Financial Peace University Review - Lesson 2 "Cash Flow Planning"

You might have heard of Dave Ramsey. He's a national talk show radio host who takes calls from people like you who have questions about their finances, debt, investments, foreclosures, etc.

In addition to his radio show, he created a 13-week course called Financial Peace University. This faith-based program is designed to help you get out of debt, invest in your future and have a stress free retirement. Too many of us struggle daily with our debt. There are those who can't afford to pay the bills they incurred and those who can afford their bills but should utilize their cash better. Dave has 7 "Baby Steps" to getting out of debt and building wealth. I will mention these baby steps as I review each week in the course.

Each week as I take another course, I will provide a review of each session. My classes are held each Sunday night for the next 13 weeks. Click here to see my review of the first session "Super Savers.

The second session is titled "Cash Flow Planning". The class began with a 60-minute video. It sounds like a long time but it isn't. Dave was comical in the video so time passed quickly.

The focus of the video was to start a budget also known as a cash flow plan. It's very simple and his book has multiple forms to use in case your pay is not pre-determined or not always at certain days of the month. You simply take you pay for the month less expenses. Assign a name to every dollar and at the end, your entire paycheck should be gone. Your ending balance should be $0.00. If it's not, assign the extra income to something like more groceries or entertainment or bills. This should be done before you actually spend the money. Just plan on paper first how you will spend your cash and stick with it. He has an envelope system for some of these things like groceries. The recommendation is the money you allow for groceries should be withdrawn as cash and put in an envelope labeled groceries and that is all you are to spend that money on. If you run out of money before you get paid again, then you have mo more money for groceries. In this category, he says for you first few months, over estimate your grocery bill because it is usually more than you think. See my article regarding planning meals in advance. This will help you control your grocery spending. If you don't know where to start, look at your check register for the prior month and any credit cards you use to pay bills and see where your money has been going. This will remind you of what to pay and what different categories you need to set aside money for. It will take about 3 months to get your budget right.

If you are married, both partners should work on the budget together and come to an agreement. Make sure you set aside money for each of you to spend on whatever you want to. If you restrict what you purchase and leave no wiggle room, the chances of sticking to it are slim.

If you are behind on your bills, make sure you pay the minimum on each bill. If you're extremely behind, then make your priorities these first. Shelter (house payment), food, utilities (lights), clothing and transportation (car & gas). After that, if you have credit cards to pay, pay the minimum on them and if you can't pay them all, pay the ones that you can. Prioritize them in some way to determine which ones will get paid this month.

This has been an eye opener for me. I'm in a situation where I have some extra money each month. What I've learned to do through this course is set aside this extra cash for things that I know are coming like my property taxes, home and car insurance and Christmas. Don't forget Christmas. If you don't save for this, the chances you'll use those credit cards are high. You want to be able to afford Christmas and pay cash without using credit cards.

Credit cards are discussed in great length. Pay off these cards, close the accounts and make sure you never use them again. Not even for emergencies. Your emergency fund is now for emergencies. This is baby step 1. Going forward, you should only use cash for purchases or your debit card that acts as a credit card but comes directly out of your checking account.

This session also touches on balancing a checkbook. There are interesting statistics indicating that most people don't balance their checkbook. You should know what money is put in and taken out. Nothing should be a surprise and you should not be out of balance anywhere. If you are, reconcile it to make sure you know where the difference is. Even if it's in your favor. You need to find the discrepancy.

For week 2, I'd have to say it was more informative. This is a hard subject to discuss with others as you can throw out suggestions but most people including yourself don't want to discuss your income or debt with others. It's a private matter that some people may be ashamed of. My spouse and I are usually not on the same page when it comes to spending money so I hope this course can bring us closer together with our money. He was unable to attend Lesson 1 & 2 because he's been doing extra work on the side for supplemental income. We hope he attends the next session.

Stay tuned for my review of Lesson 3.