Tidy Team · Team meeting
Your Money, Your Plan
Simple money steps for you and your family
Based on Dave Ramsey’s Baby Steps
Welcome everyone. Goal for today: give you a simple plan for your money. We will cover how to use $1,000 from your tax refund as a starter emergency fund, how to build a monthly budget for your family, and how interest and total price affect what you pay. Nothing fancy, just steps you can start this week.
The plan
The first three Baby Steps
TODAY
1
Save $1,000
A starter emergency fund for surprises
NEXT
2
Pay off debt
Smallest balance first, then the next one
LATER
3
Save 3–6 months
Of expenses in a full emergency fund
These are the first three of Dave Ramsey’s seven Baby Steps. Step 1 is a $1,000 starter emergency fund. Step 2 is paying off all debt except the house, using the debt snowball: list debts smallest to largest, pay minimums on all, and throw every extra dollar at the smallest. Step 3 is a full emergency fund of 3–6 months of expenses. Today we focus on Step 1 and on budgeting so Steps 2 and 3 are possible.
Baby Step 1
Starter emergency fund
$1,000
Save it first. Keep it separate. Use it only for real emergencies.
Use $1,000 of your tax refund to start this fund. It is a buffer so a flat tire or a doctor bill does not push you into debt. If your refund is less than $1,000, put all of it in and add the rest from your next paychecks. Dave Ramsey suggests a smaller starter fund only when income is very low.
Baby Step 1
What counts as an emergency
Yes: use it
- Car repair so you can get to work
- Unexpected medical bill
- Hours cut or job loss
- Urgent home repair, like no heat or a leak
No: budget for it
- Sales, wants, and gifts
- Vacations and eating out
- Bills you know are coming, like car tags
- Anything you can plan for
Rule of thumb: an emergency is unexpected, necessary, and urgent. If you can see it coming, it belongs in your monthly budget, not in the emergency fund.
Baby Step 1
Where your tax refund goes
Open a separate savings account
Keep it apart from your everyday checking.
Move $1,000 there first
Under $1,000? Put it all in, then add from each paycheck.
Leave it alone
Only touch it for a true emergency.
Refill it if you use it
Put the next extra dollars back until it is $1,000 again.
Do step 2 the same day the refund lands, before any of it gets spent. A separate account makes it harder to spend by accident. Once the fund is full, move on to Step 2 and start paying off debt.
Budgeting
A budget gives every dollar a job
Income
Money coming in this month
−
Outgo
Bills, savings, and debt payments
=
Zero
Nothing left without a job
Zero does not mean you spend it all. Savings and debt payments are jobs too.
This is the zero-based budget from Dave Ramsey. Write your budget before the month starts, not after the money is gone. Every dollar of income gets assigned to a category. If your pay changes from week to week, plan around your lowest recent month and add extra when you earn more.
Budgeting
Cover the four walls first
Food
Groceries for the family. Eating out comes later.
Utilities
Electric, water, gas, and phone.
Shelter
Rent or mortgage, plus basic home needs.
Transportation
Car payment, gas, and insurance to get to work.
Pay these first. Then minimum debt payments, savings, and extras.
Dave Ramsey calls these the four walls: food, utilities, shelter, and transportation. If the four walls are not covered, nothing else matters yet. Cover them first each month, then give the rest of the dollars their jobs.
Budgeting
Example: $2,800 a month
| Category | Per month |
|---|
| Housing | $950 |
| Utilities | $250 |
| Food | $450 |
| Transportation | $350 |
| Insurance & medical | $150 |
| Debt payments | $150 |
| Savings | $150 |
| Personal & kids | $350 |
TOTAL
$2,800
In equals out. $0 left without a job.
Paid on a 1099? Set money aside for taxes first.
This is an example only. Your numbers will be different. Fill in your own take-home pay and your own bills. If you are paid as a 1099 helper, taxes are not taken out of your checks, so set aside money for taxes before you build the rest of the budget. Giving is part of Dave Ramsey’s plan too; add it as a line if it fits your family.
How interest works
Interest is the price of borrowing
Principal
The money you borrow
Rate
The percent the lender charges each year
Time
How long you take to pay it back
Borrow $1,000 at 20%: about $200 in interest after one year.
Interest is what you pay a lender for letting you use their money. More principal, a higher rate, or more time all mean more interest. The example is simple: 20% of $1,000 is $200 for one year. Interest also works in your favor when you save, but the amounts on savings are much smaller than the amounts on debt.
How interest works
Interest grows on itself
Owe $1,000 at 20% and pay nothing? In 3 years you owe $1,728. Interest is charged on the interest too.
This is compounding: each year the interest is added to the balance, and next year’s interest is charged on the bigger balance. The numbers assume 20% a year and no payments. Credit cards and late or unpaid loans work this way, which is why paying debt down early matters.
Total price vs. monthly payment
A lower payment can cost more
Same $20,000 truck, same 8% interest rate. Only the length of the loan changes.
48 months
Payment: $488 a month
Interest paid: $3,436
Total: $23,436
72 months
Payment: $351 a month
Interest paid: $5,248
Total: $25,248
The smaller payment costs $1,812 more in the end.
Math: $20,000 at 8% a year. 48 months is about $488 a month for $23,436 total. 72 months is about $351 a month for $25,248 total. The difference is about $1,812. Sellers like to ask what monthly payment you want, because a longer loan can make almost anything fit. Always ask for the total price and the total interest.
Before you buy
Ask four questions
1
What is the total price?
Payment times months, plus fees.
2
What is the interest rate?
Lower is better. Get it in writing.
3
How many months?
Longer loans mean more interest.
4
Is it in my budget?
If not, wait and save for it.
Make this a habit before any purchase that involves a payment plan, a store card, or a loan. If you cannot answer all four questions, you are not ready to sign. The best answer to question 4 is often to save up and pay cash.
Next steps
Your plan for this week
1
Open a savings account for your $1,000
2
Write next month’s budget before the month starts
3
List your debts from smallest to largest
Questions?
Keep it simple: three actions this week. Offer to sit down one-on-one with anyone who wants help filling out their first budget.