#004 – On this episode, Mayra reviews why paying cash helps tame our spending habits. Automatic payments are usually out of sight and out of mind, Mayra reminds us why we need to review them periodically. She also goes over Dave Ramsey’s baby steps and explains why budgeting takes practice.
[0:02] Hello, welcome to the All Things Money Podcast. My name is Mayra Alejandra Garcia, and I am a Financial Coach that wants to inspire you to reach your goals, grow your net worth, and be wise with money. On today’s show, we’re gonna be talking about why cash is the best way to do any transaction. I’m also going to be walking you through the exact same baby steps I took to become debt free and these are Dave Ramsey’s baby steps. We’re also going to be talking about behavior and how that needs to shift in order for us to be successful at any of the things that I’m going to be teaching today, and ultimately how practice makes perfect. So stay tuned. We’re gonna walk through every single one of these things.
[0:53] Why cash? Well, when money leaves you, you have an ouch moment. You feel money. This is why you should use cash for as many categories as you can. For the first couple weeks, when you’re budgeting and using my system, I ask my clients to use cash only for food, clothing, and a couple other categories, depending on their spending habits. When you’re able to feel money leave, you are more in control of your spending, you can automate from payments, you can swipe your card for gas, for example… but you don’t have the actual ouch moment when you’re swiping a card. That could be a debit card or a credit card.
[1:50] Do you actually feel the taxes that are coming out of your check? Not really, but that’s because it’s automated. So, let me tell you, they take a check. You didn’t feel it. Out of sight, out of mind. You know that you’re taking home a certain amount and that’s what you anticipate. But really, your gross is anywhere between 20 and 30% more than what you brought home. And that’s exactly what happens with automatic payments. You don’t feel them. You will start feeling the money that leaves you when you use cash, but because you have these monthly memberships like Netflix, like Disney+, and Ipsy and Boxy Charm, and all these things that are out there, that you really need to start evaluating and really feeling the money that is leaving, because these automatic payments are on auto draft, you don’t feel them. A lot of the times we completely forget that they’re there, and it takes effort and time to sit down and cancel all these things that are not necessary, because most of them aren’t. So, it’s really important that we start paying attention and that you start using cash, as much as possible, so you can visually see how much you have left or accounted for in a certain category, and so on.
[3:37] So, we’re gonna move on to the Dave Ramsey baby steps. These baby steps were exactly what I used in order to become debt free. And so, baby step #1 is to save $1,000. If you are a homeowner, I recommend that you save $2,000 in this step, because I have found that $1,000 is not enough when you’re a homeowner. So baby step 2 is to pay off your debt using the debt snowball. And I’ll go into more detail about the snowballs later on the show, but pretty much as you pay your payments smallest to largest, and I’m talking about balance, so the smallest balance first, and you pay minimum payments on everything else and attack the little one with a vengeance. Baby step 3 is that you have a 3-6 month emergency fund. So, not necessarily what you make in 3-6 months, but what you spend in 6 months. So, what does it take to sustain your household for 3 months? And so, I would recommend that you have that saved up in case of an emergency, a lost job, etc. Baby step 4 is saving 15% of your take home pay into retirement. And it’s really important that you partner with somebody that is willing and able to teach you how to invest and why they’re investing that way for you. So, a really good financial planner is what I recommend. They’re experts in their field and they can teach you and so go with somebody that is willing to teach you, why, the why’s behind what it is that you’re investing in. #5 is college fund. And baby step 6 is paying off your house early. And what I want to mention is baby steps 4, 5, and 6 should be done at the same time. And baby step 7 is give. So, once you’ve had your house paid off, then you’re able to give a lot more to charity, you’re able to give a lot more to your church, or whatever it is that you want to do with the wealth that you’ve been blessed with.
So, I want to talk about money is an active thing. Currency is called… it’s called currency, because it moves. People that win with money are the ones that understand that it needs to be tamed. The number one habit in Highly Effective People, the book by Stephen Covey, is that you have to be proactive. You happen to think… you aren’t a victim and you don’t use victim language. You have to be intentional and proactive on what’s leaving. What is happening to your money? The number one mistake that I see people make is that they don’t pay attention. I talked in episode 3 about how my mom just didn’t pay attention. She wasn’t organized, she didn’t have any recollection of when her bills were due, and really, you have to be intentional and you have to make your dollars behave. You will either learn to manage money, or the lack of money will manage you. Money flows from those that don’t know how to manage money to those that do. And that’s a fact. So, we have to start changing our behavior. And we change your behavior when the pain of staying the same becomes greater than the pain of changing, and this is a quote by Henry Cloud. He’s a psychologist. And I’m going to say that again. “We change our behavior when the pain of staying the same becomes greater than the pain of changing.” So, behavior and choices cause results. We have to do a written plan. You have to do a budget. You have to do a cash flow plan, whatever you want to call it. You’ve got to plan your money every single month.
[8:23] So we are approaching October, so it’s time between now and the next couple of days to plan out October. Well, practice makes perfect. So, you have to give yourself grace when you’re starting to do something like this. It will be awful at first. The first month, you’re going to find that you forgot to add things to the budget. The second month, you might have an unexpected thing arise. The third, you’ll be a little more understanding of the process and have much more control of what you have going on. So give yourself a solid 90 days. Do you remember that when you first started riding a bike, you had training wheels? You have to remember that when you first started driving, you had someone beside you. Give yourself grace. It’s scary at first, but partner with someone that you trust. Feel free to reach out to me or to someone at your church, or someone that you trust that you know manage money well, and talk to them. Help them hold you accountable because this is going to be so important. You have to have accountability, because then when push comes to shove, and you have to make a decision at the store, and you don’t have an accountability partner that is going to keep you in check, you will overspend. And that’s the problem. And in order to be successful, you need to be accountable to someone. If you are married, that someone should be your spouse. So make sure that you prepare for success, because practice makes perfect. You didn’t ride the bike without training wheels, all by yourself without someone next to you the first time you got on your bike. Is this going to be hard? Yes. Is this still possible? Yes. If you keep doing what you’re doing, you’re gonna keep getting what you’re getting. So, you have to shift, you have to start. This is a perfect time. It’s September 29. You might be listening to this a little later, but it’s perfect to start planning your October budget. So let’s get to it. Thank you so much for listening. If you are enjoying this podcast, please head over to mayraalejandragarcia.com. I’d love to stay in touch with you. And make sure to drop your email address so that we can stay in touch. If you have a question, make sure to leave that on my website as well. I’ll make sure to answer it on the show. And you would like to share this on Instagram, tag me @mayra.alejandra.garcia, and I’ll see you on the next episode.