Here I go again, taking a moment to tell you (again) that budgeting works. We just received our semi-annual bill for our auto insurance via email and the amount due isn’t small change. It is over $1200, which I am sure is similar to what many of you pay to insure your automobiles. Insurance is crazy expensive!
We used to pay our auto insurance monthly, but we discovered during week 6 of the Financial Peace University class when they had you review your insurance policies that we were actually being charged more for the monthly billing. (That is how we also found out we could get two months of house insurance for free.) We switched our auto insurance to semi-annual payments and saved a little bit of money by doing so. However, we still set aside the cash each month when we fill out our monthly budget for the auto insurance. We put this cash into our file folder, along with other amounts we set aside like homeowner’s insurance money, property tax money, vacation fund money, auto license tab money, etc. To figure out the amount you need to set aside, divide your total annual insurance premium by 12.
The awesome part of this budgeting system, telling your money where to go, is that when the bill arrives we have the cash on hand to pay it. No worries, no moving funds from one spot to another (“robbing Peter to pay Paul” as my Gran would have called it). Budgeting works guys!
If you want to start using a monthly budget, we strongly recommend you keep it simple and flexible. We use a simple spreadsheet that we talk more about in this post.
It’s hard to put into words how empowering it feels to be in complete control of your money. We plan where every dollar is going, and there is a bunch of planning that goes towards fun too. Planning a monthly budget allows us to go out to dinner without feeling guilty, to give to charity, to plan for an upcoming vacation, to have money to go to the movies or shopping or to a concert, etc. It is peace of mind that has dramatically changed our lives.
There are a bunch of budgeting methods out there, but only have experience with Dave Ramsey’s Financial Peace University. We’d suggest that class to everyone. Take a minute to learn more about FPU or check out the free radio show daily (you can access the radio show archives here). There is even a Dave Ramsey YouTube channel.
Budgeting works – trust us. Give it a whirl, we promise that if you stick with it your life will be changed.
