Transparency ... Accountability

As almost everyone who knows us already knows, Beth and I have been living on "the envelope system" for almost one year. We have cut up our credit cards, "given every dollar a name" at the end of each month, and have tried to work quickly to reduce our debt. As anyone who reads this blog knows, we have not completely deprived ourselves of travel and entertainment, but I assure you that our primary focus for the past five-plus years has been on eliminating our debt.

We use Google Documents to create and manage our budgets. It's a fantastic program and its web-based nature allows us to do our budgeting from anywhere we can find an internet connection (we did our March budget from Barcelona).

This pie chart is tied directly to the numbers in our Google Spreadsheet budget. They reflect actual dollars allocated toward various categories (some of the money is not yet spent, but it's all been "given a name" as Dave Ramsey says) (btw, we have a few more budget categories than this...some have been consolidated for the chart). As our budgets change over the next few months/years, this pie chart will automatically reflect the changes.

Beth and I will finally have our last student loan paid off by this time next year. You may notice that "Loans" is a big part of our budget. One of the challenges that we will face after paying that last loan is how we will use the excess money. We could put it into Housing...perhaps get a bigger place, or move to a better neighborhood. We could put it into Fun/Big Buys...get new furniture and electronics, take expensive vacations. We could create a new pie category called Savings...we still need to build up our emergency fund and eventually save some more money for retirement (full disclosure: we have a 401k that is not part of the budget). We could shrink the size of the pie...if my work becomes unhealthy for some reason, I could take a different job or work fewer hours, even if it meant a pay cut.

Some of those are good options, and we might choose to do all of those things to some degree. But our hope -- and the reason to create this blog post and provide some transparency into our financial life -- is that we will be able to greatly increase that Giving wedge. Please keep an eye on it -- we're counting on you.


Jenni said...

good for you!!! I appreciate your transparency here as well as the sound financial decisions that you appear to be making! so many people our age just don't do that.

Clay said...

So first, big respect to you guys for putting the whole pie out there.
I'm really interested in knowing what your attitude is toward the student loans and the related anxiety. I mean do you guys believe in the good debt/bad debt idea?
My deal is I have no credit card to pay off, and i'm finally coming out ahead at the end of every month, but I also have that TC payment set on the 30 year plan. My attitude to this point has been to set it and forget it.
So I'm not asking for a thesis or anything here, but where to you guys stand on prioritizing the school debt?
Out of respect for your openness I'm sending a copy of my '07 pie your way.

Elizabeth said...

Just to hijack my husbands blog for a minute: Our debt has been almost exclusively school loans. Through scholarships, family support, and work, Brandon and I were able to leave undergrad and marry debt free. We quickly made up for it by both attending an ivy league school and borrowing 10 semesters worth to complete our grad degrees. We then bought an apartment and took a loan for some renovation (it seemed small at the time compared to our school loans-now I don't see any loan as a small thing). We paid it first and quickly.

We didn't carry credit card balances but used credit cards to just wander through the month buying whatever we needed. We are both naturally careful when it comes to spending and we felt like because we paid it off every month and never paid any interest we were doing great. That's not how I see it now. For the sake of convenience and some airline miles we were brainlessly charging our way through each month and then financially reacting at the end of the billing cycle. We thought we used a budget but now realize it was working more like a theoretical target. Forensic accounting-analyzing how we did after the fact.

Now we plan our month and then financially execute. We live our budget. The difference, both in heart and dollars, is incredible. And we didn't think anything was wrong with how we were doing it before, we just switched to enevelopes as an experiment. I don't see us ever going back. I try not think about how much further along we might be if we had taken the proactive approach when we started.

Hopefully Brandon will post about student loan debt and the good debt thing. To me and for us its just debt and we want OUT! That's our priority and has been for a number of years. The weight of this so-called "good debt" is felt in every financial decision. Even on minimum payments the debt you owe ends up getting a vote in choosing where you live, how you live, and what job you can take because you have obliged yourself to it. No thanks.

And if you need other inspiration on those school loans - calculate what you end up paying with all the interest if you ride out the payments on the lenders terms. School was expensive but NOTHING compared to how costly the debt becomes over 30 years.

With me being sick and our leap into real estate we have certainly had times/years when minimums were the best we could do and sometimes deferments felt like a Godsend. But I encourage everyone to do all that you can when you can because it does make a difference and it is worth it: financially, emotionally, relationally, and spiritually. Bring on the peace people!!!

Sorry for thesis Clay and getting off on the budget tangent. I love you Brandon.

hr said...

This is totally fascinating. Thanks for sharing it!

Fenridal said...

Attention! See Please Here

Dumuro said...

See Please Here