Lesson Two: Relating with Money- Couples

This step is very difficult for many couples.  There are challenges when you have to share the decision making with another person.  Pooling our money and making joint decisions about our money now and for our future has given John and me a lot of peace of mind.  I believe that in the case of combining money 1+1= more than 2.  There is an accountability about where you spend your money when you know you are sharing it with someone else.  I think twice before spending money on things that I haven't had John's input in buying.  He's not a control freak at all.  In fact, he hardly ever tells me I can't buy something-- mainly because that accountability step has reduced my impulse to buy things I don't need.  There has to be trust with the other person when you share everything.  That trust is developed and built by communicating and respect.  Maybe you think you want to buy something now that the other person is not opposed to you having, but would like for you to wait to buy at a later date. If you both communicate respectfully about your reasons, there will be more peace in that decision.

Usually there is one person who likes to do the budget and the other person who doesn't.  Maybe the free spirit has no concept of how much your family is bringing in and the operating costs of running the household.  Financial Guru Gail Vaz Oxlade recently wrote an article called Managing Money Together and suggests getting a deck of cards and putting dollar symbols on them and asking the person who is reluctant to help with the budget to use the cards to build the budget.  Another way to get the other person to participate is to have him or her pay the bills for one month.  It's important that both people communicate about the family's needs and wants so that they are a team.  Even if one person still does the budget most months, the other person needs to have an understanding of where the money is going.

I do believe that each person in the marriage should have some money to spend on whatever they want.  Setting an amount of money each week to be taken out gives the other person freedom while still maintaining a budget.

Lesson One: Super Saving for Purchases

In the meantime, we all know that certain expenses are going to probably arise during the time that you are paying off your debt.  From what I can gather, Dave advocates saving for these purchases.  Let's say you know you are going to have to replace your washing machine soon.  You are not to use your emergency fund for purchases, so you must save for this expense.  This does not mean you have to go out and buy a $1000 washing machine.  Familiarize yourself with reliable brands of washing machines on Consumer Reports and look for good values on places like Craigslist.  People often sell their working washing machines when they are trading up.  You don't have to buy new... but that is another lesson for another day.  You also must not purchase these new appliances on no money down plans.  Save and pay for the purchase with cash.

There are several other savings accounts you may consider having, depending on how you pay for these items.  A lot of the annual expenses that Dave Ramsey lists in his work book, we pay for monthly or bi-monthly through paycheck deductions or combined with our mortage.

• Real Estate Taxes (we pay this through escrow with our mortgage payments) 
• Home Owners Insurance (we also pay this through escrow with our mortgage payments)
• Health insurance (taken out of my paycheck) 
• Life insurance/ Car Insurance (combined to get a discount, and taken out of my paycheck)
• Disability insurance (covered by our work)

These are the Savings Accounts we have connected with our online bank:

• Car repair/ Car replacement
• Car inspections/tags/ taxes
• Vacation (sometimes you have to travel-- family weddings, holidays.  Even if you drive and don't fly, you still have to budget for the gas, etc.)
• Gifts (Christmas, birthdays, etc-- just make sure to budget for how much you are going to spend for these gifts and don't go overboard)
• Home repairs/ Replace furniture 
• Medical bills
• Emergency Fund

John and I have several small savings accounts connected with our checking account that we funnel money into every paycheck (vacation, car repair, car tag/inspection/taxes, car replacement, gifts, medical, home repair, etc).  There is trial and error in figuring out these numbers but it's important to plan for emergencies and have your money in a place where you can access it quickly.  NOT in something like a CD that charges you fees to access it.  

Lesson One: Super Saving- Your $1000 Emergency Fund

The first step in Dave Ramsey's Total Money Makeover Baby Steps is Save up $1,000 in a small emergency fund.  ($500 if your income is under $20,000).  Why is this important?  Shouldn't you start tackling your debts right away?  The reason the $1000 emergency fund is so important is that it serves as a safety net for unexpected out of pocket expenses that might cause you to go running back to your credit cards if you don't have the money there.  I've done it before-- paid off my credit cards, sworn off using them, and then had a car repair.  I had to pay for it with my credit card.  What happens next? You have to pay the balance on the credit card and you run out of money in your checking account.  That leads you to putting more expenses and sometimes non-necessities on your credit card.  Does anyone else see how this can become a problem really quickly?

The average person going through the Total Money Makeover pays off their debts in 2 to 2 1/2 years.  John and I have been doing this for two years.  Have we had to use some of the emergency fund?  No.  Really?  Why not?  Because the only emergency we have had in the two years we have been doing this is for car repairs.  We actually have a budget for car repairs because we know we are going to have to maintain our cars until we run them into the ground and can afford to buy new ones.

So save the $1000 as quickly as you can.  It will give you more peace of mind than I can tell you.  And DON'T USE YOUR EMERGENCY FUND FOR NON-EMERGENCY ITEMS.