In last week's article, I mentioned that Keith and I are now debt free! We are so excited we can't stand it. We walked around in shock for several days after checking our account to make sure the last payment to the student loan company posted. It was surreal. We had given five years of our lives and our entire married life to this goal. And now it was over.
What on earth were we supposed to do now?
Fortunately, we knew exactly what to do because we've been waiting for this moment to happen for five years. It's like the tornado drill we used to have in elementary school. You practice, practice, practice so you'll be ready if and when a tornado showed up.
We had been practicing for this moment the entire time we were working on getting out of debt.
What are we supposed to do now that we're out of debt? The exact same thing we did while we were getting out of debt.
It doesn't change. We did a budget before we became debt free. We will continue to do a budget now that we are debt free.
The New Budget
The difference is what goes in the budget. In the past, we had envelopes for all of our debts and an envelope for our debt snowball. Those have been given a very immediate retirement party.
We now have an envelope called "Transfer to Savings." It is the new home of all of the money we used to send to debt reduction and the debt snowball.
Because the amount varies each pay period, we'll set up an electronic transfer to take place at the end of each month. We'll transfer the money to savings and begin to build our fully funded emergency fund.
In Dave Ramsey's Baby Steps, he teaches that your emergency fund should be only $1000 while getting out of debt. The premise is to have just enough in savings to ward off a mishap. All other funds go to get rid of debt as soon as possible. Once debt is gone, the emergency fund should be fully funded at 3-6 months of expenses (not income, but expenses).
We have chosen to build a four month emergency fund. It was a very technical decision...I wanted three and Keith wanted six. Four it is.
Once our emergency fund is built, we'll resume retirement savings and turn our attention to the purchase of a home.
Our budget will change again at that point and will begin to include a place to save for a vacation and maybe a little extra fun money for each of us.
But the overall concept will not change.
A budget is what got us out of debt...A budget is what keeps us out of debt.
The big take away is that a budget is the key to Christ-centered financial wellness. As much as we'd like to believe we can just spend any way we want, doing so will not create significant long term financial security. Planning has to take place.
Luke 14:28 tells us "Suppose one of you wants to build a tower. Won't you first sit down and estimate the cost to see if you have enough money to complete it?"
We must count the cost first. To not do so is unwise.
I'm including all of my budget forms to help you be proactive and begin to count your costs. Click on each picture to download.
Feel free to reach out if you have questions. And please share your thoughts on this idea of lifelong budgeting.
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Until next time...be well...be encouraged.