Zero-Based Budgeting for Financial Control: The Ultimate Guide

We all want financial control but what are we willing to do to get it? That’s the question.

Some will start a business, a blog, or get a remote job and make more money.

But for most people, that still isn’t the answer.

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It’s easy to mismanage money, no matter how much, and overspend so what everyone really needs is a simple budget that helps them spend only within what they earn. And what better way to do it than with Dave Ramsey’s Zero-Based Budget method?!

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Although budgeting is not fun at first, making a budget is key to becoming successful financially.

And I’ll show you everything you need to get started in this article

What is Zero-Based Budgeting?

Zero-based budgeting is simply allocating every cent from your monthly income to a need or want until nothing is left.

It doesn’t necessarily mean you should spend every dollar that comes in, but that any surplus is going towards a specific goal or needs like groceries, kids’ college, savings, debt payoff, retirement, vacation, etc.

The goal of a zero-based budget is to put every dollar you earn to work for you and never idle, either on a need or investments or debt such that at the end of the month, there shouldn’t be any money left in the budget.

You start with your income, subtract out your expenses, and then decide where your monthly surplus is going to go.

It is called budget based on income.

photo of a person counting money depicting Who Is The Zero-Based Budget Good For?

Who Is The Zero-Based Budget Good For?

A zero-based budget is meant for every woman who wants control over her finances. Who dreams of living a fulfilled life, having enough time to do other extra fun activities with family, friends, and loved ones.

But most especially, a zero-based budget is meant for moms who have a steady income source and are ready to work hard for maximum results.

See Ways to Make More Money from Home Now.

Why Zero-Based Budget Right is For You?

Wondering why Zero-Based Budget is right or wrong for you?

Simple. Because your biggest wealth-building tool is your income, and the best way to harness the power of your income is the monthly budget and zero-based budget to be precise.

Although investing, and paying off debts are important, it means nothing without a commitment and that’s what the zero-based budget helps you achieve.

For example, you want to invest money in a mutual fund, you make room for that $200 or $400 in the monthly budget.

Or you want to get out of debt? You include your debts in your spending plan and get it paid comfortably.

These are some examples of ways a zero-based budget can help you.

Five Areas You Spend On That Eats Up Your Money

Probably you’ve discovered you are spending more than you make per month, that’s a call for you to start cutting off some stuff from your expenses list. Here are some common areas that eat your money up without you knowing:

1.  Utilities.

You can do well cutting some utility bills. There is nothing wrong with shutting the lights off when you leave the room to cut down your light bills. You can entertain yourself with a book instead of the TV (that’s part of developing yourself for more productivity at work and life at large) teach the kids the same. Those are just some ways to save, but they are big.

2.  Eating out.

If you can shy away from restaurants in the meantime, you can actually save yourself a couple of dollars each month. Start eating leftovers, it’s not bad.

3.  Car payments.

You can buy a quality car for $2,000, and it will get you around town just fine. And you won’t miss that $500 payment.

4.  Clothing.

We don’t always need new clothes as often as we think we do, and buying used clothes from consignment stores and garage sales can save you enough to make your jaw drop. Surprised! Try it.

Even better; Sell Your Used Clothes and Make Money

5.  Groceries.

Use coupons, shop with cashback apps and sell items that you don’t need or have payments on, and stop going out frequently to eat.

How To Start A Zero-Based Budget?

Let’s work together to create your zero-based budget

An excel sheet will work great for creating a zero-based budget template.

Step 1: Write Down Your Monthly Income After Tax

The first step to creating a zero-based budget is to figure out how much you earn each month. Know exactly how much lands into your account each month. (usually, employers deduct tax on their regular employees before paying them) Once you discover your after-tax income, next is…

Step 2: Write Down Your Monthly Expenses

Now that you’ve got your income after tax figured out, the next step is to identify what amount you spend each month or rather, your monthly expenses. Although it may be hard to actually figure out this step, you need not worry.

Which is why I have two categories for easy understanding. They are Fixed and variable expenses.

Fixed Expenses:

These are expenses in your budget that don’t change from month to month. They are things like rent, insurance, mortgage, or any kind of memberships/subscriptions. It can also be seen as a budget by paycheck app.

Your fixed expenses could be:

  • Rent / mortgage
  • Gym membership
  • Insurance (car, home, health, life) if paid monthly
  • Subscriptions of any kind: Netflix, DollarShaveClub, Coaching Class, etc.
  • Prescriptions for medicine
  • Tithe / Fixed giving
  • Cellphone / Wifi
  • Payments on all forms of debt: car payment, credit card, student loans, etc.

Note: Fixed assets can change with time. You could cancel a membership or subscription, negotiate a lower rate, move to a larger/smaller place, increase your charitable giving, and if you pay off a loan, anything could possibly happen.

Variable Expenses:

Variable expenses can change from month to month based on your spending and consumption habits. Some months you may spend less or zero on a particular aspect while other months you may spend over

Examples are:

  • Groceries
  • Utilities (water, gas, electric)
  • Eating out
  • Gifts
  • Travels
  • Gas
  • Personal allowances: clothes, luxury coffee,
  • School expenses: books, books, and more books.  
  • Entertainment

Step 3: Identify All Non-Monthly Expenses

The third step in making a zero-based budget is figuring out how to plan and budget for your non-monthly expenses.

Now, let’s look at a wider point of view. In a year, do you have any upcoming expenses that you need to plan for? Maybe Christmas in December or family Thanksgiving, Birthdays or anniversaries.  It could be any other expenses known to you. Think of any expenses that can come up not every month and plan for them as well.

Examples are:

  • Christmas
  • Vacation
  • Home insurance / taxes
  • Medical Fees
  • Pet vaccinations
  • Yearly memberships: Costco, amazon prime, etc.
  • Contacts
  • New tires
  • Home repairs

Step 4: Set Some Goals For Yourself

This step is where we figure out if there is any surplus from your monthly salary and know what to do with it.

How do you do this? Simply deduct all expenses mentioned above and see what’s left out.

After knowing the surplus from your monthly income by subtracting all expenses.

Now set some goals to boost your financial portfolio.

Goals You Could Set:

  • Emergency fund
  • Debt payoff
  • Setup your own business
  • Retirement
  • House down payment
  • Travel / vacation
  • Home improvement
  • Kids college funds

RELATED: 10 Goals Success-Hungry People Set Every Year

Step 5: Equal All To Zero.

At this step, you want to make sure your income – expenses – goals equals zero.

Remember the goal; to put every dollar you earn to work for you and never idle such that what’s left is zero. That’s why this whole thing is called a zero-based budget.

If at this point you still have a surplus, what to do is to increase one of your goals for that sake of balance. Else, If you have a deficit, then ideally you can find a way to decrease your spending or you have to cut one of your goals

For effective practical budgeting, get Dave Ramsy Budget Excel Sheet here…

image of a hand dropping a coin into a piggy-bank depicting Zero-Based Budgeting Advantages And Disadvantages

Zero-Based Budgeting Advantages And Disadvantages

4 Strengths/Advantages Of The Zero-Based Budget

If you ask me, I will stand before the jury and say that zero-based budget is my #1 recommendation to all people but of course, moms who are trying to take control of their finances so that they can save more to reach financial freedom.

And below are the reasons I stand with that notion.

1. Zero-Based Budget Is Extremely Effective

The zero-based budget is extremely an effective method of budgeting. Because every single dollar you earn is given a job to do. Compared to the traditional budgeting method, zero-base budgeting is far ahead, it’s accurate and result oriented.

As you gain the capacity to stick to and maintain your budget, then you’ll be successful at saving more money beyond your expectations.

2. Zero-Based Budget Saves More Money

One key thing about the effectiveness of the zero-based budget is that you continually realise and channel more money towards your “goals.” This is the major strength of the zero-sum budget.

As you cut expenses and increase your income, the amount allocated towards your goals should be the only place you increase. with time, you’ll discover you are saving more money each month than you’re spending! Which is good for you.

3. You Know What You Spend Your Money On

The zero-sum budget is meant to help you figure out your spending. It helps you to know where each you are earning is going.

Most people don’t have a clue about what they actually spend their money every month. They don’t know especially how much they spend on food, entertainment, gas, or what their average utility cost, etc. but with this approach of budgeting, you know it all.

4. Zero-Based Budget Gives You Control Over Your Income

The biggest advantage of zero-based budgeting is that it gives you a sense of control over what’s happening with your money. When you know exactly how much you’re spending each month, you can make informed decisions about your finances.

3 Weaknesses/Disadvantages Of The Zero-Based Budget

1. Time Consuming

Being a fan of zero-based budgeting, the reality of it is that it takes more time to actualize balance.

Although it is effective and gives plenty of results, on the other hand, it can take a little more time and legwork each month than what you need is a little patience at the start, you will see how well zero-based budgeting is working for you.

2. It makes It Hard to Predict All Expenses

The hardest part of a zero-based budget is predicting all of your expenses.

You could be a thorough person, but there are sure going to be things coming up that you least expect. At times, you may have to include “miscellaneous” into your budget to make it balance.

But the goal of a zero-sum budget is to get as close as possible.

3. Not good for variable income

It is pretty challenging to manage your money when you have a variable income. The whole idea of a zero-based budget is knowing what your income is and budgeting every bit of it as effectively as possible to reach your goals.

So, when your income dances each and every month, there would be a problem of accuracy with your zero-sum budget. Your budget would have to also change each month.

The truth though is that anyone with a variable income will have a harder time sticking to any kind of monthly budget.

However, that doesn’t mean it can’t work.

10 Budgeting Tips For A Zero Based Budget 

Honestly, I am so happy that you are taking control of your finances and soon reaching your goals.

However, here are 10 tips for zero-sum budgeting

1.  Overestimate variable expenses. Give it little room, it’ll help.

2.  Negotiate your fixed costs. There is absolutely nothing with negotiating your bills, memberships, cell phone plan, wifi, etc. it gives you a high return over time.

3.  As a mom, for the love of all things good in the world, walk through this whole process with your spouse.

4.  Improve your finances by 1%. Every small improvement can add up big time.

5.  Focus on reducing your Housing, transportation, and food expenses.

6.  Budget in money for car repair, home repairs, etc.

7.  Use cash-back apps to lower your everyday spending… Check out my super-detailed ibotta review.

8.  Set-up autopay for your credit cards.

9.  Automate your “goals” section by setting up transfers to increasing your retirement contribution.

10. Set up your checking account to automatically transfer to your sinking fund or IRA accounts

Don’t forget that “sharing is caring.” Share this post with other moms to help them better their lives and to attain their financial goals.

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