Monday, August 17, 2009

Money Monday - Zero Based Budget

Do you budget?

I'm constantly looking at mine.

We have a zero based budget, which means, EVERY SINGLE PENNY is spent. It also means, that, at the end of the month, your checking account should be $0.

That freaks people out. It even freaks me out a little.

Here's why/how I do it this way.

1. Giving every dollar a name insures that we never have to ask the question "Where did our money go this month?" We know exactly where each penny went.

2. It's not really that scary because the checking account never really is at zero because of overlap. Plus, we keep a small cushion in there just in case. I don't record that cushion in the checkbook.

3. It just makes everything work out neatly and cleanly at the end.

4. It allows you to put the maximum amount of extra income towards debt or savings.

5. Doing our budget this way has allowed us to pay off $34,000 of debt in 2 years.

Here's what my favorite financial guru Dave Ramsey has to say about the zero based budget.

What is a zero-based budget? Why is it important?
In a zero-based budget, the income minus the outgo always equals zero. A budget is telling your money what to do instead of wondering where it went. You must be intentional with your money if you want to win with it. It is important to use the zero-based model because it gives every dollar a name before the month begins,
which puts you in complete control of your money!

Name some of the reasons we need to do a zero-based budget each month.
A cash flow plan ends management by crisis.
Managed money goes farther.
Budgeting ends most money fights.
Budgeting removes much of the guilt, shame and fear you now experience.
Budgeting ends overdrafts and the accompanying stress.
Budgeting tells you where you are overspending and underspending.

I can't tell you how insane it makes me when I hear that most people don't even balance a checkbook. I don't know how you can look at an ATM receipt or even at your online statement and think you have any idea what's in your account. For me personally, I wouldn't be able to sleep at night if I managed things this way.

When you take control of your money, balance your checkbook, and begin budgeting I can PROMISE you one thing. YOU WILL FIND MONEY YOU DIDN'T KNOW YOU HAD!!!!!

You want a raise? Try this for 3 months and let me know how it goes. (I only charge a 10% convenience fee.)

1 comment:

  1. We need to do something like this. It would be a MAJOR change for us, but in the end I think it would really help. I am SO impressed with your paying off your debt. That is really awesome!


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