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If you are a part of the budgeting community or debt free community, then you have probably heard of zero-based budgeting. If not, I’m going to teach you the basics of a zero-based budget and how to create one.
When I began my budgeting journey, I didn’t have money left over after paying my bills. I was living paycheck to paycheck. As I learned to save and cut out expenses, I had extra money left over. I wanted to put that leftover money to good use, so I did some online research. That’s when I learned about zero based budgeting. As I used this method of budgeting, I was able to save money and plan for upcoming expenses.
I want to help you do the same and stop the cycle of living from paycheck to paycheck. I’m going to get to the point so that you can take control of your finances today!
Give Every Dollar of Your Money a Purpose
Zero based budgeting is a method used to create a budget. This can be used to create a weekly, biweekly, monthly, and/or per paycheck budget. This budgeting method is used to budget each dollar of your money to a category or expense. In other words, give every dollar of your money a purpose or assignment. You tell your money what to do.
Your Budget Doesn’t Have to be Rigid
The process of budgeting is important, but don’t be too restrictive with your budget. Zero based budgeting allows you to create budget categories and you determine how much money you want to put into each category.
You can even budget money for unexpected expenses, commonly named a “buffer”. This helps you to stay within your budget and not feel so strict with yourself. Even if you are paying off debt, you can set aside a small amount of money to treat yourself. I call this “fun money” and normally give myself $50 to $100 per paycheck. I don’t feel deprived because I can buy anything that I want with my fun money.
Choose Which Categories Your Money Goes Into
Your budget categories will first consist of your monthly expenses such as: housing, utilities, transportation, food, clothing, insurance, and any other bills that you are obligated to pay. You can create your budget amounts by percentages of your income or by total expenses. Percentages of income is common if you want a certain percent of your income to go to expenses, debt, and savings. IT IS YOU BUDGET, SO IT IS YOUR CHOICE.
I write down my income and then subtract my expenses from that amount. The amount that is leftover is usually allocated to debt payments and savings accounts.
Income – Expenses = Money Leftover
I am a cash envelope stuffer, so I use sinking funds to save money for upcoming events and expenses. Savings challenges are another way that I use my leftover money. It’s a fun way to save money and I seem to save more when I do savings challenges.
Use Budgeting Tools
If you are new to budgeting, I would suggest that you get a notebook or sheet of paper to create your zero-based budget. There are budget planners, budget sheets, spreadsheets, and apps that can be used to create a zero-based budget. It does not have to be complicated; a pen and paper will be okay.
Create a Zero-Based Budget
Now you are ready to create a zero-based budget. I have a free 2023 Budget Planner that you can access here. The monthly budget sheet will help you to create a zero-based budget. Below is an example of a zero-based budget based on a $2,500 a month income.
Your budget may look different based on your expenses and financial goals. This is to help you see how a zero-based budget can look.
Set a Budgeting Schedule
To stay consistent with budgeting, it’s best to create a budgeting schedule. You can do this on a monthly, biweekly, or weekly basis. It can be done each pay period. It’s up to you. I would suggest that you put budgeting into your weekly, biweekly, or monthly schedule. This will help to reduce the stress of squeezing in time to budget at the last minute.
You Got This!
Now that you know what a zero-based budget is, it’s time for you to create your budget! This budgeting method has transformed my finances and helped me to be in control of my money. I know that it may seem intimidating, but you got this!
Before you create your zero-based budget, please leave a comment below letting me know what you will use to create your budget. Don’t forget to head over to the free resource library and grab your budget planner here! This is your budgeting journey, so make it fun!
