Have you ever had the feeling where one day it’s payday and you feel incredibly rich? Especially if you were crawling to payday, it just feels like this huge sign of relief when you finally make it.
Then, it’s time to release the streamers and start the party. Now that you got paid, you can go to Starbucks as much as you want. All of a sudden take out nights are back on. You can hit up amazon again now that you have money.
But just a few short days later, you’re left wondering where it all went. Surely you have more in your account than this. Is this number even right?
Then, suddenly, you’re in a panic because you’re thinking about all of the bills you’ll have to pay in between now and payday.
Even if you’re a budgeter, if you aren’t great about actually assigning all of those dollars to jobs, it can happen where you wake up and you can’t believe that you don’t have more money than that.
This is why having a zero based budget is so important.
What is a zero based budget?
A zero based budget simply means that you budget every dollar you have. It follows a simple formula.
Income-Expenses=$0
You may be thinking, where does my “extra” money go? The money I have that I want to put towards savings or paying off debt?
That money needs to be assigned as well. In fact, it is critical that you assign every dollar. Even the dollars that you want to save need to have a job.
They need to have a specific job.
So if you want to save each month for a trip that’s coming up next year, then you’ll want to create a savings category for that and put money there.
If you have a computer that needs replacing and you want to save up and purchase a new one, then you need to be setting aside some money each month so that you can make that purchase.
A zero based budget means that every dollar is assigned. So after assigning all of your expenses for the month, you need to take that leftover amount. The money you have that is “extra,” and go ahead and put it towards a goal you have.
In fact, it may be more important to set an amount that you’d like to put towards your goals and then assign the money that’s left over to your monthly expenses. It will make you realize fast how little you have to spend on everything else if you’re really being intentional with putting that money towards goals.
Why Budget Each Dollar?
When you’re budgeting each dollar, even for the things that you’re wanting to save up for, it may give you this feeling that you don’t have as much money to put towards things as you’d like.
I want to encourage you not to look at this as a negative thing. There is a real scarcity that is created when you assign all of your dollars.
Now, I know that we don’t want to live our lives from a place of scarcity. That feeling that we’re trapped or that things can’t improve. That’s not the feeling of scarcity I want to invoke.
The feeling of scarcity I’m talking about is actually good because it encourages you to see that you only have so much you can spend with the dollars in your bank account today.
It’s going to be really important that you’re intentional with those dollars and that you’re really putting your money towards things that are important to you.
When you’ve budget each dollar, including those extra dollars that really have savings jobs you’d like them to perform, it prevents you from wandering.
You know that if you overspend at Amazon this month, you’ll have to take those dollars from somewhere.
And where’s the first place that those dollars are going to come out of?
That’s right, your savings categories. Which means that now you won’t be saving as much as you’d hoped.
When your budget is zero based, you know where you’ll be pulling that money out of, and it’s just one more safety mechanism to keep you on your budget.
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