During the 3rd session of FPU, Dave Ramsey talks about budgeting and cash flow. Like the previous session, on the topic of Relationships and Money, this is a foundational pillar to the following Baby Steps that Ramsey will eventually lay out. Ramsey teaches that budgeting needs to be a way of life, that it is your road map for your financial plan. Your budget tells you how to get to the destination you set for yourself (for Ramsey, that’s initially debt reduction, for others, it may be other goals). According to Ramsey, there is no one that doesn’t need a budget and there is no one that can’t do a budget. He even has a modification for people with inconsistent incomes. He says that he and his wife still do one each month. These are his guiding principles for budgeting:
The Why, in a Nutshell
- Budgets keep you in control – Your money is going to go somewhere. By planning out your savings and expenses, you stay in control of your finances, avoid fees (overdraft, low balance, ATM, etc.), and can have peace about where your money is going each month.
- There’s no excuse – There are lots of reasons people don’t use or stick to their budgets, and all of them are just excuses: budgets have a bad connotation, they feel restrictive, they are used by one spouse to control another, they are incomplete (things are left out), or they aren’t actually followed. All of these are reasons people fail to budget properly and all of these problems are fixable.
- Budgets improve your life – A well done budget removes uncertainty, crisis, and worry from your life. It can reduce money fights and the guilt or fear associated with spending. Your budget shows you where you can “trim the fat” on your spending.