Any Dave Ramsey fans out there? Quick question. . .

[Joyous_5]

Hi all,

My husband and I are nearly a year into the DR plan: no more debt other than the house and part of an emergency fund saved--woo hoo!

I have a question though--part of the budgeting/baby steps that I'm confused about:

I'm looking at our yearly expenses--let's say they are 10k to make it easy. These are things we put into our budget monthly but which are paid out only yearly or quarterly. Things like property taxes, auto insurance, vet bills, etc. BUT now that we're looking at padding our emergency fund to five months of expenses, I'm wondering how to separate out that 10k worth of known expenses when we are this far along in the year. Do I just pretend we haven't paid anything toward savings for these items and make our savings account $XX + 10k? Or should we open a separate savings account just for the emergency fund? I hate to do that (we also have a joint checking account already and also one for my self-employment business). But maybe that's the way to go...

Any help is appreciated.

Thanks,
-Joy

PS When do you start adding to a sinking fund for different things like car replacement, home repairs, etc? I know these things are on the horizon but wonder if we should wait to save for these after the EF is fully funded?

[ToomuchStuff]

DR, says he puts his in something like a Money Market account (can't get to it as fast as a savings account, truly an emergency).

Long term one (remember he has said he has an emergency fund, for the emergency fund), I think that is a good idea. Short term (just to that point), I would treat it more like what my grandmother did with her checking account. She had a buffer that she did not record in her checkbook. Unless she really messed up her math, it was never touched. (I think one time she came close as she forgot to record a check)
But as I said, the point is moot, and either would work. My view comes from, what happens, if I had to use the entire emergency fund (am I charged for closing an account? What is the minimum required in that account, and what interest rate verses access and safety does it have?)

[rosarugosa]

Joyous: I only have one account for EF, irregular expenses, car repairs/eventual replacement, etc. and I just use a spreadsheet to "bucket" the funds. I also challenge myself to pay the irregular items out of my monthly budget without tapping the account (even thought it is "legal" for me to pay these items out of the account). Sometimes I succeed and sometimes I don't, but it's fun to try (my husband says I have perverse sense of what constitutes fun).

[Joyous_5]

Thanks, Toomuchstuff--I like the example of your grandmother's buffer. That's helpful!

And rosarugosa--I think that you're plan sounds fairly simple and straightforward. I think if I create many different accounts for all these different items we're saving for I'm going to end up extremely confused. Thanks for sharing.

[catherine]

Joyous_5, I'm a DR devotee, but I'm not quite sure I understand the question--(maybe because I'm still in Baby Step 2). But, I like having separate ING accounts for all the different categories outside the basic living expenses and debt snowball. Also, I use YNAB to sort things out, which is really helpful.

I think if I were in BS3, I would definitely segregate the FFEF. And I would start a car replacement fund and any other sinking funds. Maybe the sinking funds could be all in one account. My personal opinion is that if you're in BS3, certain sinking funds may be "legal." If it's for a car that is definitely going to be needed soon, I'd say go for it. If the sinking fund is for a boat, I'd say, wait.

[Joyous_5]

Thanks, Catherine. You know, I set up our savings to include sinking fund items (I think that's what you call all those yearly/quarterly expenses like property taxes and such?) and the emergency savings and I don't think it's going to work. I like your idea of having it separate. But what is a YNAB? I'm finding that already, we are dipping into that emergency savings column of the savings ledger--most recently to repair our television. I was wondering about the car replacement fund. DR never really specifies what step that takes place in, does he? I thought after the emergency savings was built up but that could take a looooong time!

[ToomuchStuff]

YNAB, personal finance software, Y(ou) N(eed) A B(udget).

[fidgiegirl]

Catherine, I have a trial of YNAB right now, but I am failing to see the magic in it. I think it's because I have been into YMOYL for so long, which doesn't focus the budget aspect - just the post-mortem reflection. What are the features you love the most? I am trying to decide if I will buy it when the trial is up.

Joyous_5, we treat our EF and our "sinking fund" as one and the same. However, I am not in love with that method. We're constantly reevaluating, but it hasn't resulted in any changes yet. :/

[catherine]

Kelli,

I like the 4 principles:
--Give every dollar a name
--Save for a rainy day
--Roll with the punches
--Live on last month's income

It melds nicely with the Dave Ramsey philosophy, which is why a lot of DR fans use it.

I think in practical terms it is a very user-friendly budgeting software. I have my budget set up according to the All Your Worth idea of "needs," "wants," and "savings" (in my case, debt). You can see at a glance how much money you've spent and how much is left to spend What you don't spend or what you overspend is automatically taken into account in the next month's budget..

It's not for everyone, but if you really are into keeping track of the money you spend, this is the tool for you.

[The Storyteller]

I think in practical terms it is a very user-friendly budgeting software. I have my budget set up according to the All Your Worth idea of "needs," "wants," and "savings"

Excellent book. I think it it is time to reread it, though, since I read it when it first came out.

[fidgiegirl]

Thanks for the feedback. I assume this (http://www.amazon.com/All-Your-Worth-Ultimate-Lifetime/dp/0743269888/ref=sr_1_1?ie=UTF8&qid=1380392302&sr=8-1&keywords=all+your+worth) is the All Your Worth book?

[catherine]

Thanks for the feedback. I assume this (http://www.amazon.com/All-Your-Worth-Ultimate-Lifetime/dp/0743269888/ref=sr_1_1?ie=UTF8&qid=1380392302&sr=8-1&keywords=all+your+worth) is the All Your Worth book?

That's the one! And the very same now-US Senator, Elizabeth Warren is the author. She wrote the book with her daughter, and it makes a lot of sense.

[fidgiegirl]

I'll have to check it out. Thanks for letting me derail, Joyous_5. :) Back to your regularly schedule DR programming . . .

[Joyous_5]

Ahhhh, thanks for the clarification on that acronym. Opening a new savings account (linked to our existing "sinking fund" one) this week to keep the Emergency Savings money separate. Otherwise, I fear it will get dipped into much too frequently! :)