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Money management 101: an introduction

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About Tsh

Tsh is the founder of this blog and lives in Bend, Oregon with her husband and 3 kids. Her latest book is Notes From a Blue Bike, and believes a passport is one of the world's greatest textbooks.

The Sound Mind, Sound Mom Book Club is about halfway done with its first book, Your Money Or Your Life. That, combined with all the news lately about the economic downturn, has resulted in a lot of emails hitting my inbox with your questions about basic money management.

This spring, I’ll be writing a series called Money Management 101 – it’ll work through those most basic of personal finance skills. There are no stupid questions – after all, home managers need to be money savvy, in order to be wise stewards of that which is given them. The posts will be sprinkled here and there alongside other topics, but money management is going to be one of my main focuses for the next few months. I really think it’s that important a topic, and I think it’s one many people avoid, out of fear of screwing it up.

I know that personal finance isn’t always sexy. It can seem really boring, quite confusing, or worse – painfully overwhelming. So much so that many people close their eyes to their bank accounts, their debt, and their grocery receipts, and just hope they’ll magically morph in to the numbers they want to see.

My journey with my money – the short story

I honestly didn’t know much about money management until a few years ago. I knew the basics, of course, but since I’ve never been good with numbers and math, I assumed learning those pesky money terms just wasn’t for me. In fact, I think I just thought that our finances would somehow take care of themselves. I didn’t like dealing with bills or with budgets, so I did the bare minimum to get us by. And don’t get me started about any long-term financial planning – that seemed so… not “us.” We wanted things to go well for us financially, of course, but I really didn’t want to be the one making any big decisions. So we just ignored any money issues other than that day’s financial tasks at hand.

dave ramseyEnter Dave Ramsey. Yeah, yeah, that guy I’m always writing about, and whose name can create quite a stir around the blogosphere. But he truly was the first “money guy” I actually understood. He explained things in regular-people terms, and he answered both the newbie, I-should-already-know-this-and-I’m-embarrased-to-ask questions, and the most experienced investors’ questions about wealth-building. I first heard of him from Crystal at Money Saving Mom – she seemed so sure of her family’s finances, and she actually had hope about their future. And she wrote about drastic ideas, like not using credit cards for anything, even for emergencies, or even for the airline miles. She and her husband’s plan was also to save up for a 50% down payment – half a house in cash! I didn’t know much about personal finance, but I did know that was unusual.

So I tuned in to Dave, mostly to see what all the fuss was about. And it took only one podcast of his radio show, and I was hooked. I bought his main book, The Total Money Makeover, and devoured it in one sitting. There were some more elite, more scholarly personal finance gurus who didn’t think the world of Mr. Ramsey, but I didn’t care – I was a regular girl, just trying to manage my family’s finances in a God-honoring way. He just made sense. Plus, he follows Jesus, like me – so I knew that at the very core, his ideas stemmed from the same place on which my worldview rests. That was reassuring.

I became passionate about personal finance. I inhaled all the money knowledge I could get my eyes on. Finally, all those terms like mutual funds, 529s, and PMI made sense. I understood the difference between a traditional and a Roth IRA. Those things I felt like I was “supposed” to already know – I learned them.

Why I’m passionate about wise money management

a rose cupped in hands
Photo by Hamed Saber

The reason I’m so passionate about wise money management is because when the finances are run properly, life works better. Spouses communicate, cash is spent guilt-free when it needs to be spent, and longer-term goals like saving for children’s college become a real possibility. You actually think about money less, because you know its doing its job in your life. It doesn’t run your life – you’re in charge of the numbers.

You’re no longer scared of the numbers. They’re just numbers. And you truly start experiencing that sweet spot called enough.

Planned Money Management 101 topics include:

  • credit – what it means
  • more budgeting ideas
  • the best definition of frugality I’ve ever heard
  • how to communicate with your spouse about finances
  • how to communicate about finances with your kids
  • your FICO score – how important is it?
  • insurance – what kind you need
  • investing basics explained

In the meantime, you can read more money management topics on Simple Mom:

And these are some top-notch posts from some of my favorite bloggers:

What are your financial fears? What have you experienced in your life when you finally understood something about your finances?

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Comments

  1. I look forward to this series Tsh, because yeah–money is confusing, boring AND overwhelming to me. I hate hate hate it, and often feel like there’s no way to ever understand it. Oh the stress.

    Thanks for tackling this topic and inspiring me to stick around and learn. :)

    `Arianne

    To Think Is To Create´s last blog post…See You At The Beach

  2. I’m also looking forward to this series. I believe that money management is essential in order to reduce the financial stress in any relationship. Hubs and I just recently sat down and itemized all our spending and re-alligned our savings/ expenditure budget for this year. I will be keeping close track of money movement through my excel sheet.

  3. Sounds like a great series! I’m very passionate about teaching our children at a young age about money to break the cycle of debt. I have been speaking locally about this topic and wrote a post about it. You might find it helpful. Great meeting you at Blissdom too:-)
    -Amy

    http://www.livinglocurto.com/index.php/2008/11/teaching-kids-about-money/

    Amy @ Living Locurto´s last blog post…Weekly Meal Plan – Week 1

  4. Looking forward to this series. We’ve really enjoyed reading Money, Possessions, and Eternity by Randy Alcorn. Especially, as you mentioned, with a desire to share Jesus’ worldview, Randy notes that all this frugality, spending, giving, whatever should be in light of the fact that what we do here on this earth with our money will matter forever. It’s a great read and I’ll look forward to hearing all you have to say about managing our money better!

    I blog about seeing things in light of forever over at http://burningbushes.org/ Hope you’ll join me.

  5. Dave Ramsey is the man!! I have one or two of his books and he’s great! It’s so important to be financially aware, especially during this time of economic downturn. thanks for the reminders.

  6. What a great post Tsh! I must say that the new columnists are great, but I have been missing “you” in the posts, so looking forward to the new series. I have always been thinking of myself as a person who is good with money, but am always keen to learn, and from what I know you are the right person to learn from.

    Emma of Baby-Log.com´s last blog post…What it takes to teach a toddler feed himself, part 1

  7. I can’t wait to read your new series. Since moving I really just pay the bills. I use to keep track of every cent we spent. When I stopped doing this we have gotten into trouble. This February we will be paying off my automobile early (our tax money). So we are finally working our way out of debt.

    SoBella Creations´s last blog post…Chalkydoodles

  8. I really look forward to your new posts coming soon!!!! I was just pondering yesterday… ‘how the heck are people getting rid of $25k of debt in just one year?!?!’ I am hoping that your series will have some insights for me to use :)

  9. I was pleasantly surprised to see a mention criticism of Dave Ramsey’s philosophies in this article. It would be nice to maybe explore some of the critiques in your series, such as the higher APR vs snowballing approach. I personally disagree most with his aversion to home mortgages. Some debt can be good debt, especially that which is tax deductible. That said, anyone who encourages fiscal responsibility and personal accountability cannot be ignored. A balanced technical discussion of the issues would be lovely as you explore this topic in detail. But I am sure you are already planning to do that anyway. Good luck.

    Rebecca´s last blog post…Visit to the Park

    • Yep, I’ll be happy to discuss some of the most common “arguments” to Dave, like paying off the house. To give other people a heads up:
      • Dave advocates paying off the house asap.
      • Many people argue this is whittling away a perfectly good tax deduction.

      What Dave says about this:
      • What you’re not paying in interest towards a mortgage is greater than what you were saving by not paying the government. I don’t have hard numbers in front of me, but basically, if you kept a mortgage around for the tax deduction, you’re paying the bank $1200 in interest to avoid paying the government $600. (Those aren’t real numbers, mind you – I’ll do it more concretely in an actual post).
      • So if you want that same tax deduction, take that money you are now going to pay in taxes b/c of a lack of mortgage, and make a charitable donation. You still get the write-off, and you actually get to decide where the money goes, instead of to the bank in interest.

      That’s a VERY basic explanation of what he says. I’ll get into it more, later, but I wanted to have something in writing for this first post, in case someone comes across it later. Thanks for your comments, Rebecca! :)

  10. Wow, we must be on the same wavelength here. I just finished a post about my favorite personal finance blogs, because I do think that this issue is so important to everyone, including those of us focused on creating a good home life for ourselves and our families.

    Some of the positives of being in control of your personal finances, and not the other way around, are:

    1. Consciously deciding where your money goes, instead of being surprised, good or bad, at the end of the month.

    2. Being able to plan for the future and using your money as a tool in that process.

    3. Avoiding additional debt, because when you have control of your finances you can save for things, making sure you don’t incur debt, and also generally can get better interest rates meaning it won’t take as long (or as much cash) to pay back any debts you must incur.

    I am really looking forward to reading your series!

    Taylor at Household Management 101´s last blog post…Feb 14, Personal Finance Blogs I Recommend

  11. I am so excited to read some more on money management. Near the end of 2008 I read some Dave and I am currently reading Your Money/Life. Even once you start learning about money management it’s hard to find a system that works for you. It is one of the most problematic areas of my life, and I truly think once I can get a handle on this whole personal finance thing my whole quality of life will improve.

    My biggest money fear is, hands down, not getting my personal finances together and not being able to provide the life I want for my children (a home instead of an apartment, money for college, etc.).

    I am excited for more development on these topics!

    Lucie @ Unconventional Origins´s last blog post…7 things I learned at my first blogging conference

  12. I look forward to this series — but, my biggest money “fear” is about my husband and mines’ income right now. We make a pretty good income, but it is the type where we have money coming in from several (about six) different employers between the two of us. We can’t even keep track of all the paydays or figure out how much money we have from month to month. It’s not like we exactly have a variable income (which I understand means some months there’s no income — thankfully, that isn’t our situation), but it is highly confusing.

    Before I married, I was a public school teacher, so I made a certain amount net every month, without fail. I did zero-budgeting (where I put my money at the top, subtracted my non-negotiable expenses, and divvied out the rest). Now I don’t know how to budget anymore — and my husband who is better with math and investments handles most of the money, but I’m in charge of all “household expenses.” He gives me no budget limit, but trusts my judgment. I didn’t even trust my own judgment when I was single!

    That’s my biggest money fear — that I’ll blow it accidentally, and lose my husband’s amazing trust in me.

    • Just an idea… I recently cam across a budgeting tool that helped me grasp the variable income situation (my hubs is self employed and I am at home). He proposed using this months income to pay next months bills. This way you have concrete numbers to work with. I think the software was YNAB. Even if the software isn’t something you want to buy I think he has some valuable tips especially for those with variable income.

      Liz´s last blog post…Crimson is complete!

  13. There is so much stress and worry when people don’t understand stuff, and money is usually at the top of that list. There is nothing like the peace that comes from having a handle on your money. Even if you still have debt, just having a plan can be instrumental in bringing a sense of calm to any house.

    Staci at NoIwasn’tsleeping´s last blog post…7. Cheap Friends – Worth more than their weight in Gold

  14. I look forward to the series.

    My financial fear is not having enough in our later years. The first time I really understood that I need to have a more active role in our finances and retirement was when I realized all of the fees we were paying in our retirement accounts. Years ago we had our accountant set up our retirement accounts and while we were diligent about contributing to them, we were forking over some very high fees. I didn’t realize this or I should say ‘understand this’ until recently. Now I am working on switching our iras over to a different company that has low fees. In the long run I hope to save us alot of money and take a more active role in planning our retirement.

    Family Balance Sheet´s last blog post…Retirement Planning: Staying the course even when it hurts.

  15. I like your ideas and info but why do we have to bring Jesus into it. Who cared what denomination the financial guru is – that’s seems rather exclusionary. Can’t we just privately believe what we believe instead of needing to bring it up liek that?Bummer to see that on the site.

    • Hi Karen,

      Are you referring to seeing it on my site, or on Dave’s? If it’s on Dave’s, I hear your frustration that it seems like “religion” is brought into a finance site, and that it seems rather unnecessary. But handling finances does speak deeply into a person’s core values, and for Dave, his (and my) faith plays a direct role in how he chooses to spend and save his money. I, for one, think he does it rather tactfully, but then again, my beliefs are pretty much in alignment with his. :)

      All this to say – please don’t let his solid advice be brushed off because you might not necessarily agree with his theological views. His financial wisdom is healthy for anyone, regardless of their beliefs.

      If you don’t like that I mention my beliefs in this post, feel free to contact me using the form above, and we can talk further. :)

  16. I really look forward to your series! My church small group just began watching Dave Ramsey’s DVD series and so far it is really great. My husband and I have already been able to make some changes and improvements with our money even after only watching 2 episodes!

    Sarah H.´s last blog post…Meal Plan Mondays: 2-16-09

  17. After discovering SimpleMom this past fall, we started an envelope system and completely revamped our “budget” based on the articles I read in your archive. I’m starting to see a better future for us because of your guidance and I truly appreciate that.
    That said, I can’t wait for Money Management 101! Especially the post on communicating with your spouse about finances. That is the MOST difficult part of money management for us.

  18. I’m so glad to see that you are going to delve deeper into this topic. I think people are hungry for information and just feeling anxious about finances across the board. I like to see women, and especially mothers, tackling finance issues, giving their perspective, and sharing their knowledge. Finance typically seems to be a “man’s” territory, which can scare off women into thinking that it’s just not something they are capable of handling by themselves. Looking at it as part of the big picture of being a savvy home manager for your family is refreshing.

    We are Dave Ramsey fans as well. We have been following his plan to get out of debt and live in financial peace for 8 years now. I can honestly say that now that we have things under control and my husband and I are working toward common goals, I don’t have any fears about money anymore. That’s true financial peace and it’s a huge blessing.

    katydid6´s last blog post…Kiss Kiss From Us Us

  19. I am looking forward to your series. We went down from two incomes to one in the past year, plus, I am back in school, with two small children. Trying to stay afloat is really hard right now, especially since my husband had to take a cut in pay last week to keep his job. I am afraid to log onto our bank website and see the bad news, and we have cut out every luxury that we possibly could. Any help that I can get would be greatly appreciated!

  20. I can’t wait for the series! You have already helped me so much with my budgeting, and I can’t wait for you to delve deeper.

    Kate´s last blog post…Free Necklace Giveaway!

  21. I too can’t wait for this series. This is something that I’ve been trying to get a hold of in my own household. But with lots of debt and a partner that has no head for finances it’s been a difficult journey. Hopefully you’ll share something to help us out.

    LaToya @ Christian Momma´s last blog post…Retail Therapy

  22. I love to meet other Dave fans! You and I are a lot alike!

    Heidi´s last blog post…Whose Cash Is It?

  23. I am really excited about this series. I recently listened to The Total Money Makeover on audiobook. It felt so empowering. I was the ostrich who stuck my head in the sand whenever money was an issue. Being married to a man with good credit (with my fair/poor credit) made it a constant issue. Dave gave me some good tools and the motivation to really work on getting our finances together and out of debt. I can’t wait to participate in the discussion of this series.

  24. I am also a Dave Ramsey “disciple.” I am so thankful that we heard about Dave and his money management principles early in our married life. What a relief it’s been during the lean times to be out of debt and have an emergency fund in place. However, I always feel we can do a little bit better in this area, so look forward to following your series!

  25. looking forward to this series. we’re a single-income family, trying to get stuff turned around and pay off our debts despite my husband’s pay cut this year. and i agree that when your finances are in order things just work better. what’s most important to me about sound money management is that it allows us to be better stewards of the money God has provided for us. i get frustrated at myself for not being more responsible about our spending beforehand, because i feel it limits how we can use that money to help others.

  26. Yea for Dave Ramsey! My husband and I have always been pretty frugal, but Dave helped us in the budgeting dept. I’ve done a few posts about his stuff at my blog, here: http://www.thetowells.com/?s=dave+ramsey. I enjoyed your post, too. Great site.

  27. I am looking forward to this. I also really like Dave Ramsey. He makes sense to me and his advice is pretty cut and dry. I agree that when you have a budget and you know where your money is going each month you think about money less. I may not always LIKE where my $$ is going (to pay off credit cards instead of savings, for example) but I KNOW where it’s going and I have a plan. I really like the envelope system that Dave recommends and can’t tell you how much it has changed our lives.

  28. I love Dave Ramsey, the FPU was such a wonderful program!!
    Fave Dave Ramsey on MomFaves! http://www.momfaves.com/faves/1240

  29. I don’t find this stuff boring at all – just necessary. Especially for women. I manage the finances at my house and I’m always surprised how little my friends know about their own – I’m usually referred to their husband when I have a tax or mortgage or other such question that I want to hash out with someone.

    I also wanted to mention that when my now-husband and I were engaged and living in Nashville 8 years ago, we actually went to Dave’s office for the 13-week group money study course they had. It was the best move we could make to get ahead of the money argument in marriage. If I’m not mistaken, there are lots of people all over the country running these Money Makeover (not sure exactly what Dave is calling it) courses in small-group fashion. So if you’re someone who wants the benefit of a group guiding you through the process, log onto Dave Ramsey’s web site and look for a small group near you.

    • It is called Financial Peace University, and they’re not only all over the U.S., but it’s also online (it’s how we took the course). I highly recommend it to everyone, no matter their financial status. Here’s more information about it.

  30. I’m so excited about this series. I have been working on becoming a better home manager, especially in my finances.

  31. Good post, I am so excited to read some more on money management. Even once you start learning about money management it’s hard to find a system that works for you. It is one of the most problematic areas of my life, and I truly think once I can get a handle on this whole personal finance thing my whole quality of life will improve.

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