Budgeting 101

[PDS]

My advice--in a vacuum and without any claim to profundity--but based upon 20 years of successful marriage, is as follows:

1. Budgets don't work.

2. A specific game plan to get rid of debt does work.

But in order to establish a realistic get-rid-of-debt game plan, isn't it necessary first to know where all one's money goes each month, and doing at least some budgeting?

4. The rollover plan to get out of debt is key, i.e., using the expired payments from your worst debts to add on top of the existing/remaining ones, especially if you don't get substantial bonuses or "found money" from your employer or rich relatives. Otherwise, use 90% of the "found money" to retire old debts in chunks, and the other 10% to splurge.

Dave Ramsey's rollover 'debt snowball' plan plan attacks debt from the opposite direction: he recommends paying off the smallest debts first. He says that this creates a faster-to-reach feeling of having acccomplished something, and that the psychological power of a such a 'lift' motivates people to stick to the free-from-debt program.

3. #2 above becomes de facto #1, if you get a buy-in from your spouse, and if you (yourself) stick to the game plan. Sort of like dieting together.

I think every financial advisor will agree on this: There's no getting rid of debt in a family (or in family-like structures in which people live together), unless each team member is actively involved (according to his/her mental capacities - but even an eight-year-old can understand that Mum and Dad have to pay for food first before buying the latest computer game).

Therefore being in debt as a 'group [family, etc.] member' means getting out of it will be' group [family, etc.] member' issue as well.

5. Not all debt is bad. Don't go apeshit about getting rid of it.

Put in Objectivist terms: debt is contextual, since it is always: Debt to whom and for what purpose? For example, a loan for paying off one's house would be 'good' debt, because paying it back will result in ownership of something that will contribute to more financial independence.

5. Bonus tip of best marraige advice I ever recieved: don't try to change your spouse--ain't really gonna happen.

I'll bet my bottom euro that anyone here who has ever been in a longer-lasting relationship will have to agree to that.

Imo working with a partner's resources instead of focusing on his/her 'deficiencies' works far better.

And what kind of partner would bring out the best in us: the bickering type, or someone focusing on our strengths and resources?

Xray: when I said "worst" debts, I meant those with the worst terms/interest rates, not necessarily the largest. FWIW.

[Xray]

But lemme go through that again... Helping the very weak to become more able?

Heh.

Be careful. You're starting to sound like an Objectivist.

Michael

But since "helping the weak" does not sound very Randian, I'm quite confident that my post won't be interpreted as sounding like an Objectivist.

But I do like the "objectivism" as a label for the kind of philosophy I'm interested in. For it focuses on the factual, the empirical.

[Xray]

Xray: when I said "worst" debts, I meant those with the worst terms/interest rates, not necessarily the largest. FWIW.

Thanks for clarifying, PDS.

[Xray]

Dave Ramsey is awesome. He truly does help people find their way out of the debt trap. Listen to his show any Friday and you will hear the debt free screams. It is very inspriring. For about 2 years I have nibbled around the edges of the program and now I am actually going to the 13 week course and trying to drag MSK along. I think having a house that is underwater was a real wake up call.

Dave Ramsey really gets down to business, pointing out e. g. the absolute importance of having a well-stocked emegency fund. We want to fill up ours a good deal more. A few years ago, some bigger, unexpected expenses had us dip into our long-term savings, which was very annoying.

Anyway it is rice and beans and beans and rice for us for awhile. Good thing Mike likes it so much.

I have quite a few books that advocate a simpler lifestyle, which involves getting rid of excess (and also financial) clutter. My favorite author is Peter Walsh. His tips really work. Like Dave Ramsey, Peter is a no-nonsense type who says it like it is.