Is there a secret to following a budget?
Yes, I think using a Zero-Based budget has helped my frugal self stick to a budget month after month , greatly restrict overspending, and has allowed me to increase my savings much more quickly.
A zero-based budget subtracts all the monthly expenses from the monthly income. The income for the month is all you are allowed to spend, no more, and every dollar has a specific purpose.
There is always enough money to cover your basic essential bills and there are specific amounts designated to go towards your money goal each month already built into your budget, instead of carelessly spending on what you want, only to find out there is not enough money for groceries or to put towards debt/savings at the end of the month.
A zero-based budget subtracts all monthly expenses from the monthly income. A secret to successful budgeting.
Here is a simple example of a zero-based budget just to give you an idea of what it would look like. Of course, your numbers will be different and there will be more line items in your budget.
Income for the Month
Benefits to a Zero-Based Budget
- Every dollar has a specific purpose and you know where every dollar is going.
- There will always be enough money for the essentials, because you planned them out at the beginning of the month.
- Seeing where every dollar for the month is going, helps you be more conscious of and avoid overspending. You know there is no extra money to just spend because you have it in your checking account.
- The budget can be the ‘no-sayer’ and can take the blame for when your spouse or family want to do something when there is no money allotted for it.
- Planning out specific amounts to go towards paying off debt or building your savings at the start of the month means the money will actually be applied to the money goal, instead of hoping to pay extra money towards debt, but having nothing left over at the end of the month.
There is no guilt with spending on a Zero-Based Budget.
- There is no guilt on spending. If you have decided to put $50 for clothing in your budget and want to spend all the money on one shirt, that’s fine.
- A zero-based budget gives boundaries to your spending. If you overspend, you know you will be directly affecting another category.
- You learn to ask yourself if you really need the item you want to purchase or if it can wait. If it can wait, often you will find that you don’t end up buying the item anyways, which saves money.
- You have specific amounts for each line item which makes it easy to know if you have actually spent less throughout the month and you can skim off the extra to apply towards your money goal.
- You see more progress towards your money goals than if you kept the extra money in the account to roll over each month.
- Patience is developed as you build up savings to pay for a larger purchase.
- Discipline in spending is developed over time.
- The majority of your line items expenses will stay the same from month to month, with just a few variations.
- If you are married, your communication with your spouse will improve as you discuss goals and work together on your finances.
Cons to a Zero-Based Budget
There are some things to consider with a zero-based budget, that some people consider to be a negative.
- If an unexpected expense comes up, you have to juggle your line items taking money from one (or more) category, to come up with the money for the expense.
- A zero-based budget can be tricky at the beginning if you are on a variable income or if you are not paid on time, but it can be done.
- You have to delay spending and you can’t always get what you want when you want.
- It takes time to know every expense you need to put down as a line item each month (including annual expenses).
- There is no room for impulsive purchases.
- If you don’t add in a line item for extra expenses then you will constantly be juggling your accounts. I like to have about $50 each month for extra nominal things which do come up so I don’t need to readjust the entire budget.
How I follow a zero-based budget
- Every month, I will write out my zero-based budget with my income and expenses, adding any amount specific to the month in a notebook.
- I show the budget to my hubby and see if there is anything he needs to change.
- Then, every time I get paid, I prioritize the expenses that need to get paid immediately and cross them off my overall list.
- All the money which goes towards annual bills, are transferred into savings towards the end of the month, after all the bills which have monthly due dates have been paid.
- Any extra money goes towards my savings goals.
- Repeat for the next month.
I like using a zero based budget because it forces me to be more disciplined with my spending and budgeting in general.This discipline has ensured there were funds to get out of debt, pay for my hubby’s tuition, and build up savings.
Over the years, I have come up with a few tips to help make the Zero-Based budget work.
My budget is written in a loose-leaf notebook, where I can cross everything off as it gets paid and keep track of any savings or extra expenses. This method is simple, portable and works for me at this time in my life.
Keeping $1,000 of my emergency fund in my checking account provides a buffer for when bills are deducted from my account at the beginning of the month before I get paid, however, once I receive a check, the bill is crossed off the master list and the $1,000 balance is re-instated.
However, this $1,000 is not spent for any other reason and has No Touch written all over it, basically I consider my $1,000 to be my 0 balance.
I have learned to include annual bills each month, as a small monthly portion which gets transferred into my savings account for that specific bill. That way, the money is always there when the bill comes due. Now, I see very little variation between each month for 98% of the line items in my budget.
When there is a variation, for example on my anniversary month, a new line item is put into the budget for that month to pay for anniversary gifts for my husband and I. It is a small amount easily absorbed and doesn’t need to be saved for over several months.
As I continue to put every extra cent into savings each month, I find going through my budget at the end of the month to see if there was money left over to be very exciting as I am making more progress than just the planned savings.
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