How low does your checking account have to get before you squirm?
$100?
$50
$10?
In the winter of 2009, things were desperate. Just divorced, house for sale at the bottom of the market, new city, new job.
But I had money in the bank:
$17
My bills were paid. I was out of debt any my 2 doggies and I were housed and fed.
I was too proud to ask for help and knew that I could hang on until the next pay day.
And I had just begun to follow 2 of Dave Ramsey’s guidelines:
No more than the following of take-home pay:
*25%housing+util+tax
*15%car+ins+gas
Month after month I kept at it. Paying off bills, having faith, living below my means.
Years later, I would learn about Financial Peace University, the Total Money Makeover book and cashflow from Mr. Ramsey.
The days of $17 and little more in the bank haunted me for a long time. And once I saw $100 or more in there, I liked having a cushion of money to feel secure. The cushion grew a bit and I wasn’t sure how to best use it for the future.
What does he mean by “cashflow” and a “zero-based budget?” It simply means that your money should “0 out” each month.
What?! Keep $0 in the bank?
No. Keep a little cushion in there that comforts you.
Maybe it’s $50, $100 or more.
At the beginning of the month, each dollar has an assignment: “sir, yes sir!, I shall pay the mortgage!”
“M’am, yes, m’am, I will buy groceries!” And so on.
And any remaining money? It has an assignment too: it goes into your sinking funds-those things you want to save for: a new sofa, a down payment, paying off the mortgage.
How on earth was I going to do this in the Budget in Excel? Ramsey has paper forms to use on his site. That’s great if using paper and pencil helps you-in fact he encourages this tactile exercise to feel the budget and see it on paper.
I’m a spreadsheet nerd. So, I made space at the top of our family budget to go to “0” each month.
Like this example:
Cashflow: $0
(Pay-expense-sinking)
Post tax pay: $3000
Total actual expenses:
$2800
Sinking fund:$200
(Pay-actual expenses)
Ding! See how the leftover $ starts to fund the sinking fund?
Conceptually, I always thought I understood this but until I saw it on my spreadsheet, I could not have any idea how much we could expect to put into a sinking fund.
The leftover money was not employed. Flopping about in the basement and playing video games into its 30’s.
Now it has a job and its title is “sinking fund team lead”. When we get good at this, it may become “night manager”.
After I figure out how to create a calculator online, I will share a template.
For now, you could just use the free cashflow forms from Dave Ramsey: once you see it on paper, it’s life-changing:
Suzewannabe 