It has been almost one year since we became debt free. Looking back on this year the one thing we feel like we did not do well is save. We saved about 20% of our income but, with no debt we could be saving much more. In previous months we have created a budget and itemized categories and kept track of every dollar we spent. This worked well, but it has become very time consuming. When we were trying to get out of debt, this budget method was perfect because it allowed us to see where our money was going and where we could cut back.
Now that we are debt free and the economy stinks our new goal is to be super savers. I have simplified our budget to include three areas; giving, saving, and spending. For our budget, giving will be taken out first. Then with the money we have left we are going to divide it in half. Half of that money will go into long term savings, a combo of mutual funds and money market accounts, the other half with go into our checking account.
The remaining half will be our spending money for the month. I am not going to categorize it because we seem to spend the same amount in the same areas each month. The only catch with this money is that 1/4 of this amount will be transfered to our savings account to pay for yearly items such as car registration, renter’s insurance, dental visits, gifts, etc.
In order to make this real I made a chart to demonstrate what we are doing. These are not actual figures, I was just trying to find numbers to make the math look pretty.
Pay: $9,000
Giving: $1,000
Long term savings: $4,000
Spending: $4,000 minus $1,000 transfered to short term savings
With this budget we will be able to save about half of our income. When the spending money is gone each month we are done spending money. If there is money leftover in the spending account it will be transferred to short term savings at the end of the month.
I hope this plan will help simplify my life and help us to save significantly more in 2009.
Wow, teach me your ways!
I would LOVE to be debt free. Do y’all follow Dave Ramsey? I’ve been thinking about reading his book and seeing if it could help us.
I wish we could save, but that’s not realistic when you don’t have two quarters to rub together.
So does debt free mean no mortgage payment either? That is our only debt. It should be paid off within 7 years.
Elisa- Yes we followed Dave Ramsey’s plan, I highly recommend it!
Kristy- We don’t have a mortgage because we live in military housing. We move every 1-2 years so purchasing a home at this point doesn’t make much sense (or cents!) We are saving in hopes to purchase a home for cash when my husband retires (don’t know when that will be
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I consider debt free when you have no debt, or no debt except mortgage.
Toni, Great ideas. We are moving toward debt free and getting there slowly. Blessings.
I thought I recognized some Dave Ramsey thought process.
Stumbled on your site when I was looking for recipes and frugal living. Enjoying perusing old posts.
I’m currently teaching Financial Peace for the Next Generation at our homeschooling co-op. It’s excellent! Dh and I trying hard to get out of debt. We’re making progress but it sure does take time.
Thanks for sharing!