Dave Ramsey's Complete Guide To Money: The Handbook of Financial Peace University

by Dave Ramsey

budgeting works.

It. Fucking. Works.

you have a budget that’s not working, it’s not the budget’s fault; it just means that you need to tweak how you’re setting up the budget or, better yet, how well you’re actually living on the budget.

1. You leave things out.

anticipate all those little expenses that can sneak up on you and derail the budget halfway through the month.

2. You overcomplicate your plan.

those people who win with money over the long term do so by doing the same few simple things over and over again.

4. You don’t actually do it.

Remember, your goal is to write out the budget on paper, on purpose, before the month begins—every month!

6. You don’t actually live on it.

Remember, we’re dealing with behavior change, not math skills. The math stays on the paper, but the behavior is in how you actually apply the plan to your life.

No matter how blessed or distressed you are financially, your first priority every month is to cover what I call the Four Walls. Think of it as the four walls that hold your house together. They are food, shelter, clothing, and transportation.

Starting today, make a commitment to never allow anything or anyone to prevent you from covering these basics every month.

Your family comes first.

Managed money goes farther.

When you run your money through a budget, it just works harder. It has more muscle.

you’ll only build that wealth and security if you free your income from accidental, careless spending and an endless cycle of debt payments.

it’s not just about money.

A written plan will also remove a lot of the guilt, shame, and fear that may be associated with buying necessities for your family.

It gives you this incredible sense of control and power in ways you’d never expect.

When you sit down to do your budget, there’s one crucial thing to remember: every month is different.

That means you’ve got to do a fresh budget every single month. You can’t just do a template of all your income and expenses and expect it to work every month. It won’t. You’ve got to plan for each month, one month at a time.

When you sit down to do a budget, that’s what you’re telling the paper. It should not be some calm, casual, half-thought-out, quiet discussion. You should sit down with your budget, calculator, and pencil and literally scream, “SHOW ME THE MONEY!”

This is your financial well-being we’re talking about here! Get excited! Make those dollars dance!

With a zero-based budget, your goal is to spend your income all the way down to zero before you ever even get paid. You’ll write your income at the top of the page, and then you’ll write every single expense for the month under it, including giving and saving. By the time you get to the bottom of the page, your income minus expenses should equal zero.

But if you’re working the Baby Steps like we teach, then you know every cent of any extra money you have goes to Baby Step 1: saving up the $1,000 emergency fund first. After that, all the extra money goes toward Baby Step 2: the debt snowball. After that, everything you can squeeze out of the budget goes to Baby Step 3: filling up your full emergency fund of three to six months of expenses.

Here’s how the envelope system works. When you get paid, there are some expenses that can (or should) get zapped right out of your account. For example, retirement accounts and utility bills can be set up on auto-draft so you know that money’s just gone. Other expenses require you to put a check in the mail or make a debit card payment online or by phone.

identify those things in the budget that we could use cash for.

food, gas, and entertainment

take that amount out of the bank in cash and put it in an envelope marked

When the envelope was empty, we were done buying food.

If you’re not sure how much you’ll make each month, and if you don’t know when you’ll get your next commission check, your budget will look more like a list. At the top of the page, write down your first spending priority. Ask yourself, If I only have enough money to do ONE THING this month, what would it be? Write that at the top of the page. Then ask, If I only have enough money to do ONE OTHER THING this month, what would it be? Write that down. Continue this all the way down the paper until you’ve covered everything you could spend your money on (including debt payments, giving, saving, etc.). Now, you’re ready to get paid. When you get some money, you’ll just work down the list. When the money’s gone, you stop. Draw a line on the paper where the money runs out and carry those things into the next month’s budget.

Irregular income budgeting

personal finance is 80 percent behavior; it’s only 20 percent head knowledge.

In order to win with money, you must spend all of your money on paper, on purpose—before the month begins. That’s called a budget. The envelope system is an effective way to manage key budget areas, such as groceries, entertainment, and gasoline. Your budget will not work the first month! It usually takes about three months to really start running smoothly. Use the forms in the back of this book or our online budget software to get your finances in order.

Key points budget