We had a brilliant week 5 class of Dave Ramsey’s Financial Peace University last weekend. Lesson 5 was called Buyer Beware and it focused on how companies use marketing to convince us that we need their products. Companies aggressively compete for our business. We think we need them, so we use credit to buy them and find ourselves in debt.
Same as cash financing is a perfect example of this; in face 88% of the 90 days same as cash contracts are not paid off before interest charges kick in! 88%! And the typical interest charge is 24% on those offers.
Dave did a brilliant job of walking us through these traps for debt and helping us recognize the pitfalls.
We also discussed a household’s method for making a “major purchase”, which is anything in the $300 or more price range. He recommends a cooling off period for this type of expensive purchase, waiting 24 hours before you agree to the purchase. This cooling off period allows you to discuss the purchase with your spouse and to thoroughly think through the purchase and the act of spending the money. It eliminates the spur of the moment decisions that can wreck havoc on your budget. If you are going to move forward with the purchase, he urges you to pay cash for the item.
Cash is king; this is a recurring theme in every class and since we’ve switched to a 100% cash spending system we have noticed a huge difference in our relationship with money. We were avid debit card (not credit card) users, I hardly ever had more than $5 in cash on me. We switched to the budgeting system and started using our envelopes for purchases at the beginning of February. It’s been a huge adjustment but we are in love with the system. You can read more about this cash based spending here.
We did pretty well considering it was our first month. We found we didn’t use our whole amount for groceries but that our entertainment envelope is empty as of yesterday. Since we don’t have plans for the weekend, it doesn’t matter that our funds are spent – we are planning a lazy weekend at home.
Tomorrow we sit down to do March’s budget and on Monday I’ll run to the bank to withdraw the month’s cash to fill our envelopes. We are so very excited about taking control of our financial future, and having a handle on spending our hard earned money. We have added 2 more “envelope” systems to our way of handling money, which are 2 expandable file folders that we picked up at the thrift store ($0.59 each!). Jim carries one with him with his cash for gas, entertainment, pocket money and car expenses (because he is the one that buys the windshield wiper fluid and misc. car stuff). The other file folder holds the money for items like taxes, insurance, and other regular bills. We didn’t feel it was smart for us to carry around all that cash for these kinds of bills.
Week 6 focuses on insurance, so we are anticipating learning a lot about that subject! Check out Dave’s free online budgeting tool Every Dollar to see how budgeting can be easy and helpful in your life.
And…..we have some big news we’ll share later this week about our FPU journey!
