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Ask Dave

Stop the Drama

Traci wants to know how to start her Total Money Makeover. She's broke, behind on bills, and doesn't know how to start the envelope system. Dave explains it starts with the budget.

QUESTION: Traci on Facebook wants to know how to start her Total Money Makeover. She’s broke, behind on bills, and doesn’t know how to start the envelope system. Dave explains it starts with the budget.

ANSWER: I don’t know why you have to be caught up to start. You misunderstood how to do a budget. A budget is, I’m going to sit down with all the bills that I have, which includes being behind, and look at those bills and my income for this month and this pay period, and I give every dollar a name. You put your income at the top, and the first things you need to take care of are food, clothing, shelter, transportation and utilities. You have to eat, you have to keep a place to live, and you have to keep the freaking lights on. No drama here. You’ve got the money to do that, so sit down and pay your light bill on paper. Put your income at the top. Pay your food bill. Write out how much you’re going to spend on food. Pay the lights. Pay the water. Pay the rent or the mortgage. Pay the car payment if there is one. Put gas in the car. A little bit of basic money for clothing—nothing fancy. You look at that, and then with what’s left over after you do your basics ...

The drama is all in this email here. Just stop the drama. You’ve got the money to do the basics. Then you look at the bills you’re behind with. What have I got to do to get current with those? Let’s say you’re behind on your electric bill, and you’re behind on MasterCard. MasterCard gets nothing until the electricity is current. You’re behind on the electric bill, and you’re current on MasterCard. You quit paying any bills that aren’t necessities until the necessities are current. You get current with necessities first and foremost. Then we’ll work on everything else that’s not a necessity. The necessities are food, shelter, clothing, transportation, and utilities. Then you work on everything else. Everything else has a name, dollar by dollar by dollar by dollar, right down the list. Every dollar has a name. Every dollar has an assignment.

As far as the envelopes, you don’t have to be caught up to have cash just suddenly appear. You get paid this week, you’re going to go buy groceries this week. All the envelope system is for groceries is you say instead of putting your money in the bank and then writing a check at the grocery store—all the envelope system is, is you put your money in the bank, and you cash a check for your food budget for that week, and you put that cash in the envelope, and you use that cash at the grocery store. It’s the same money you would’ve been using anyway at the grocery store.

You don’t need to get “caught up” to start envelopes. That’s not how it works. And you don’t need to get caught up to start a budget. You do have to assign a priority to some things and decide on purpose what’s not going to get paid this pay period or this month if you’re behind. You go down the list as far as you can go down the list, and you draw a line, and whoever is below the line simply does not get paid this month. Something’s not going to happen. You might as well decide what that is on purpose. You have to happen to your money, or the lack of it will always happen to you. You have to make the dollars that you have behave.

You don’t have to get caught up to start the envelope system, and you don’t have to get caught up to budget. All a budget is, is you’re making the money that you have go to what you want it to go to this month. That could include things you’re behind on.