Have you thought about doing a budget, but didn’t know if it would truly be helpful or where to start? Here are 6 easy steps to follow to help you get started with doing a zero-based budget like a pro!
1. A Meeting Of The Minds
First and foremost, if you’re married you have to include your spouse – Some way. Somehow. If you think your spouse will be reluctant, you can try to start by telling him/her about your interest in doing a budget and why it would be beneficial to not only you but your family unit. When discussing this with your spouse discuss the logical side of things but don’t forget the emotional side of things. In fact, I would encourage you to emphasize the emotional side of it. Personal finance is so much more than numbers. You’ve spent so much of your life working for money. You owe it to yourselves to enjoy the fruits of your labor.
Once you have your spouse on board, then move right along to step number 2. If your spouse isn’t on board, that’s OK for now. We can try again in one of the later steps.
2. List Your Income For The Month
Sounds simple enough, right? Make sure you are using your net pay (take-home pay). Also, don’t forget to include any other sources of income, such as child support, alimony, or rental property income if you consider it part of your monthly income. If your monthly income varies a lot, you could work with worst case scenario numbers.
3. List Your Expenses
List your expenses in regards to what you must spend money on monthly. Some of these categories would include things related to donations, savings, housing, utilities, food transportation, medical/health, personal care, and miscellaneous. This is not an all-inclusive list, only suggestions.
I suggest starting with your standard bills, i.e. mortgage/rent, utilities, cell phone, cable, phone, internet, car insurance, etc.
Next, list your expenses for your debts that you must pay monthly. This includes any credit cards, car payments, student loans, doctor bills, etc.
Finally, you’re going to list your miscellaneous expenses, which includes any subscriptions that you pay for every month, i.e. Netflix, satellite radio, OnStar, gym membership, daycare, etc.
4. Decide On…
Now that you’ve listed the amounts that you must spend for the things in step 3, you’re going to list how much money should be allocated to some of the other important things that you spend money on monthly such as groceries, gas, lunch, etc.
5. Take A Break
Now that you’ve listed all your expenses, take a much needed mental break if you’re feeling overwhelmed looking at the numbers you’ve listed. There’s no need to over do it at this point, especially if you have a spouse and finances isn’t a favorite topic of discussion at this point. You have made a huge leap already by even doing this much. Rest your mind so that you can get ready for the next step, which is…
6. Do The Initial Budget
If married, hopefully, your spouse has been working with you up until this point. If not, go ahead and start the budget by yourself and then have your spouse look at the budget with you and give their input. Hopefully, this will pique his/her interest.
After a much-needed break, vacation is now over. Go ahead and get started with working on your initial budget. We do a zero-based budget and believe that it’s the best way to go. The following steps will teach you how to do a zero-based budget.
- Add up all your expenses from steps 3 and 4.
- Then subtract that amount from your total income.
- If the number is negative, you’ve allocated more money than you actually have. You will have to re-evaluate your expenses until what’s left over is zero.
- If the number is positive, then you haven’t allocated all your money. You will need to re-evaluate your budget and decide where that extra money will go.
- If the number is zero, congratulations! You have just done a zero-based balanced budget!
To be the most efficient with doing a budget you should do your budget, at a minimum, every month. We find it easier to do our budget every time we get paid, which is bi-weekly. However, we’re still taking the whole month into consideration.
** If you need a budget template to use, you can check out the ones that are available in the shop! **
I hope these steps have been easy to follow and set you up with being able to do a zero-based budget. If you have any questions, let me know!
Check back next week for The 4 Things You Can’t Leave Out Of Your Budget.