Compelled By Reality

Creating a Zero-based budget

Filed under: Blogging, Featured, Money, Practicals of Life

In my journey in managing the finances I have been given, there have been a few things that have helped along the way. One is the war I have started against an enemy I call debt; Creating a strategy to attack it and keep attacking until it begs for mercy (see this post for more info on that strategy American Cravings: Money).

Who OWNS 100% of my money?
I used to think of the money I earned as just that; money that “I” earned, therefore it was “MY” money. This however differs from God’s view. “The earth is the Lord’s, and all its fullness, the world and those who dwell therein.” God is the owner of 100% of the finances I have. Not just 10%. He owns all 100%, but has given it to me to manage it. So I can no longer think of myself as the OWNER of this money, like it is mine, but I am managing it for God.

So if I was an investment banker and someone gave me $50,000 a year to manage for them, I would need to make sure to take the time to put down on paper and do the research to figure out the best strategy possible. I need to do the same for the money God has given me to manage. First I need to find out what he wants me to do with it, and then manage it appropriately.

One of the things that has helped in this mindset shift of managing the finances given me was to create a “Zero-based budget.” Well, “what is a zero-based budget?” you might ask. I’m glad you asked. I asked myself this same question when I first heard of it.

Spend Your Money on Paper BEFORE you actually spend it
A zero-based budget is where your total income minus your total expenses = $0. It’s that simple. Here is a great “how-to” on creating a zero-based budget and I highly recommend it. If you are in debt you need to get fed up with your debt and start spending your money ON PAPER before you actually spend your money or else it will get sucked out of your bank account.

In addition to the “how-to” above, also wanted to give you a resource to use in creating a budget that I have created. Below is an excel document with formulas that add up and populate and all sorts of cool things, and it is what we use to create our budget each month. Yes each month Stephanie and I sit down and have a “budget meeting” and spend our money on paper for the upcoming month. It is actually really fun. Imagine having fun talking about finances with your spouse! But we look at the upcoming month, the birthdays, the unexpected expenses that we need to be expecting and spend that money on paper so that we know what is coming. Then when the paycheck comes in, it will not be sucked into the black hole that it used to end up in, never to be seen or heard of again.

I have of course changed the numbers and the expenses in the spreadsheet to protect the innocent. This is just sample data for a joe shmoe budget.

Zero-Based Budget

I just started working on a budget spreadsheet for an irregular income budget. It was definitely more difficult than if you know each month what your income will be, but it is still workable. So if you anyone is interested in a spreadsheet for that, let me know.

Do you use a zero-based budget? What type of budget do you use?