For the vast majority of people, the word budget may as well be a banned four letter word.  No one likes constraints and being told what they have to do.  That is what most people think a budget is; a document that says 'No' to everything they want to do.  I would propose that those individuals are not doing a proper budget and thus their money is still getting away from them.

 

Budgets are a tool that the most successful people use.  Millionaires use them all of the time.  Budgets are simply spending plans; a document that outlines how you are going to spend your money.  And a proper Zero Based Budget spends ALL of your monthly income on paper before the month even begins.  Let me explain the basics of how this works.

 

Let's say Karen (Karen because apparently it is a popular name to make fun of these days in social media) makes $5,000/month in take home income.  To start her budget, Karen would write down Income: $5,000.  Then Karen would begin to go down the list of items that she needs to spend money on that month.  Karen is generous and so she decides that 10% of her take home income will be designated for charity.  So in the category "Charity" she writes down $500.  Next Karen needs to take care of Food, Utilities, and Shelter.  Karen is single and so manages to eat off of $300/month.  Water and Electricity averages her $150/month and her mortgage payment is $850/month.  All of these items are categorized and accounted for.  At this point, before the month has even began, Karen has spent on paper $1,800 of her $5,000 take home income.

 

Karen has now taken care of the basics.  She has given some to charity, paid for groceries, lights and water, and her house.  Next comes transportation costs, Lifestyle costs, pet costs, and other life event situations.  Karen has financed a car which costs her the average car payment in America of $498/month.  She spends on average $200/month on fuel for this car and designates $40/month for repairs and maintenance.  Karen still has not figured out streaming services and spends $220/month on internet and television.  She also has a $60/month cell phone bill.  Karen's dog is a designer dog with a litany of health issues that require $300/month in food and veterinarian bills.  Karen is smart and allots $50/month in eating out, $100/month for clothing, $200/month in "Walk Around Money" (because allowance sounds like socialism), $200/month to cover vehicle and home insurance, and a "Miscellaneous" fund of $200/month to cover unforeseen or rarely purchased items.  Up to this point, Karen has spent $3,868 of her $5,000 take home income.  Karen likes to invest 15% of her income into a retirement fund and so she spends $750/month on that.

 

Karen now has $382 left in her monthly income to spend on paper.  Seeing she has a $22,000 vehicle debt and $8,000 credit card debt, Karen needs to work on getting that paid off.  The extra $382/month goes towards her credit card debt while she makes the minimum car payment.

 

This is a fairly common budget for someone with debt.  The idea is to spend all of your money on paper at the beginning of the month, and get those debts paid off as fast as possible.

 

Does some of this sound familiar to your own life?  Or are you making good money but have no idea why there is not any money available by the middle of the month?  It's okay.  Martha and I understand; we were that couple.  Only difference was we were not nearly that organized and methodical in our finances back in 2006.  Martha was a newly minted nurse, I was attending community college, we lived in an apartment with a couple pound puppies and could not figure out why there was no money left over at the end of the month on a $60,000/year salary.  If you are sick and tired of being sick and tired, let's talk and we can show you the path out of wealth destroying financial decisions.