Are you tired of wondering where your money went once the month is over? It’s way too easy to let spending get out of control. A lack of insight into where your money is going leads to debt and is poor stewardship over what you’ve been blessed with.
A budget gives you control so that you can tell your money where to go instead of wondering where it went. An effective budget is one that accounts for every dollar of income. The zero-balance or zero-based budget will do this for you.
The idea is that if you have any money that is not allocated then you’re likely going to waste it. After all of your typical expenses is taken care of then allocate the remainder to the debt, giving, and saving categories. Your money will find somewhere to go if you don’t give it some direction.
Create Your Budget
Why are you budgeting?
Ask yourself and your spouse why you're budgeting and why it's important to you.
It's important that you envision a transformation. What do you see yourself doing with the margin (extra money, time, peace of mind) that budgeting will bring to your family.
When will you review your progress?
It's important that you check on your progress and adjust as needed. I like a weekly review of at least your expenses. Of course you'll need to review your monthly progress to determine where you may need to cut back in an expense area or adjust your percentages. Determine when you'll meet with your spouse and set aside time to review your budget.
Determine Your Income
You may have an irregular income. In this case you may need to do a bit of guesswork prior to setting your budget each month. If you normally bring home the same amount every month then this one is easy. This is your net income, what you bring home after taxes and deductions.
List All of Your Normal Recurring Expenses
Write down all of your normal recurring expenses. You should have a good idea
or possibly an exact amount for things like your tithe, mortgage, insurance, food, and utilities. The food bill may take you a month or two to dial in so don't sweat it if you don't know that one right off.
Determine Your Funds or Buckets
Figure out any once-per-year expenses such as vacation, birthdays, and Christmas. You could also set aside funds for ongoing expenses such as medical. Be sure to keep an emergency fund too.
Set Your Target Category Percentages
Start out with the below typical percentages for expenses. Adjust as needed. Below are the typical categories. You can consolidate or add more depending on your situation.
It’s okay to adjust your category allocation over time as long as you end up with a balance (Income – Expenses) of zero. After tracking your spending and understanding your habits then you’ll be well on your way to mastering your budget. You can read a couple of previous posts on tracking your spending here and here.
Budgeting will allow you to feel like you have more control over your money. You actually will have more control over your money! It just takes a good plan and consistency. I talk about budgeting a lot on this blog. Here is a post on having a successful mindset for budgeting. I talk about some of the many benefits of budgeting here.
Don’t worry about getting your budget perfect. Just start it and stick with it. You won’t get it right the first time but you will get better. This stuff is not hard. You’ll learn over time and gain more traction as you get more comfortable with managing your money.