Julie Gumm - Author, Speaker, CliftonStrengths Coach

Taking Advantage of The Housing Boom

by //

The next huge step in our financial journey really came in 2004 when the housing market in Phoenix went absolutely crazy.

The house that we bought for $199,900 over a year earlier was suddenly worth about $350,000. Crazy right? So of course Mark starts talking about selling and I start rolling my eyes at him.

At this point we’ve been married 11 years and moved 7 times. I was tired of moving. Plus I loved our house and our neighborhood.

And, as I was quick to point out, what was the point of moving when everything was hugely over inflated.

So we did some research and began to look at new housing developments that were a little further west (the city of Phoenix just keeps spreading out) and had not yet peaked like the rest of the city.

And I learned something. I shouldn’t look at model homes unless I want to move. Because of course once you look you find something you love.

It didn’t take us too long to decide to make the leap and we signed on the dotted line for the construction of a new home. We downsized a bit (going from 3300 sq ft to 2700 sq ft) and after our construction options I think our final sticker price was $215,000.

They told us construction would take 6-8 months.

It took about 12.

Of course all that time we were praying that the market would hold because we weren’t going to put our current house on the market until we were closer to the move time. The market had been so crazy that houses were literally being bought within hours and I was NOT going to have to deal with a whole temporary move thing.

When it finally came time to sell we listed the house and sold it within a few days for $385,000.

From the proceeds we held back money for movers (my stipulation although we packed all the boxes ourselves), paint, landscaping, window treatments, etc.

But everything else was spent on the down payment which left us with a $65,000 mortgage.

And then we started to do some math. By this time we were making more money and we had continued to keep our budget pretty simple so we moved money around and figured out that by dumping everything extra at it, we could pay off the mortgage in 2 1/2 years.

And so we cheated. We totally skipped baby steps 4 & 5 and went straight to paying off the mortgage. We were so motivated because we could see the light at the end of the tunnel and could almost grasp total financial freedom.

Only later would we realize how important that freedom would be.

…to be continued

The “B” Word: B-U-D-G-E-T

by //

Part 5 of our Debt-Free Story

So Dave Ramsey lays out these 7 baby steps ($500-1000 in an emergency fund; pay off debt except house; 3-6 months expense in emergency fund; invest15%; college funding; pay off mortgage; build wealth – MORE DETAIL). (We’ve kind of adapted our baby steps/financial plan but that’s a different post.)

Well to get to any of those places there’s one thing that needs to be in place and that is a budget.

Preferably one that works. Our previous attempts had not.

We quickly realized that we were going about it all wrong. We were trying to come up some perfect one-size-fits-all budget in our nice yearly spreadsheet. Sure we accounted for things like Christmas but other than that life was supposed to be the same every month. Right?

Yeah, not so much. When we finally realized that the budget had to be a monthly thing it was like the light bulb went on. Sure, a lot of the expenses stay the same but there are always things to take into consideration.

  • Is it back to school time (school supplies, clothes)?
  • How many birthdays will you be celebrating that month?
  • School pictures?
  • Company coming (bigger food budget)?
  • Car registration?

The bottom line is this: You MUST tell every penny of your income where to go.  Add up your income, list your expenses. If you have extra put it toward your baby emergency fund or your debt. If you don’t have enough? Well, now we’ve got an issue don’t we. (We’ll come back to that.)

I will be the first to tell you that some of our first monthly “budget meetings” were not pretty. Not that they were screaming matches but there was much we disagreed on (why did I need a “misc” category; should golfing come out of his fun money or the general budget). But, we learned to compromise and we knew that if it didn’t work that month we would revisit the issue the next month. And the biggest thing is that we had an agreed upon goal that we were both excited about working toward – paying off our debt.

Dave has some great forms to get you started on his web site.

You might really be struggling to figure out what to put in some of those categories. If you’ve never tracked your spending before you may have no idea what you spend on groceries every month. Take your best guess (maybe look at old debit/credit card transactions) and then save EVERY receipt for the next month to track what you spend.

What if there’s not enough money? If you run out of money before you run out of expenses then there are two things to be done. ONE – cut your spending and TWO – pay the most necessary expenses first (in drastic situations).

The second one is a bit complicated to get into here but I will address the first one briefly. Sometime I’ll do a more detailed post on ways to trim the budget.

There are 3 main areas that seemed to be the first to go to when it comes to trimming the budget (not counting selling cars, etc that have HUGE payments).

1) Eating Out/Entertainment – The average American family spends $225 a month eating out. That’s incredible isn’t it. It adds up quick – a family meal out, some stops at Starbucks, run through the drive thru on the way to/from the kids activities, order a pizza in, lunch for the working spouse(s). One word for you: STOP. Brown bag your lunch, store some frozen pizzas in the freezer, keep a bag of snacks in the car to stave off hunger until you can get home. Budget a modest amount and stick to it. In our strictest budget days we allotted $30 to this category.

2) Groceries – $700. That’s the amount the Jonses (family of four) spend on groceries each month. We knew one couple (w/ no kids) that was spending $900 a month and had no idea that it could be done on so much less. I know families of four who spend $70/wk ($280 a month). I feed our family of six for about $400 a month. I do some coupon clipping but it’s mostly shopping the sales, stocking up when I can and cooking wisely.

3) Cable/Internet/Cell Phones – We’ve come to expect these things. We deserve these things. We need these things. Yes, some are necessary. We need high speed internet at home for our job. Can you downgrade or eliminate your cable package? Can you shop for a new cell plan that’s cheaper? Get rid of your home phone?

Ah, I digress – sorry I get excited about this stuff.

So once we figured out our budget the next problem was figuring out how to stick to it.

Dave Ramsey has a plan for that too. It’s called The Envelope System which I will introduce you to next week.

The Baby Years: Baby Steps, Baby Boy

by //

Part 4 of our Debt-Free Story

So there we were in 1999 – both of us working, living in Dallas now and expecting our first child. We were making good money but it was going out as fast as it came in. We had no real savings and no real plan.

When Noah was born Mark had a job that involved a nearly hour long commute each way and it was during that time that he found Dave Ramsey’s radio show.

I would start to get these little tidbits of “Dave Ramsey says…” or “you should’ve heard this caller” each day. He began working on our budget and talking about the envelope system.

I, on the other hand, was knee deep in diapers and daycare and work and honestly don’t remember paying that much attention. Something about “baby steps” (not Noah’s) and paying off our debt. Sounded good to me. Thus a new budget was born and we began to make some progress on our debt with Mark leading the charge.

We moved back to Arizona the summer of 2000 and it was that fall that Mark dragged me to Financial Peace Live, Dave Ramsey’s live one day seminar that he does around the country. (Well, now they’re called Total Money Makeover Live but it’s the same thing.)

It was there that the light bulb went off for me and I was able to put together all the tidbits that Mark kept bringing home.

Honestly I don’t know how someone could attend one of Dave’s events and NOT come away totally excited and ready to tackle their financial issues.

We left there finally on the same page when it came to our financial future. We left there with THE BABY STEPS.

More next week………

P.S. If you live in Phoenix you need to get yourself to Total Money Makeover Life on Thursday, September 23rd.

Archives

Financial Freedom

Taking Advantage of The Housing Boom

The next huge step in our financial journey really came in 2004 when the housing market in Phoenix went absolutely crazy. The house that we bought for $199,900 over a year earlier was suddenly worth about $350,000. Crazy right? So of course Mark starts talking about selling and I start rolling my eyes at him. […]

I Met Dave!

We interrupt our normally scheduled post for this breaking news… I met Dave! Yesterday I got the opportunity to volunteer at the Dave Ramsey Live Event in Phoenix. It was this same event 10 years ago that changed our lives. Before the show Dave came around and greeted every one of the 60 or so […]