Would you like to have better results with your financial situation?  Then you MUST budget!   Most people have a negative reaction when they hear the word “budget”, but this simple tool can help put you in control of your money.  It is a way to track when and how you earn or spend your money.  More specifically, a Zero-Based Budget can help you:  pay off debt, build your emergency fund and invest for the future.

What does zero-based mean?  It simply means that when you take your income for the month and subtract your expenses, it will equal zero.  Now that does not mean that you will have zero dollars in your account.  It means that you have given every dollar you earned a purpose.  It is your roadmap for the month and will enable you to become aware of where you are spending your hard-earned money.  It will also give you permission to spend without feeling guilty.

There are many ways that you can make a budget.  You can use an app like Every Dollar or YNAB (You Need a Budget).  You can create and use a template on Excel or Google Sheets.  You can also start the old-fashioned way with a notebook and pen.  Make sure to have a calculator and your calendar out when you get started.  Set aside one day before the current month ends to make the budget before the next month begins.  If you are married, make it a date night/budget meeting where you both participate in the meeting.

Here are the steps to create your first budget:

1. Start by listing your income for the month.  This includes regular paychecks, irregular income and any extra money (side hustles, etc.) that you have coming in.  Next to each pay list the date that you get paid.  Then total all of that up.  For irregular income, look at the last few months and list the lowest amount.  You can always adjust if you end up making more.
2. List all of your expenses.  It is important to have your bank or credit card (if you are still using them) monthly statement out so you will have exact numbers and not just estimates.  Write down the amount you pay each month along with the due date.  It is important to set aside money for tithing (10% if you can) first, then money for your beginner emergency fund if you do not currently have one.  Next, you want to ensure you can cover your “Four Walls”:  food, utilities, shelter, and transportation.  Some of these are fixed such as rent or mortgage and some may change such as food or gasoline.  Next, list all your other monthly expenses such as insurance, car loans, credit cards, etc.  List a miscellaneous category for any non-essentials such as fun money or personal spending.  *This is where your monthly statements will help you list more precise amounts. *  Using the calendar that you pulled out can set you up for success by showing you those expenses that usually come up as surprises throughout the year:  holidays, vacations, birthdays, anniversaries, semi and annual expenses.
3. Subtract your expenses from your income.  This number should equal zero.  That is why it is called a Zero-Based Budget.  Always keep a buffer in your account as well ($100 to $500) depending on your personal financial situation.  What happens if you do the math, and you have extra money?  Great!  Apply that money towards paying off debt or saving towards your goal.  What if you end up with a negative number?  Don’t be discouraged.  This is an opportunity to look at those categories that are busting your budget and cut them down.  For example, eating out is a category that a lot of people overspend without even realizing it.  Once again, that is where those monthly statements will come in handy to help you become aware of what you need to work on.
4. Track your expenses throughout the month.  Next to your budgeted amount, make a row called Actual. It will look something like this:  Due Date    Description of Debt    Budgeted Amount    Actual Amount     To make your budget actually work for you, you have to TRACK EVERY SINGLE TRANSACTION.  Your budget will not work unless you do this step.  Every time you get that special coffee drink, fill up your gas tank, pay your rent, or buy that cute new pair of shoes, add it in the Actual column.  You can do this once a week or daily if you need the extra accountability.  It really will start to change your behavior and keep you from overspending.

It takes about a good 3 months to really get into the flow and feel like you have more control over your finances.  It is definitely worth it!  Give yourself grace and you will keep improving each time. It is definitely something that can change your life and enable to reach your financial goals.