For the last several weeks, I have been attending the Financial Peace University class offered at my old church. I had heard of this program before, and had even attempted taking the class once before...but I never really got into it until I started taking it a couple of months ago. If you don't know what it is, it is a program designed to teach you how to establish savings, get out of debt, live debt-free and prepare for retirement. I have really learned a lot, and I thought I'd share some of my experiences with it.
First off, I have been very fortunate to have all of my education paid for by scholarships and will be one of the lucky few that comes out of college...grad school at that...mostly debt free. I'll admit, I've got a couple credit cards here and there, but no huge balances...I've mostly just had them for emergencies and to build up my credit score for when I want to go purchase a house in the future. BUT....this class has helped me realize I don't need credit cards for either of those things...Here are the first couple of Baby Steps associate with FPU, which I am currently working on:
Baby Step 1: $1000 in an emergency fund. This should be a savings account that you can easily access if you need the money.
Baby Step 2: Debt Snowball. Basically, you pay off your smallest debt first up to your largest debt, until you are completely debt free (unless you have a mortgage...which I don't...still a lowly renter ;)
Baby Step 3: 3-6 months of living expenses in a savings account. This will take care of you not needing your credit card when emergencies or unexpected events occur.
Some of the really important disciplines I have had to work on in order to start accomplishing these baby steps have been things like:
-Creating a MONTHLY budget. Each month you may encounter different expenses and need to spend more in one category vs. another. I get paid monthly, so I have found it very important to update my budget sometime during the week before my payday.
-Sticking to said budget, and actually keeping track of it. If you have a budget set up, but you keep no record of what you are spending in each category...what's the point?
-Balancing my checkbook often. I used to balance my checkbook MAYBE once every 2-3 months. Now I do it every 1-3 days. Saving receipts is a huge thing.
-Making savings and giving a priority. I have 3 different savings categories in my budget...one for my emergency fund, one for my taxes (I have to set aside my own taxes...they don't come out automatically) and one for my car insurance (I pay every 6 months). I also have a category for tithing/giving. As soon as I know my paycheck has direct deposited into my account, I transfer the funds into savings and write a check for my giving and put it in the mail. That way I can't "accidentally" spend it on something it wasn't intended for.
It hasn't been easy, but I've learned that the more I do it, the more it becomes like a habit and not an added stress. I've actually gotten to where I kinda enjoy it (I know...I'm a nerd)...and that makes me happy, because it is very important to me to take care of myself and my future family financially. That being said, that's all I'm going to say for Part 1. Stay tuned for Part 2 of the things that come next in my financial planning...not gonna lie, some of it intimidates me a bit!
Have a blessed day!