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How to create a zero-based budget



In my last post, I covered why most budgets don’t work and how to fix them. One of the ways to make your budget work is to create a zero-based budget. Today’s post outlines how to create your first zero-based budget. Over the next few weeks I’ll be addressing various aspects of creating and managing a budget. Let’s start with the basics. Some of these steps may seem obvious or simplistic. But for those who just can’t seem to get a budget started, I hope to give you some step-by-step detail that will help make creating a budget easier.

What is a zero-based budget?

A zero-based budget is one where your total income minus your total expenses equals $0. In other words, it forces you to assign every dollar of income to an expense (or savings) category. As Dave Ramsey puts it, you’ll be “spending your month’s income on paper” before you spend it in real life.

Benefits of a zero-based budget

Using a zero-based budget and properly dealing with the difference from month to month will allow you to gain total control over every dollar you spend. If you get a bonus or spend less than you planned during the month, you can easily redirect that money where you really want it instead of letting it dissipate through unfocused spending.

A word about spreadsheets

I highly recommend using a spreadsheet to do your initial budget because it’s very easy to calculate amounts and rearrange the order of items. If you don’t have Excel, you can download the free Open Office CALC spreadsheet software or use a free online spreadsheet like Google Spreadsheets or NumSum.com. Simply using paper and pen is ok too. If you do, you may need to re-write it a couple of times and be sure to double check your calculations.

When first starting your budget I would NOT use the budgeting tools in Quicken, MS Money or other automated tools. You may be able to use those tools effectively once you have a solid hold on your budget, but for now it’s best to make your budget by yourself so you know every nook and cranny. That way you’ll be less likely to make errors due to not understanding how an automated tool is built. You will also be more likely to use a budget if you create it yourself. Once you have a high degree of confidence that your budget is working properly, feel free to experiment with pre-built tools and spreadsheets like pearbudget.com.

Preparation: Get out those statements

Before you get into the thick of things, you’ll want to do a little preparation by collecting the following:

  • Pay stubs
  • Records for other income such as bonuses, gifts, and tax returns
  • Copies of your recurring bills
  • If you track expenses in Quicken or MS Money, print out monthly reports of your expenses for the last few months
  • If you use checks regularly, it may be useful to have your check register on hand

Agree to be civil

Now take a few deep breaths. If you are doing this with a spouse, agree to be civil. Ask yourself “how can I do this and enjoy it?” As you go through the initial steps of allocating, don’t nit-pick too much. If one person wants to budget funds for a category and the other disagrees, let them budget the funds and you can go back later and adjust once you know if you’re over and by how much.

If things tend to get heated, I also recommend setting a time limit for your budgeting. My wife and I tend to do well in chunks of about 30 minutes. Once we go over that, I start to get grouchy. It’s ok to do this a little at a time. If you schedule 30 minutes a night for several days, you should be able to get through everything.

Step #1: Write down all your sources of income for the month

Let’s get started. If you have a fixed paycheck once or twice a month, this step will be easy. Just write down how much you make every month. If your finances are really tight, you should do a budget for each paycheck to ensure you have the funds on hand to pay bills that occur in that time period.

If you are self employed or have an irregular source of income, you’ll want to wait until you get an actual check and then follow this process for just that check. In the meantime, you can follow this process for the money you have available in your bank account. Just use your balance as the income. For example, if your bank account balance is currently $3,000 then put that amount as your income. As we go through this process you’ll be allocating how you’ll use that $3,000 until your next paycheck.

Do I put down net or gross income?

It really doesn’t matter if you put down net or gross. If you use gross (the amount before taxes, insurance, etc that are automatically deducted from your paycheck) you need to be sure to include the categories and amounts that are automatically deducted from your paycheck in your budget. I prefer using net so that I don’t need to write the extra expenses down every month. Because taxes and insurance are the same from month to month I prefer to simply check the amounts every quarter or so to make sure everything is still the same. It’s more efficient to track them separately.

Of course, if you’re self employed, be sure to allocate for paying taxes.

Step #2: Write down a list of expenses

Write down a list of all the expenses you expect to have this month. I’ve included a list of possible expenses below to prompt your memory. Be sure to include expenses unique to only this month. Do you have a friend or family birthday? Is your registration due? This step may actually unearth some expenses that you forgot about. If you think of expenses that are coming up but not in this month, that’s ok, just go ahead and write them down and we’ll deal with them a little later.

  • Income
    • Paycheck 1
    • Paycheck 2
    • Other Income 1
    • Other Income 2
  • Expenses
    • Taxes (if using gross income or you are self employed)
    • Mortgage Payment
    • Second Mortgage payment
    • Household (yard)
    • Utilities: Gas
    • Utilities: Elect/Water/ Gar
    • Auto: Gas
    • Auto: Insurance
    • Auto: Maintenance
    • Auto: Registration
    • Satellite TV
    • Life Insurance
    • Debt reduction
    • Babysitting
    • Clothing
    • Grocery
    • Grocery: Eat Out
    • Grocery: Eat Out
    • Grocery: Nonfood
    • Medical
    • Hair cut/personal care items
    • Charitable Donations
    • Emergency Fund
    • New car savings
    • College Fund
    • Dry Cleaning
    • Gifts: Birthdays
    • Gifts: Christmas
    • Gifts: Holidays and Other
    • Household: Maintenance
    • Retirement Savings
    • Magazine Subscriptions
    • Entertainment: Dates
    • Entertainment: Video rentals
    • Personal money (1 for each individual)
    • Cushion

You’ll probably miss an expense or two at first and find yourself part way through the month saying “shoot, I forgot to budget for that.” To address this scenario, be sure to budget a “cushion” account (last week I called it a “grease” account, but I think cushion is simply more understandable and descriptive, so I’ll stick to that). I recommend starting at about $100 at first. Over time, you’ll be able to get a feel if this is too much or not enough.

Include savings and debt reduction in expenses

When I say “expenses,” I really mean “funds that will be spent or allocated to other purposes.” Saying “expenses” is just so much easier. Include any savings allocations, debt reduction payments, or any other monetary outflows in your expense list.

Step #3: Identify your expense types

For this step, simply go through all the expense categories and mark if they are fixed, semi-fixed, or variable. Just write an “f,”"s-f,” or “v” next to the category (or in another column if using a spreadsheet). Fixed expenses are those that don’t change from month to month like your cable bill. Semi-fixed expenses are those that may vary slightly from month to month like a phone bill. As a rule of thumb, semi-fixed expenses shouldn’t vary more than $10 in a month. Variable expenses are those that vary from month to month more than $10 like groceries or gas expenses.

Step #4: Allocate your fixed and semi-fixed expenses first

The reason we marked each expense type was to determine the order to allocate them in. First allocate your fixed and semi-fixed expenses. I recommend doing this simply because it’s easy. Your fixed expenses will probably include your largest expenses, such as your mortgage, so it will be easier to deal with the smaller amount left over. Plus, most of your fixed expenses are probably not very negotiable without dramatic lifestyle changes or disruptions so they give you a sort of “hard landscape” around which you will fill in the variable expenses.

Once we are done allocating all our expenses, we’ll circle back and see if we want to eliminate one or more of the fixed expenses. For now though, allocate them all.

Average out your semi-fixed expenses

For your semi-fixed expenses you’ll have to average out how much you’ve spent over the last 3-4 months. No need to get too crazy or precise as long as your in the ball park. You’ll be wrong anyway.

How to deal with periodic expenses

There will be many expenses that won’t occur this month but that you will need to save for like car registrations, birthday and Christmas gifts, and some insurance payments. To ensure you have enough money when the time comes you need to start saving that money now.

Most people just divide these expenses by 12 and save that amount each month. DON’T TAKE THIS APPROACH WHEN STARTING A BUDGET. You will end up short unless that expense is a full year away. Instead you need to take each expense, count how many months away it is, and divide the total payment amount by the number of months. For example, if I have a car registration payment of $100 due in four months, I will divide $100 by 4. That means I should budget $25 a month to save towards the registration. As soon as I pay the registration, I can then divide the next registration payment by 12 and save little by little for next year.

This approach may cause a little strain on your budget at first because you will need to be saving a larger amount each month for the expenses coming up in the short-term. However, once you make the payment, your monthly allocation will go down for that category freeing up extra cash that you can redirect wherever you want.

There is one other approach I should mention. My wife and I find that we will fairly consistently receive “windfall” money two or three times a year in the form of bonuses, gifts, or tax returns. Occasionally we will budget portions of the windfall to periodic expenses so we don’t have to worry about saving from month to month. The only problem with this approach is that if you don’t have enough windfalls, you could end up having a periodic expense and not enough money to pay it.

Step #5: Allocate your variable expenses.

Now that you’ve gotten a good chunk of your income out of the way, it’s time to deal with what’s left (hopefully it isn’t depressingly little). So far we haven’t worried about calculating income minus expenses. If you want to, you can do a quick calculation at this point so you know how much left over you’re dealing with. Or you can just speed through and budget your variable expenses and do a mass calculation at the end.

Try not to scrimp too much on your necessity categories like food, clothing, and transportation/gas. Most people underestimate these categories.

Personal money

I highly recommend allocating personal money for each spouse. Having your own money to spend however you want is crucial to making a budget work. Even if you can only afford to budget $10 or $20 dollars, it will help your budget feel more manageable.

Step #6: Calculate the difference between income and expenses.

Ahhh, the moment of truth. Subtract your total expenses from your total income. This is where a spreadsheet comes in handy. You might want to be sitting down when you do this.

Step #7: Adjust your categories until income = expenses

Now comes the hard part. You need to adjust your categories until your income equals your expenses. This is where you will need to make some trade-offs between one category and another. This step is usually where the most conflict occurs between couples because it exposes their conflicting values. If things get too heated, it’s probably better to take a break and continue later. Just remember that this is your first budget and you will refine things as you go. You don’t have to feel locked in to the decisions you make now.

What to do with a positive difference

If you’re in this situation, congratulations! Now you just have to allocate the remaining money. The whole point of a zero-based budget is that you need to ALLOCATE EVERYTHING. That way the remainder won’t just disappear through unconscious spending. The good news is you can allocate it any way you want. If you are going to allocate it as money to blow, that’s fine as long as you consciously do so. Some other suggestions for allocating this money include:

  • Pay down debt
  • Save for retirement or your children’s college
  • Save for larger purchases like vehicles or furniture
  • Save for a vacation
What to do with a negative difference

I’m guessing that the vast majority of people will have allocated more expenses than they have income resulting in a negative difference. Don’t be discouraged! The first time we did this, reality hit us hard. We had to do a major evaluation of our priorities and really distinguish between our wants and needs.

For many families this process will expose that they have been spending more than they make and can’t support their current lifestyle on existing income. It can be extremely hard to realize that lifestyle changes are in order, but at least you now know the truth and can fix your problem instead of going into more debt.

Here are some suggestions for adjusting your budget:

  1. Identify all your non-necessities. Yes, cable is a non-necessity.
  2. Each spouse should rank the non-necessities in terms of importance to them
  3. Eliminate or reduce those that both spouses agree are a low priority

Hopefully by eliminating or lowering the easier “consensus” items you will now be at a zero balance. If not, you will have to negotiate which categories are most important to each of you. You may have to make a lifestyle change by either earning more income or lowering your cost of living. In some cases, moving to a less expensive place may be in order. Housing is usually the largest expense and can make the biggest difference to your expenses. Not long ago, my wife and I almost had to move in order to live within our means because we had a bad year with some unexpected medical expenses. That is what prompted us to really take control of our finances. If we hadn’t got on a budget, we would have had to move to a less expensive home.

Step #8: Print out your final budget

I strongly recommend you print out your final budget and put it in a binder. This gives you a hard-copy record of your decisions. The problem with keeping only an electronic version is that you sometimes can’t be sure if it’s been changed from the original. Printing a copy allows you to put a stake in the ground for your decisions up to that point. It will also be useful when reconciling at the end of the month and planning next month’s budget.

Next steps

Congratulations! You’ve now completed your first zero-based budget. Now that you have a budget in place you will need to execute your plan and follow up at the end of the month to deal with what you actually spent. Over the next few weeks, I will be covering some ways to make tracking your spending and reconciling your budget much easier. The first month you use a budget, review it as often as you need to stay on track. Take a few moments each day to review your spending if necessary. I recommend reviewing your progress at least each week at first. Once you get your budget down, and with a few tips and tricks, you’ll be able to stay on track with a single monthly review.


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Posted in Budget, Budgeting, Budgets, Finances, Money, Personal Finance, Tools | 73 Comments »

73 Comments to “How to create a zero-based budget”

  1. Lifehacker Says:

    Build your zero-based budget

    The Getting Finances Done weblog has a great post explaining how to set up and implement a zero-based budget. A zero-based budget is one where your total income minus your total expenses equals $0. In other words, it forces you…

  2. Mark Says:

    I already have a spreadsheet for this “zero based budget” approach I built years ago after having read Dave Ramsey’s books. It’s found here:
    http://www.ratestate.com/news/index.php/free-budgeting-tool

  3. rob Says:

    Hi, great ideas on budgets and the softer side of getting to a workable resolution. Do you have any suggestions/links for places to find help with forward looking financial plans (I’m trying to help my retiring parents look out 25 years)

    Thanks!

  4. Ab Says:

    [...] A zero based budget is one where you total income minus your total expense equals zero. Using a zero based budget you allocate all of you income eihtere as an expense or saving [...]

  5. Master Gunner Says:

    Excellent Post!

    I’ve been doing a “Zero Balance” budget for about 18 months now, with a twist:

    I get paid every two weeks, and I have found it easier to budget by breaking it down by pay period. For the purpose of this example, let’s say I make net $2000 every two weeks, and I’ll use the first pay period as an example.

    1. Always pay yourself (savings account) first. I try to save $500 every two weeks. So $2000-$500= $1500

    2. Divide mortgage by 2. If $650/2=$325, then $1500-$325=$1175.

    3. Divide your recurring bills for the month into similar amounts (1.Cable+ CellPhones+ Insurance = about $300, 2.Water+ Electricity+ Insurance = about $300). Pick one that you’ll pay during each given pay period (in this case, we’ll pay 1. at the beginning of the month, and 2. at the middle of the month). So now, we’re at $1175-300=$875

    4. Now, I get paid on the 1st and the 15th. So my $875 needs to cover me from the 1st until the 14th. So, $875/14=$62.50, so I have $62.50 allowed to spend for every single day until the next pay period (this is for groceries, gas, etc…).

    5. If I go “over” on any given day, then I just re-compute based on the balance I have left. For example, if I spend $100 on Groceries and gas on the 1st, then I just re-calculate for the other 13 days ($875-$100=$775/13= $59.61 a day).

    Screwing up at the beginning (going over), isn’t that painful, since the overage is spread out over a (relatively) long period of time. (I very rarely get an “overage”, it’s hard to spend $60 a day on just daily expenses) Towards the end, you’ll notice that the times you could only really spend maybe $40 or less, will boost your daily “allowance” significantly. Usually, by the end of the pay period (on Day 14), I’ll have like a $200 “allowance” for the day. On the 15th, I transfer over (to savings) whatever I had left from the beginning-of-the-month paycheck.

    When you reach $5000 or so, transfer that money to a CD or investment.

    Using my plan, I have completely paid off all my credit cards and car payments, and am now financially independent.

    Try it for one month. It WORKS.

  6. Cari Says:

    Just came here from Lifehacker and will definitely be visiting in the future. Most of these types of features don’t address the pitfalls of setting up a budget as a couple, which was great, thanks!

  7. Anoop Says:

    Check out You Need a Budget. It is an Excel based budget that does pretty much everything you’ve mentioned above. It’s not free, but its very useful, unlike say Quicken.

  8. sjpeer Says:

    \”Do you have any suggestions/links for places to find help with forward looking financial plans (I’m trying to help my retiring parents look out 25 years)\”

    Rob, over time I will certainly be addressing longer term planning on the site, so please check back. In the mean time, you could check out these sites,

  9. sjpeer Says:

    Master Gunner,
    I like your approach for dealing with one check at a time. This is a particularly good (and sometimes necessary) approach if you’re really tight financially because it helps you track your progress more frequently. In fact, this is also a good approach for people with unpredictable income flows. You just deal with each paycheck the same way most people deal with their whole month’s income.

    Sam

  10. sjpeer Says:

    “Most of these types of features don’t address the pitfalls of setting up a budget as a couple”

    Cari,
    Thanks for visiting. I will certainly continue to address issues that couples face. Finances tend to be a heated topic for most couples.

    Sam

  11. Life or Something Close… :: links for 2006-08-16 Says:

    [...] Getting Finances Done » How to create a zero-based budget (tags: budget software useful money management finance) [...]

  12. GGTD-Geeks Guide To Getting Things Done » GTD Power Links 08-16-06 Says:

    [...] What is a zero based budget?  [...]

  13. Inner Index Says:

    Create a zero-based budget

    A zero based budget is one where you total income minus your total expense equals zero. Using a zero based budget you allocate all of you income eihtere as an expense or saving …

  14. Oli F Says:

    I agree with all this in principle, but I have a simpler, more refined version, which allows you to easily keep to your allocated budgets.

    I’ve found the best way is to just have 4 separate accounts with specific functions and the budgeting then looks after itself.

    There is a little bit of work at the beginning, but after that it’s hands-off all the way! First thing to do is to work out the following totals:

    1: Incoming money
    2: All regular fixed outgoings (mortgage, phone, etc)
    3: Roughly the amount you spend on food (eating at home); just add up the last month, no need to go back 4 months, cos this system is easy to tweak on the fly.
    4: The amount leftover after these deductions is your money to split between savings and your spending money for the month.

    So now you set up 4 bank accounts (which is really easy to do these days):

    Account 1. Paying in account. Salary & other incoming goes into this. All regular standing orders automatically come out of this account, as well as standard orders going into the remaining 3:

    Account 2. Grocery account. All food is bought using this account; like you say it’s a semi-variable so you will spend roughly the same amount each month, so set up a standing order from account 1 into here with the appropriate amount.

    Account 3: Saving Account. Rainy day money, big item saving whatever. Decide on a monthly amount and set up a standing order from account 1.

    Account 4: Spending money account. Once all the regular payments, grocery money and savings are accounted for, what’s left over is your spending money! Set up a standing order from account 1 for this amount and there you go.

    The beauty of this is that at pay day each month all your spending money goes into it’s own account, so you can easily see how much spending money you have left for the month just by looking at the balance. Similarly with groceries, you can see what you budget for the month is like, just by looking at the balance.

    No adding up, no keeping receipts, no printing out budget planners nor nothing, and any spending money you need (from accounts 3 & 4) is kept track of easily by just looking at the balances.

  15. Josh Says:

    This is great if you have a fixed salary coming in every month. Any suggestions for those of us that have variable income every month?

  16. How to Budget Your Finances ~ Lockergnome’s Doing It Says:

    [...] Budgeting is among the hardest things I ever do – I simply don’t enjoy it. I have a bad habit of paying bills and automatic investments, and then allocating the remainder to dining and gadgets, which makes the concept of zero-based budgeting almost mind blowing. Zero-based budgeting is the process of assigning a place for every dollar you take in each month before you actually get the money. Whether that’s groceries, savings, investments or the latest PSP game releases, knowing where your money is going makes it easier to plan. Getting Finances Done offers a comprehensive look at how to create a zero-based budget, which in many cases will lead to having more money even if you’re “spending” on paper before you actually get the funds. Use the recently mentioned Free Accounting Software to plan your finances and you’ll have zero cost for your zero-based planning. [...]

  17. Angryonion » Build your zero-based budget Says:

    [...] I really like the idea of the zero-based system, but that would make sense, since it reminds me of my feature on budgeting. Do you follow a zero-based budget? If so, let us hear about it in the comments or at tips at lifehacker.com. For more on handling your money, check out our money tag. — Adam Pash How to create a zero-based budget [Getting Finances Done] [...]

  18. Ron Pemberton - Personal Perspective/ Music Reviews/ Film Reviews/ Book Reviews/ Product Reviews/ WordPress/ Palm OS » links for 2006-08-16 Says:

    [...] Getting Finances Done » How to create a zero-based budget (tags: Finance Budget money Personal income howto guide spreadsheet advice tutorial) [...]

  19. Akkam’s Razor Says:

    [...] Getting Finances Done » How to create a zero-based budget A zeroo-based budget forces you to assign a category to every last dollar – at the end, your balance equals zero, with expenses equaling income. (tags: Finance Budget money howto tips) [...]

  20. Karen Says:

    “If you are self employed or have an irregular source of income, you’ll want to wait until you get an actual check and then follow this process for just that check.”

    We get many different checks of varying amounts all month (say from $100 to $3000), but our average stays about the same each month, so I’d guess I’d use that average? Or is there some other way to deal with that?

    Great article, I’ll definitely be reading the rest of them and checking the news feed.

  21. Ryan Says:

    Would love to hear your take on spending only with a credit card, to get points and or cash back, and how you budget for that since you spend in one month and then pay the following month.

  22. Mouli’s blog » Zero Based Budgeting Says:

    [...] The basic concept here is that, all money coming in will be spent either  by ‘actual’ purchases, or on paper. In other words, every penny/paisa/cent should be accounted for on paper. If it goes into savings, or into investment, wherever, it goes on to a spreadsheet row. Total income – total exp = 0 Check out the post here. [...]

  23. Jef Says:

    Great post and a great blog.

    Thanks,

    Jef

  24. Bernie Says:

    Great post. A bit simplistic for me, but like you said, anyone trying to budget for the first time should find this *very* helpful indeed.

    I’ve been practicing budgeting like this (well, at least something similiar) since a few years back. Always saved my neck at the end of the month.

    However, I think budgeting is the easy part – the hard part is to track and control expenses.

  25. links for 2006-08-16 at super hanc petram Says:

    [...] Getting Finances Done How to create a zero-based budget (tags: money life) [...]

  26. Getting Finances Done » 6 ways a short-term emergency fund can help save your budget Says:

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  28. AllFinancialMatters » Blog Archive » What the Heck is a “Zero-Based Budget?” Says:

    [...] I was over on Lifehacker a while back and they linked to a post on something called a zero-based budget. According to the author of the post, “a zero-based budget is one where your total income minus your total expenses equals $0. In other words, it forces you to assign every dollar of income to an expense (or savings) category.” [...]

  29. Leon Kadoch / IA » What is a zero-based budget? Says:

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  30. Logical Disconnect » Blog Archive » Pay your bills and Patience Says:

    [...] Today I learned that sometimes if you wait long enough your problem goes away. Actually I always knew that, but this was in a positive way. I kept assuming something wasn’t working when in reality it was just taking longer to get an IP address than it should have. But what’s 7 minutes among friends. I also learned that budgeting and paying your bills is a good thing. I wasn’t behind on anything, but boy did I owe a lot of money. Expensive wifely birthday presents, children being born, Fantasy leagues being financed and car inspections all conspired to beat me senseless financially. Now I am going to take a shot at following the simple budgeting advice at Getting Finances Done. Mostly to get my plan together for the basement stage two. [...]

  31. Getting Finances Done » Start budgeting today! It’s a new month Says:

    [...] *How to create a zero-based budget [...]

  32. DEBTective Says:

    Thanks for spreading the word about Dave Ramsey and debt freedom, baby. Dave’s plan makes a lot of sense and you’re a good spirit to do a budget breakdown for all the joes and jills out there. Keep working to deep-six the debt and connect with the cash. Here’s looking at you, kid.

  33. FIRE Finance Says:

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    This week’s Carnival #63 of Personal Finance was hosted by 1stMillionAt33. It was a wonderful carnival of information sharing with around 50 quality posts. Our post Research – From Junk to Joy ! was published under the category Saving Tips. In the c…

  34. Ashley » ‘”Is there an explanation to this?” says she Says:

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  36. Mathieu Jobin Says:

    May I suggest my own budget software to help create a zero-based budget? Justbudget just let you enter your real data, your incomes and expenses. Then it automatically generates stats and informations. Justbudget also create a virtual category called saving. Basically, everything that you don’t spent gets added in there. I beleive it turns out the same as a zero-based budget where you have to create those category yourself.

    I let people use my software for free. give it a shout. http://justbudget.com/

  37. jordan Says:

    I recently about the same thing at http://instantbank.blogspot.com/

  38. Outta Debt Says:

    First Time Zero-Based Budget

  39. Getting Finances Done » The Easiest Way to Organize Your Budget Says:

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  40. The Stubborn Capitalist » Blog Archive » 63 Fantastic Personal Finance Posts Says:

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  41. Luc Gauthier » Faire un budget …et savoir s’il est respecté Says:

    [...] Blog financier intéressant: Getting Finances Done [...]

  42. Levnow Self-Help Tools Blog » Blog Archive » Are You a Financial Illiterate? Says:

    [...] It would not seem right, to me at least, to write about financial literacy without talking about where you currently stand. Checking out Getting Finances Done, I came across this article: How to create a zero-based budget, I thought “What the ……. is zero-based bug…” and there was the answer right in front of me. I love this post it is the first one I can truly say, “Yes, I can do this right now.” In other words, don’t ask me to explain what an IRA is, even with a 401k; I don’t care, well at least until this month. [...]

  43. Getting Finances Done » Applying GTD principles to your personal finances - Part 1 Says:

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  44. Getting Finances Done » How to become a personal finance “black belt” Says:

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  45. I will change your life . com » Blog Archive » 50 Ways to Change Your Life for the Better Says:

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  46. Compelled By Reality » Blog Archive » Creating a Zero-based budget Says:

    [...] 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. [...]

  47. mark Says:

    Hopefully http://www.spendingdiary.com could be of use to track spending over time and help set up your budget.

  48. Emil J Molin Says:

    I cannot be at zero. I must have some cash in my pocket at all times. I do this by living lean.

    I just keep cutting until there is some money left over.

  49. Rhys Campbell Says:

    Great idea, forces you to make your income and savings work hard for you. I think it would take a bit of effort to master but definitely something worthwhile trying.

    If you’re struggling with creating your spreadsheet, check out http://www.easy-budgeting.com to download a simple, straightforward and easy-to-use budget planner.

    Cheers

  50. 63 Fantastic Personal Finance Posts : SCN - Personal Finance Says:

    [...] How to create a zero-based budget – Getting Finances Done [...]

  51. jessica Says:

    the process was so easy. it felt like a 123 step for better budgeting. This guide helped me tremendously. im only 20 years old and at my age finanace is the last priority but with an easy read, i managed to find time to budget all my finances. thanx

  52. » Advice For Managing Your Career: 50+ Resources For Programmers & Software Engineers : devnulled: A stream for software developers and engineers Says:

    [...] How to Create a Zero-based Budget [...]

  53. Mind-Manual » Why People Don’t Manage Their Money Says:

    [...] So, if you’ve been procrastinating on setting up a system to manage your money, now is the time to make the mental flip from a restrictive mold to a tree which can grow leaves and more branches out, out, out forever! Now’s the time. Two good systems are the JARS system Martile is talking about, and a Zero-Based budget from Getting Finances Done. [...]

  54. Why You Don’t Have to Budget to Manage Your Money | Mind-Manual Says:

    [...] 4. A simple and effective, zero-based budget. [...]

  55. Mika Says:

    Looks good, but to me there is one thing missing, Goals. To me a budget should have future goals tied into it. I.E. When my Investment account gets to $XXX.xx i move some money around and reinvest.

    By encorperating some long term goals into your budget it will help you to stay focused on your Personal Finances.

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  58. 8 Beginning Steps to Overhauling Your Overhead; Or, How I Paid Off Over $10,000 of Consumer Debt While Making Less Than $30K a Year Says:

    [...] Commit to having a written, zero-based budget for your household every month. This must actually be on paper (or on an excel spreadsheet, as is the case in the Right-Click household), and you must do it even if your income is fluctuating because of self-employment. My future articles will discuss this step by step, but for now, please see this link to get an idea of how to do this. If you are married, you should be working on the budget with your spouse, or have one spouse do it and then the other one reads it and approves it. It needs to be a goal that both partners are working towards. The main rule is that no money gets spent in your household without being on that budget sheet, and that the budget is something that you are looking at each month, keeping up with, to make sure you’re staying on the road to financial peace. [...]

  59. 50 Ways to Change Your Life Says:

    [...] 10. Start a budget. A budget is a plan that allocates future income towards expenses, savings, investments and debt repayment. They do not have to be rigid and complicated. Getting Finances Done has written a good guide to Creating a Zero-Based Budget. [...]

  60. Beau Says:

    Excellent article! I’ve been doing the zero based budget (based on Dave Ramsey’s guidelines) for a couple of months now. It’s freeing to have a plan for your life…

    Since I’m a web developer, it’s unsurprising that I built (and am building) a free zero-based budgeting web app.

    Budgety.net

    Thanks for the article!

  61. Anthony Says:

    I have created a variation of the zero based budget that has worked well for me, it hopefully will allow people who have had problems sticking to a budget in the past be able to become close to having one.

    http://www.thepoordollar.com/2009/07/budget-oops-part-1-906-on-food-dining/

  62. Red Parrot Says:

    I have been using Zero Based Budgeting for the last 5 years and it really saves my needs. Try it you will never go.

  63. Chris @ How We Save Money Says:

    Nice step by step break down! I look forward to reading more posts.

  64. January Wrap-Up, February Goals « The Saved Quarter Says:

    [...] Stick to a zero-based, cash only [...]

  65. February Wrap-up and March Goals « The Saved Quarter Says:

    [...] Stick to a zero-based, envelope budget, using only [...]

  66. A 360-Degree Approach to Improving Self-Confidence « Catch Your Career Says:

    [...] a plan. Create a budget and keep to it no matter the [...]

  67. Cash Is Truly King! Says:

    [...] How to Create A Zero-Based Budget and Budgeting on A Self-Employed or Irregular Income [...]

  68. Bly, Dahle Townhall Tonight. « Interned In Northfield Says:

    [...] They were asked about “0″ balance budgeting. It was quite apparent neither had a clue what that was. Both Bly and Dahle, particularly Bly fell [...]

  69. A 360-Degree Approach to Improving Self-Confidence | Says:

    [...] a plan. Create a budget and keep to it no matter the [...]

  70. Budgeting Tea Party Style « arborblahg Says:

    [...] are lots of links about how people can apply zero-based budgeting to their home budget, and  if you’re [...]

  71. Zero Based Budgeting Says:

    [...] about this concept, I came across the blog Getting Finances Done, which wrote an excellent post on zero-based budgeting. I know many people who have used this concept to get their finances back in [...]

  72. Holes | daily bricks Says:

    [...] if you haven’t tried the zero-balanced budget and the envelope system, you should.  Even though I’ve always been on the frugal side, [...]

  73. Johlene Says:

    Here’s my version of ZBB.
    20% Fun (vacations, spending money, activities & recreation etc., interest pmts on holiday trailer)
    20% Debt Reduction/Big Ticket Items (once the debt is paid off, we can finance new “toys”)
    20% Vehicles (save up for new vehicle with excess over fuel, maintenance, payments)
    20% Home (mortgage principle, home maintenance 3% of value/yr, maybe utilities etc.)
    20% Expenses (groc, clothing, mortgage interest, utilities etc.)
    20% Savings (Pension that comes off paycheques, RRSP, RESP, investments)

    This is fun. If a category is negative (such as “Expenses” or if it’s boring (like Vehicles), then I only allocated my windfall to categories that need topping up, like vacations, debt payment, and investments (pro-rated based on 20% rule). This does help set a limit, using my “values”, I am not going to try and save more than 20%, because some of that belongs to much-wanted vacations! Not going to spend it all paying off the mortgage either. The idea is to balance having fun in the present with a secure future.

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