Benefits of Creating a Zero Balanced Budget

On this edition of the Monday Money Pulse, we are learning how to create a zero balanced budget and the benefits of doing so. 

How to create a budget for a family

In today's video, I talk about the benefits of creating a zero balanced budget. On the last MMPulse we took 5 steps to help set us up for success when creating a budgeting. If you did those tasks today will be a breeze!

How to Create a Zero Balanced Budget:

Step 1:
Gather all of your financial statements for the past 3 months. 
This would include bank statements, credit card statements, and any other expenses going out and income coming in.

Divide all of your expenses up into categories; the most common are:
  • Bills
  • debt
  • food
  • gas
  • entertainment
  • medical
  • savings
  • child care
The more detailed you are in this process the better.  For food sub-categorize eating out, work lunches, and groceries. For childcare include daycare, diapers, lessons, new clothes, and sports fees, etc.

Why are you doing this? You need to know where your money is going, you need to know HOW much and you need to see that there are probably areas you are overspending on and not even realizing it!

This is typically the part my clients like to leave up to me. They give me all the data and I do the dirty work and present it to them. Book a free consultation here. 

My biggest shock when reading emails or working with clients is that most families do not have some type of written budget in place. I thought writing bills on a time schedule was common for most households, but I was wrong:

The reality is most people pay late fee’s, get recurring overdraft fees, and could not tell you how much money they had to their name if their life depended on it.

This makes me sad, but it also makes me know that I can help!

Once you have categorized your spending for the past three months you want to average those totals. You should use these totals as the input when creating your zero-balanced budget plan. This will give you the best representation of what you are spending. From there you can deduct amounts as you feel comfortable or you can add to categories like debt payoff and savings as income allows.

Step 2:
Create your zero balanced budget.

One of the reasons I highly encourage people to use a zero balanced budget is because it is straight forward. If you get paid once a week or have irregular income this plan works.

Start with your income for any given period of time. You may choose to do this weekly, by pay period, or monthly.
Then subtract your bills, household expenses, and other expenses from that income total until you get to zero.

  1. If you have used all your categories and still have money left you can put it towards debt repayment, savings or a slush fund.
  2. If you run out of money before you get to all of your expenses then you may need to switch the pay period you pay for items, look for ways to cut spending or look for a way to increase income.

I hope that you have found this budgeting technique simple and this post encouraging. As always I am here to help! I thoroughly enjoy working with families and creating budgets. I love seeing people make tremendous amounts of positive progress!  You can easily contact me to set up a personal or event skype consult if you would like!

This video guides you through a simple tutorial on how to create a zero balanced budget on paper:

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A zero balanced budget is the best tool I have found to help me and my family create a working budget. Today I am sharing the benefits and how to create your very own zero balanced budget.

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