As a wedding gift, one of DH's family members gave us a copy of Dave Ramsey's Total Money Makeover. I've enjoyed listening to his radio show quite a bit in the past, so I was excited that I actually had time to start reading the book yesterday. Eighty pages later, we arrive at Baby Step #1, which I'm sure everyone knows is the $1,000 Emergency Fund.

Now, just like Dave expects in the pages of his book, I was initially against this. I see that big mound of debt sitting in the background, charging us ridiculous interest every month, and my first instinct is to attack it first. But, I get the premise. If we save that $1,000, it will allow us to pay off debt continuously, and not have to start and stop every time an unforeseen expense comes up and we have to use a credit card.

I could have finished the book today (I'm a big reader), but I stopped myself. I figured it would benefit me more psychologically if I stopped reading after Baby Step 1, until we had completed Baby Step 1. No need in getting ahead of ourselves.

So, there I sat, thinking of Baby Step 1 and our checking account balance. My first step was to sit down and figure out our cash flow for the next couple of weeks. Starting with our balance and filling in the days with paychecks or bills due, I saw that after the bills, we should have an average of $800 in the account. Now, after accounting for gas, groceries, and other expenses that don't have a due date, I estimated we really have about $400 of a cushion.

How much of that $400 should be transferred to our savings account right now? I wish it could be the full $400, but then we'd just be transferring it right back for Christmas shopping.

So, I took a timeout and formulated a budget for our Christmas shopping. After a couple of revisions (big families add up fast), I came up with an amount of about $670, including what we will spend on each other. It would have been worse, but part of my side of the family has decided to buy a set of gifts for an Angel Tree child this year. Normally, the adults all draw one name each (so it would be two gifts for DH & I), and everyone buys a separate gift for the kids. It has gotten expensive with new ones being born every year! With this year's change, we will be buying for an Angel Tree child, effectively replacing the gifts for 10 of my family members.

So with that total in mind, I decided that I would transfer $100 to our savings account, and have DH withdraw $300 for Christmas cash. That way, we have almost half of our Christmas budget separated from the regular checking account balance, but still spendable when we decide to shop (hopefully soon). And, the $100 transfer will give our little Emergency Fund a start, albeit a small one.

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After the initial cash flow & Emergeny Fund decision was made, DH got home from work and I went over everything with him. He was in agreement, so we moved on to working on our Monthly Budget.

Now, keep in mind that DH does not get a kick out of finances. He's not a number cruncher by any means, so this was actually the first time we had sat down together and came up with a budget. In the past, it has been me doing the work and then laying it out for him to see. But, I think it is important that we both be on the exact same page with this going forward, and we both understand what we are doing and why we're trying to do it. That way, we can be strong when the other is weak.

After about an hour (and a frozen pizza), we had a rough draft. We ended up going back and cutting some of the "spending" accounts like Entertainment and Eating Out, realizing that whatever we can cut from there will allow us to either save or pay off more debt. If anybody's interested, our budget is on a page in the sidebar.

It will be a challenge to meet it, but I think we can. The biggest obstacles will be planning our meals ahead, buying groceries for dinner at home, and lunch at work. DH is on the road all day with his job, so it's not really feasible for him to bring a lunch every day of the week. But if he can do it 3 days of the 6 he normally works, he can spend $5 on lunch the other 3 days and still be within budget. Mine should be simpler, since I can bring soup or frozen dinners or whatever and eat in our breakroom. Therefore, my budget is $20/month (for the occassional drink or snack) and DH's is $80.

We tried to make the budget realistic, but also underestimated our income and overestimated a few expenses, just in case. We're going to try to stick to the weekly amounts starting tomorrow, but we'll keep track of every purchase starting on December 1st.

Besides the normal bills and expenses, we also budgeted to save in some areas for the future. We will have separate accounts for Gifts (including next year's Christmas), Vehicle Maintenance, Vet Expenses, and Health (for those pesky copays and deductibles).

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Overall, we both feel much better now that we've worked it out together, and have it on paper and hanging on the fridge. I was surprised when DH randomly said "I'm glad that we did this." It's nice to know that we'll be there to support each other. He even drew a little cartoon, labeled "Budget Head" floating on a dollar bill, with the words "Stick to it!". He's the artsy one, I'm the numbers one.

I gotta admit, it is a little disappointing to see that we only have $99 in the budget for extra debt payments or to add to the Emergency Fund. But then I have to realize, we are contributing 3% to our 401k's, saving $200/month in 4 separate accounts for future expenses, and we may have more flex money than we budgeted for, depending on if DH's overtime continues.

So... self pep talk. We are paying all the debts on time, and their balance is decreasing every month just with those minimum payments. Not as much as we'd like, but they are decreasing. And, we are saving for retirement. And, we are warding off future debt by saving that extra $200. And, we will put any little extra amount towards our $1,000 Emergency Fund, which may get funded earlier than I anticipate.

We can do it. Just gotta live like nobody else, so later we can live like nobody else. (credit to Dave Ramsey for that little motto, haha!)