The Four Walls and Budgeting
Overview of the Four Walls Budget
One of the first rules of budgeting is paying the most important bills first. How do you prioritize bills, and which bills must you pay when there is more month than money?
The “Four Walls Budget” is a budget based on supporting the four walls (your home) as defined in civics class. In order to support the four walls of your home, you must pay the following types of bills: basic shelter, basic food, and basic transportation, basic clothing.
Dave Ramsey calls for budgeting for the four walls when creating your budget, especially if you have insufficient funds to pay all your bills, so that you pay for necessities first and foremost before paying anything else.
We’ll assume for the sake of simplicity that income taxes are already taken out of your paycheck or no longer due and you are deciding what to do with the rest of the money. What does each category include, and what is not included?
The Four Walls Budget
Basic shelter expenses include those expenses required to keep a roof over your head. Basic shelter expenses include your rent or mortgage payment, though it does not include additional principal against the mortgage. Basic shelter also includes your basic utilities such as the water bill, sewer bill, electric bill, heating oil bill, property taxes and minimal phone service to reach 911.
Basic shelter expenses does not include lawn maintenance, pool service, pest control contracts, optional Home Owner’s Association services, high speed internet, decorating expenses, vacation rentals or timeshares. In a bare bones budget, you must cut everything that is not necessary to stay in your home and maintain it as a refuge during a financial storm. Your home owner's association dues may be a necessity if failure to pay them allows them to foreclose on your house, something allowed in Texas.
Basic food is that which keeps you fed and includes all essential nutrition. Eating out is not part of a basic food budget – eat at home or brown-bag it. Basic food expenses do not include soda, beer, wine or any premium brands. If you cannot meet your financial obligations, organic food is a costly luxury you cannot afford. Coffee is also a luxury, though an addictive one. If you cannot function without it, switch to a generic brand and ration it - and do not stop at the coffee shop. This is why the coffee shop “latte factor” was coined to describe the little leaks of money that ruin a budget.
Basic transportation covers the minimal costs to get to and from work, school, doctor’s appointments, shopping as required for maintaining the household and so forth. Basic transportation includes car registration and inspection costs, minimal payments on a car payment to keep the absolute minimum number of cars, legally required auto insurance and required car maintenance. If you use public transportation, a bus pass or train pass to get to and from work is part of basic transportation. Basic transportation does not include trips to visit friends, any vacations, payments for a motorcycle or “spare” car, boats, vacations, recreational trips or going “home” every few months.
Basic clothing is just that, basic. If you have a closet full of clothes, you shouldn’t need to buy anything at all except undergarments, socks and replacement shoes for a while. For families with children, new to you (don’t shun second hand) clothing in the next size is necessary. Prom dresses, new seasonal fashions, new clothes to keep up with the latest fashions and wardrobe updates are luxuries you cannot afford. It is insane and irresponsible to spend money on recreational shopping when you cannot pay for your own food or utilities. Reading glasses and eyeglasses that permit you to see fall under this category, but there is no excuse to buy new sunglasses to maintain a “look”.
What is Not in The Four Walls Budget?
Entertainment is not a part of this budget. Find free entertainment. This could be an afternoon at the library, a walk through the neighborhood or potluck dinner. Listen to the music you already have or watch movies you already own. Blowing money on concert tickets or video game subscriptions when you are late on student loan payments will land you in hot water.
Education is also not in this budget. If you cannot afford to support yourself and there is no one else (parents, partners, a spouse) to help you, educational expenses must be slashed. Private school, continuing in college, music lessons, yoga lessons, life coaching and seminars are all costs you cannot continue to pay.
Charity is also not part of this budget. You can still contribute time to causes you support, volunteering or working in their fundraising group. However, if you cannot support yourself, afford to support them financially, no matter how worthy the cause. Give of your time and talent instead.