Zero Based Budget

Zero-Based Budget

Zero-based budgeting is a strategy that helps align spending with financial goals. This approach requires you to build your budget from scratch each month to help verify that all expenses are accounted for and disbursed. With zero-based budgeting, you need to justify every expense before adding it to the official budget. This is a very aggressive approach to budgeting but can be modified to fit YOU. 

Execution…

Step One: Calculate Your Income

The first line item in your budget is your total income (after taxes). This should include all monies earned from your employer, side hustles and any cash that is coming in. Even unexpected money that you receive throughout the month! (Don’t cheat yourself) 

Step Two: Calculate Your Expenses

Categorize your monthly expenses by splitting them up into the two categories

  1. Needs: Mortgage, rent, car note, car insurance, credit card bill, utilities, childcare, gas, and other expenses that are NEEDED

  2. Wants: shopping, dining out, tv streaming packages, mini-vacation, memberships, and any expense that is not NEEDED

*Be honest in this section as it is extremely important! Identify your needs and wants to help you determine what you can and cannot afford. Remember to keep your savings goal in mind. 


Lastly, perform an in-depth review of your spending habits. Review your bank and credit card statements to discover where your money is going. 


Step Three: Be Patient and Persistent

Be patient and persistent; reward yourself during the journey! I strongly suggest celebrating the small wins! 

In essence…

  1. Set your monthly financial goal

  2. Calculate your income

  3. Determine your expenses

    1. Separate your needs and wants

  4. Disburse income to your expenses

  5. Allocate your funds to your goals

    1. Savings account (we prefer high yield saving accounts)

    2. Investment account (we prefer Fidelity or Schwab)

  6. Zero out your ledger and start from scratch each month