizer Workbook.  In a few years take a Dave Ramsey, Crown, or other course that covers everything about money from car buying to college to retirement but it is best to start now and start simple.

Looking back the below is how I wish we had done it.  It is a mashup of all the sources I have read.  Note I am stealing 90% of this from a post by Jason (gatherer) posted on YNAB discussion site at the bottom of the page.

0. Get term life insurance 5x your annual income if you are married, optional if single or its complicated.  It seams crazy to add an extra bill but so worth it given the risks.  Just get a 5 year policy it will be cheap, use a reputable vendor, like one of Dave Ramsey's ELPs.  Insurance sales is filled with scumbags who waste your money on thier boats and condos.
1. Have a spending plan.  Each month write a new one, call it a budget or a pain or Evil Aunt Matilda just know that once you set this plan it rules you.  Make it real, don't say you will spend $50 on food and $500 on the credit cards when you have 8 kids.  Spend nothing on things you want, as little on things you need and as much as possible on:
2. Live on last months income, make it last month - spend it this month.  This is your first goal.  For us this ends up as an emergency fund with about $1500 in the bank at all times.  If you are paid differently make a true emergency fund of money in the bank that is never touched unless there is a broken leg.  Dave says $1000 I say 1 month income.  Sell stuff, do stuff, make this fund a quick as you can.  If you have an emergency and spend it start back here and fill er up as quick as possible.  But still to make life easy have the spending plan based on what you made last month.
3. Pay down debt except the house.  Every single debt.  Use a debt snowball as Dave recomends.  This will take several years, take the time to learn more about money while doing this step.
4. Boost your term life insurance to ten times your annual income, the end of the term should be about the same time you plan to retire this will cost you more but you should have the money for it now.
5. Six month emergency fund.  What you spend for six months now, not what would last six months if you cancel the cable, phone and only eat spam and your front lawn.  In a long drawn out emergency, such as a job loss, you should be only use about 1/5th of this fund before you have an income again, any income such as pizza delivery.

Ok those steps done in order.  If there is a setback start at that and rebuild, two steps forward one step back is life.  Now for the ones that you can do combined after the ones above are done, and stay done.

6. Create sinking funds.  For example once each year we get hit with bills for life insurance, car insurance and stuff insurance.  They total $3000 so each month we set aside $500 for those bills.  We drive two cars over 12 years old so we put $400 into savings for our next car.  We want a house so $1000 each month into the house fund.
7. 15% of your pretax income to retirement.  I do a Roth 401k that my work matches.  They are invested in the 4 mutual fund types Mr Ramsey recommends, that is what I recommend too.  I have also rolled my pension and old 401Ks into IRA's (most are Roth because in 2006 I had no income so the tax hit was not bad for me.  One fund is not because the phone jockey at Fidelity did not do what I asked...)  Keep it simple and buy index funds like Gail Jarvis says in "Saving For Retirement Without living like a pauper."  
8. Help out the kids for college.  Tell them to plan on two years at a community college, and three at a university after that those kids are on their own.  Hopefully you taught them #0-5 by now.
9. build sinking fund accounts into super-fund accounts... "these are accounts where if you need a car you take the interest you've earned off this money and go get one. these are accounts where you don't drain them to 0 like the sinking fund accounts. replace sinking fund accounts with this type of account - can use a snowball method to get this happening ..." -Jason (gatherer) 
10. pay off the mortgage.  OK I don't even own a house.  Renting is good.  I owned two houses and spent so much changing them I lost lots of money.  Being a renter means that we pay $1000 a month and that is it.  I have a great landlord he pays for the materials for the fixing up projects.  Mortgage is debt and debt is dumb so get rid of it.
11. retire wealthy.  Be reasonable, if you find yourself with insane amounts of money you need to:
12. give give give.  Because really that is the goal goal goal of doing this whole thing for me.