I am regularly asked questions, so I thought that today I would write out a few common questions that I get along with my answers.

Do you really use cash envelopes?

Yes.  Jenn and I believe that it is the best way for us to ensure that we do not overspend the amount budgeted.  When we utilized the debit card, we blew the budget EVERY SINGLE MONTH!  Therefore, we use the cash envelope system.  I will say, however, that we only use cash envelopes for those categories that tend to go out of control – groceries, dining out, entertainment, blow money, household (stamps, haircuts, flowers, plants, holiday decorations, etc.).

We do not use cash envelopes for the utilities, the house payment, or other expenses that we do not have the ability to splurge on.  One category that we are debating right now is gasoline.  We have always used a cash envelope, but it is not like we are going to splurge on an extra tank of gas.  Where would I put it?  We may be moving that to a debit card transaction for a trial period.

How do you and Jenn put together a budget?

Whenever we plan an outing or event, we mark it on the calendar.  About 1 or 2 days before the month begins, we will sit down and put together the budget using the budget forms (you can get your free copy by clicking "Tools" in the top right-hand corner).  We have kept loaded the expenses from the previous month and adjust them according to this particular month.  Because this month is December and we will travel more and spend more time out on the town with family, we bumped up the "Gasoline" and "Entertainment" categories.  We also bumped up the "Household" category because we are purchasing Christmas Cards and snail-mailing them.  We knocked down the "Groceries" category because we will be at our family Christmas and eating leftovers for a week (YES!!!!).

We then ensure that the secret formula is applied:  INCOME – OUTGO = EXACTLY ZERO

Print it out, put the cash in envelopes, write the checks, the end.  Fun stuff!  Total Time:  20 minutes

What type of cash envelopes do you use?

The ones handed out by the bank.  We ask for a couple of extra ones and replace the torn/battered ones.  I know other people who use the free envelopes that come along with those wonderful credit card applications.  Best part – Free.

Does your daughter use cash envelopes?

Yes, our daughter does use cash envelopes.  It is priceless! 🙂  When the money runs out, it's over!

Do you tithe (give 10% away)?

ABSOLUTELY – and then some.  I believe that people who live in the wealthiest nation in the world have a special responsibility to help others.  Jenn and I passionately believe in some things – Purdue University (Go Boilers!), NewSpring Church (Yeah!), and Missionary Work (Alaskan remote regions and the Military).  We want to support these causes financially so that they can accomplish their work effectively!  Maybe we should give more to Purdue because their football team has struggled (SMILE), but we LOVE these things.  We can't help BUT give.

Does Jenn believe in this stuff as passionately as you do?

I would say that Jenn believes in this stuff at least FOUR TIMES more than I do!  Here is the big secret:  I did not come up with the budget in our family.  It was JENN!!!  I am the spender!  I hated the word "budget"!  But when I saw that it would enable us to WORK TOGETHER and achieve the PLANS we have for our life!  Oh yeah, I became a kool-aid drinking fool about this stuff!

Let me know if this type of Q&A helps you!  If you have any questions that you would like me to answer on this blog, post it in the comments or send me an e-mail.  Thanks!

Want to know what your debt freedom date is?

It is pretty easy to calculate.

I do want to say, however, that there is one prerequisite to this calculation: You must STOP signing up for more debt! If you keep adding more debt, the debt freedom date will keep moving away from you!

So, knowing that you have said NO! to debt from now on, here is how you calculate your debt freedom date.

1. Download the Debt Freedom Date Calculator.
2. List all of your debt information as shown in the example below. You will need your debt name, debt balance, and your current monthly payment.
3. The balance of your debt balances and your payments will be totaled.
4. The calculator will do the rest by dividing your total debt balance by your total monthly payments. This yields your Debt Freedom Date!
   • $26,445 Debt Balance/$1,105 Total Monthly Payments = 23.9 months Debt Freedom Date

NOTE: This will get you really close to your actual debt freedom date.  You might notice that we did not include interest rates. We also did not include positive financial events like pay raises, tax refunds, bonuses, money freed up from budget improvements, and selling stuff.  For the average person who pursues debt freedom with much intensity, it is actually accomplished in about 2/3 of the time calculated here.

You now have your Debt Freedom Date! Post it on the refrigerator and celebrate as you see each debt disappear from your life.

Want the short answer?   NO!!!

Why?   Most of the contributions to an employee-sponsored retirement plan are done so on a pre-tax basis.   The contributions have never been taxed.

Here are my reasons why you should not pull money out of your retirement plan early:

• Lose the opportunity for your money to grow tax-deferred
• Time-value of money is crushed when you pull out the money you have saved for retirement.   You will never get that time back!
• If you pull money out of your retirement plan early, it will be subject to taxes PLUS a 10% penalty.
• You will  have to recognize the withdrawal as income for that year which will usually bump you up a couple of tax brackets.
• It is a VERY EXPENSIVE way to obtain money.   You will ultimately pay around 45% taxes on the money you withdraw!   If you pull out $50,000, you will actually bring home $27,500!   Taxes and penalties will cost you $22,500!   That is worse than a credit card!
• I would ask the question, “Why do you need the money?”   There is some reason that is causing you to want to pull the money out.   In MOST cases that I see, the reason is that the person(s) are spending more than they make and are turning to debt to make up the difference.   They view this cash withdrawal as a way to avoid more debt.   I have seen too many cases where the money is withdrawn (very expensively), and they never change their spending behavior.   They then end up with  zero or very little in their 401(k) PLUS they still have a pile of debt that increases every month!
• FINAL REASON:   It’s for RETIREMENT!!!   That is why it is called an employee-sponsored RETIREMENT plan!!!   Trust me.   You WILL be tired some day.   You WILL want to reTIRE someday.   If you take this money away, how will you be able to retire?