Welcome to the zero based budget club!!

I've tried a couple different budgeting methods over the years (some very structured, some not at all), and the zero based budget is by far my favorite.

Why? Because it allows me to track every single dollar coming in and out of my possession, which is critical when managing your personal finances.

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So... what is a zero based budget?

A zero based budget is a budgeting system where your income minus your expenses equals zero. This does not mean that you have no money in your bank account, it means that you have accounted for all of your income and expenses so that they equal each other at the end of the month.

So, if you make $2,500 a month, everything you save, spend, or pay towards debt should equal $2,500.

Make sense? Yay!! Let's make your budget.

Creating Your Zero Based Budget

Starting a zero based budget is pretty simple--you can do it on paper, in Excel/Google Sheets, etc.

Write down your monthly income

Start by writing down all the income you make. This includes your paychecks, side hustles, child support, gifts, garage sales, etc.

Write down all the money that enters your bank account each month and how much you earn from each category.

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Write down your monthly expenses

Starting with the most important categories (food, housing, transportation, and utilities), write down all of the expenses you have in a typical month.

Once you have the highest priority categories accounted for, move on to logging every other expense from savings, debt payments, emergency funds, maintenance funds, subscriptions, medical bills, insurance, entertainment, and anything else you can think of.

And don't forget to add a category for miscellaneous expenses! The miscellaneous fund is there to cushion unexpected expenses (like if a lamp breaks in your home and you need to purchase a new one).

It is not there to sneak in extra purchases that wouldn't typically fit in your budget!!

Be responsible with your miscellaneous fund, but definitely make sure to include one.

Write down annual expenses

These are the items that you know come up every year, but you somehow always forget to include them in your budget (I've been guilty of this too!). Figure out what these expenses are, and add a section in your budget to start saving for them now.

My annual expenses category funds things like renewing my car registration, holiday expenses, etc.

Did you know that the average American racks up $1,300 of credit card debt during the holidays? Use your annual expenses fund to start saving for these types of expenses now!

Make sure your income - expenses = $0

This is the part that might take a little trial and error. If your income minus expenses doesn't equal zero, that means you need to start making some adjustments in your budget until it does.

Are your spending more than you make? Find ways to spend less money each month.

Are you making more than you spend? Throw that extra money towards your emergency fund, debt, or a big expense you've been saving up for.

The most important thing is that every dollar needs to be assigned somewhere. If a dollar doesn't have a place to go, then it is much more likely to disappear and you will be left wondering where it went.

Track your expenses and repeat!

This is the fun part (for me) about budgeting.

I love to see what things are working in my budget and what aren't, and make tweaks and adjustments until my income minus expenses equals zero.

To track my expenses, I download a CSV file from every bank and credit card account at the end of the week and organize what I've spent into my budget categories.

Tracking expenses is the only way to see if your budget is working!

At the end of the month, take this information and use it to create your new budget!

Yep! You need to set up a new budget every month. No monthly expenses are exactly the same, so your monthly budget shouldn't be either.

If you want some inspiration on how to adhere to your budget each month, check out this post on 13 Tips to Help You Stick to Your Budget!

What if I have a variable income?

I am a professional musician, which means that my monthly income never looks the same and that's okay!

This is one of the reasons why I love zero based budgets--it allows me to move things around to match changes in my income vs. expenses from month to month.

Budget with confidence!

Remember, you are the boss of your budget and tell your money what to do.

Creating a budget can feel a little overwhelming and intimidating at first, but the more you budget, the better at it you'll get!

Also, budgeting does not mean that you will never spend money on things you enjoy again--it means that you are being selective and intentional with how you spend so that you can achieve your financial goals.

Happy budgeting!

<3 Charlotte

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