By Brandon Pettey
As we progress into the new year, lots of folks are trying to get their clothes to fit a little looser, while others are trying to tighten their financial belts.
Over the past few years, Northeast Speech Professor Jill Dietze and her family have been working hard to discover their path to financial security.
In 2012, Dietze and her husband, Jason, found themselves in need of some financial guidance.
An avid listener of Financial Adviser Dave Ramsey’s radio show, she decided to pick up his book The Total Money Makeover and see where the man who is known as the “Money Maestro” could take them. “We had debt that we needed to get out of,” Dietze said. “We needed a place to start and get organized.”
After hearing Ramsey’s story about his own financial problems and his successful rise from serious debt issues, the couple decided they would give his plan a chance.
Jason read The Total Money Makeover first and then passed it on to his wife. The two quickly realized that in order to get their finances straight they would have to be willing to sacrifice and commit to working closely together.
“In the book we read, his premise is every dollar goes somewhere,” she said. “You figure out what your expenses are and then figure your total family income.”
Dietze and her family hunkered down with their finances. Just like a person counting calories while dieting, the couple sat down and determined where every dollar of their money was being spent.
In order to simplify things, they also incorporated one of Ramsey’s suggestions in his book called the “envelope system.”
After setting aside ten percent off the top for their church, the couple budgeted money for their monthly gasoline use, utilities, cell phone bills and mortgage and car payments, which were fairly stable cost each month.
The rest of the money was budgeted into three categories: entertainment and eating out, groceries and miscellaneous costs, which could include everything from a haircut and a birthday party gift to a trip to the dentist.
Once they had their monthly budget completed, cash money was put into the three separate envelopes to spend accordingly.
Dietze said the envelopes help them monitor their spending. For example when the envelope for eating out and entertainment is empty, they forgo a trip to McDonald’s or the movie theater.
She did laughingly admit that as the end of the month nears, any money left in the miscellaneous envelope might be pilfered for eating out if she’s too tired to cook.
After setting up their budget for their monthly bills and spending, the couple then moved toward paying off credit card and other debt, starting with the smallest.
Once one debt was paid off, they focused on the next one until all their interest-bearing debt was paid off. Ramsey calls this plan the “debt snowball” method.
“The first three months are really tough because you’re trying to figure out where all your money goes,” she said. “But once you start seeing the debt chip away, there is such a comfort to that.”
The Dietze family’s faith has also played a major role in their financial planning.
“I truly feel when you become obedient and you’re tithing to your church and being responsible with your finances that God comes around and helps you get through it,” she said, “with strength, discipline, encouragement and blessings along the way.”
Dietze admitted that sticking with this type of strict financial program isn’t always easy and comes with some major challenges. One of those obstacles was getting their three children Sidney, 16, Peyton, 14, and Luke, 10, on board with Ramsey’s plan.
“The biggest struggle is telling our kids no,” she said. “Just because they want it doesn’t mean they can have it. Not impulsively eating out when you know it costs more. Self-discipline is difficult.”
Dietze said, however, that once she got her kids to come around things improved, and budgeting became a way of bonding for the family and an opportunity to work together.
The children are now in charge of their own finances and are learning to budget their babysitting and lawn mowing money. Dietze has even found a way to use her smartphone to help keep up with her finances. Every time she spends any money, she accounts for it on an envelope budgeting phone app called “Good Budget.”
As most people who have tried and failed know, sticking to a budget isn’t easy. Americans have a tendency to love their stuff and gaining financial stability requires both sacrifice and self-discipline.
According to Magnifymoney. com, 42 percent of Americans have at least some credit card debt. Nerdwallet.com, which gets their statistics from government data including the Federal Reserve, reported that the average credit card debt is $7,087 per household.
These staggering numbers make it painfully obvious that Americans of all ages could use some advice on how to handle their finances.
Starting a budget can be the most difficult part of the whole process. It took Dietze and her husband around three months before they were able to fine-tune how to allocate their expenses.
NTCC Accounting Professor Allen Carter shared some advice on the importance of budgeting and saving and also offered some strategies for being successful.
“There are two things; one, you need to save,” he said. “Every person, individual, or household needs to budget. The other part is you need to build into your budget some sort of savings. Even if it’s only 5 percent, you need to save.”
Carter said that it is important that people realize the difference between needs and wants. He advised cooking at home instead of going out. Carter also stressed the importance of being careful with credit cards.
“I think credit cards are a necessity,” he said. ”The two things you want to do are not ask for more credit limit than you can handle, and don’t spend more than you can pay off each month.”
Carter also said it is important to start budgeting as early as possible. Both he and Dietze talked about the difficulty involved in budgeting. At the same time, the two also stressed the life-changing effect of financial freedom.
Dietze said it can pay off in more ways than one. She and her husband can now say that they are financially stable and free debt. The money they used to pay to credit card debt is now being saved for their children’s college education.
“It takes a lot of discipline, but I promise you it’s easier to sleep at night, knowing you don’t have any interest-bearing debt,” Dietze said. “The blessing of it is we know where every penny is spent.”