Budgeting, I know it’s a God-awful thing to do month after month. Taking the time to write down what you anticipate your expenses will be and how much income you can make is a daunting task. I’m right with you on that sentiment. Any type of budgeting including zero based budgeting can bring me into a funk, but I’ve learned the dreaded task can bring about great financial improvements.
However, budgeting is a necessity because it ultimately leads to FREEDOM. Freedom? How is that? Knowing where and how you spend your money allows you to be free from worry and agnst due to overspending. Have you ever come to the end of the month and realized you had more bills than money? Yes? The fear and anxiety from a lack of income can be excruciating. It can bring about internal illness, and stress can manifest itself in physical sickness. You see, money is a required element for life. A lack thereof can cause a person to have severe mental and physical anguish.
How does budgeting help ease our money fears?
(1) It allows us to know what we need to pay for in the coming month. (2) It allows us to know exactly how much income we will have for the month (3) We will need to know whether there is a need to generate extra income due to a shortfall or if we have the ability to save. Knowing these things ahead of time allows us to set up a PLAN.
A budget is how we plan where we will spend or save the money we have earned. It’s as simple as that! There are many budgeting strategies that can assist us in planning where to allocate our funds. The method that I utilize is the Zero- Based Budget plan.
What is Zero-Based Budgeting?
Zero-based budgeting is when your income minus your expenses equals zero. Yup, that’s it. The amount of money you bring in minus the amount you give, spend, or save should equal zero. I prefer this method because it lets me know exactly where my money should be spent BEFORE I spend it. It also allows me to determine how much I desire to save and spend in each category. It’s a beautiful thing!
How to Make a Zero-Based Budget
1. List your monthly income.
List every source of income that you have:
9 to 5
Side Hustles
Child support
Leave nothing out!
2. List your expenses.
- Household expenses (rent, mortgage, utilities, etc.)
- Other essentials ( insurance, debt, childcare, etc.)
- Savings
- Extras ( the fun stuff: entertainment, fun money, restaurants, etc.)
- Month-specific expenses (Any holidays, celebrations, or semiannual expenses due this month?)
- Miscellaneous – Because stuff happens!
- Giving
3. Subtract your expenses from your income to equal zero.
You are about to start the fun part of the budget! After you record your income and subtract your expenses, you should net to zero, but what if you don’t? What if there is extra money left over? Well, this is a great position to be in. You can allocate the additional funds to debt (I strongly encourage you to pay off debt as fast as possible, and adding the extra funds to this category will help you become debt free more quickly). No debt? You can apply the extra money to savings (retirement, investing, etc.) or throw the extra cash into your ‘ME MONEY’ account. Hey, be daring and add the additional funds to several categories! Whatever you choose, ensure your budget is zero when you complete.
4. Stick to your budget!
Setting up a budget is only helpful if you follow it! Track those expenses! Have you bought gas? Subtract the dollar amount from your Transportation category. Have you purchased a Starbucks coffee? Subtract it from your ‘ME MONEY’ category. You get the idea! Track a day will keep the budget-busting away!
5. Make a new budget (For the next month)
Before the month ends, set up your budget for the next month. Review your income and expenses and set up your budget categories accordingly. Lastly, pat yourself on the back and smile wide because you completed your first month of budgeting and did great!
Broke + Budget + Girl Shop has many styles of Zero-Based Budgets for you to choose from to get you started in the fabulous world of budgeting!