Why I Use a Zero-Based Budget, and Why You Should Too

My wife and I have been on a financial journey for the past few months, and although I’ve never blogged before, I thought I’d share where we’ve been and where we’re going since our story is likely similar to that of many readers out there.

For the past 12 or so years, we did what many people do. We went to work, paid our bills, invested a little for retirement here and there, and spent money on things that we needed and wanted. Generally speaking, we tried to make good decisions about how we spent our money, but we were never truly intentional about any of it. We weren’t living paycheck to paycheck, but in hindsight, we were pretty close. Had we experienced a job loss or major medical emergency during those years, I’m not sure what we would have done.

I won’t go into detail about the financial conversion I experienced in the latter half of 2020. Suffice it to say, I taught myself quite a bit about personal finance and came to the realization that what we had been doing wasn’t necessarily bad, but it wasn’t good either. This change in perspective led me to do something I’d never done before: create a zero-based budget for our household.

Simply put, a zero-based budget is an approach to personal financial planning that designates each and every monthly take-home dollar for a particular purpose. Every. Single. Dollar.

Using a zero-based budget, you’ll never be surprised by your expenses, never wonder at the end of each month, “Where did all of my money go?” Instead, you control where your money goes before you ever get it. You also control yourself. You put spending curbs on Present You for the benefit of Future You.

So where to start? Before you begin budgeting, you’ll need to do several things. First, you’ll need to record your household’s monthly take-home pay. Second, you’ll need to create a list of all monthly expenses and assign them to overall spending categories. I recommend coming up with general categories—not too many because you’ll find that overwhelming but enough so that you can categorize all expenses as easily as possible. Third, you’ll need to think hard about your long-term financial goals. Are you hoping to pay off debt? Go on vacation? Buy a newer vehicle? Save for college and retirement? All of the above? Whatever you’re hoping to do, estimate how much money you’ll need to accomplish your financial goals and how much time you’ve got to do so, then write it all down.

Just remember, this isn’t merely a budget. It’s a contract that Present You is making with Future You. This means that you’ve got to stick to your commitments. My simple advice: If it’s not in the budget, don’t buy it. If you find yourself exceeding your spending allocations, you’ll either need to reconfigure your budget or take a close, hard look at what’s causing your excess spending.

Whatever you do, be both thoughtful and intentional about your personal financial planning and zero-based budgeting. Future You will thank you for it.

About the Author

John Thomas is married to CECPTA member Carrie Thomas and has 3 children. He works at UT Dallas and has interests in finances, gardening, euro games, and craft beer.

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