Budgeting is often seen as a restrictive and daunting task, but it doesn’t have to be! Let me tell you my secret, my budget is actually permission for me to spend. With a zero-based budget, you take control of every dollar and assign it a specific purpose. Whether you’re trying to save for a big purchase, pay off debt, or just want to have better control over your finances, this budgeting method can help you achieve your goals.
So, how and when exactly can you start using your zero-based budget?
First, let’s get on the same page about what is a Zero-Based Budget?
➡️ A zero-based budget is a method of budgeting where your income minus your expenses equals zero. Every dollar you earn is given a specific job, whether it’s going towards bills, savings, debt repayment, or even entertainment. The idea is to be intentional with your money, so nothing is left unaccounted for.
How can you create this amazing zero-based budget? Glad you asked!
- 1. List Your Income:
Start by calculating your total monthly income. This includes your salary, freelance work, side hustles, or any other source of income. If money is coming in, it’s income, yes, even childcare money! Be sure to use your net income (after taxes) for the most accurate budget.
- 2. List Your Expenses:
Make a comprehensive list of all your monthly expenses. Include fixed expenses like rent, utilities, and insurance, as well as variable expenses like groceries, entertainment, and gas. Don’t forget to include irregular expenses like annual fees or quarterly payments. Especially expenses with going back to school!!
- 3. Assign Every Dollar a Job:
Start assigning your income to cover your expenses. Prioritize your needs (e.g., housing, food, transportation) before your wants, not sure what they are? You can read about it here. Continue until every dollar is allocated and your income minus expenses equals zero. If you end up with $10 or $1000 after you’ve allocated all the money to all your budget categories, first of all: Great Job. And second, no it’s not money to go spend on wants, it’s to either
- Increase your debt payments or
- To start your Get Rich Fund (yes, some call it emergency fund…) or increase your savings
- 4. Adjust and Track:
Life is unpredictable, and expenses can change. Regularly review and adjust your budget as needed. Tracking your spending will help you see if you’re sticking to your budget and identify areas where you can improve. I am a big advocate that you have a weekly Money, W(h)ine & Cheese meet because you are taking care of your Money, at the beginning there will be a lot of whining and maybe you will need some wine and Cheese is just good!
- 5. Build a Buffer:
While a zero-based budget means your income minus expenses equals zero, it doesn’t mean you shouldn’t have any money left in your account. Building a small buffer of cash in your checking account can help cover any unexpected expenses or timing differences in your payments. (See point 3).
So, what are the benefits of Zero-Based Budgeting?
- Intentional Spending: You’re more mindful of where your money goes.
- Increased Savings: By planning for every dollar, you’re more likely to save for your goals.
- Debt Reduction: Helps you prioritize debt repayment.
- Flexibility: You can adjust your budget as life changes.
Zero-based budgeting is a powerful way for anyone looking to take control of their finances. By assigning every dollar a job, you’re making sure that your money is working for you and helping you achieve your financial goals. Yes, this is my favorite method (which is why I talk about it so much!) and yes, there are other methods. However, when you are giving every dollar a job, you are more intentional with your money. I want you (and me) to be very aware that we actually have control of our finances, if we have debt or a lot of money in savings, it’s because os us.
📺 https://youtu.be/emzSxqgZMns
