6/27/2005

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"Purchased 'dream house' can't afford now!"

Dear Dave,

My husband and I bought our dream house, but we couldn’t afford it. After about six years we can sort of afford it now. My husband took a second job, I’ve done extra work and we cut our lifestyle to bare minimum so we could afford to stay here.

I’ve always let my husband do the budgeting and he’s been very strict with our money, which was a good thing. But now I’m sick of going to the grocery store with only $145 to spend. If we need anything extra – socks for the kids, for instance – it’s always come from the grocery budget. I can ask him for more money for clothes, but he’ll give me about half of what I’m asking for. I asked him to sit down with me and do a budget together, but he says he can’t budget very well because of the irregular income from our extra jobs. I get tired of being on this restrictive budget and will go out and spend $200 on things we need and he’ll get mad. How do we work this out?

Melinda in Louisville, KY



Dear Melinda,

Your husband has probably felt like he was caring for the family when he was actually being a control freak. He’s used to being in control and the idea that someone else is going to help him be in control scares him. And your reaction is a common one when someone has to deal with under-funded budget categories.

I always teach people to make a budget each month by spending all of their money on paper before the month begins. I know many people have irregular incomes, so we devised a way of budgeting for that as well. You’ll need to make a budget for the amount of money you do know is coming. You have regular jobs with regular pay, so plan for that. Then make a list of all of the things you need or want to pay for beyond that initial budget and prioritize this list. When you’re extra income comes in, you just go down that list and spend the money in that prioritized order. If you have an extra $500 this month and the first thing on your list is $200 for clothing, you can go spend it. If the next thing on the list is an extra $350 car payment, you don’t have enough to spend on that. You work your way down the prioritized list until you run out of money. This way you’re able to make a budget and you can both agree on where you’re going to spend your money.

This irregular income budget also works great for people who live on only commission. Sharon and I used this method of budgeting for years when I was in real estate and might earn nothing one month and $20,000 the next. 

-Dave
 

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