Zero based budgeting is the best method I have found to keep track of my debts and build a managed savings account. I started my first zero budget spread sheet in college. At this time I did not use credit cards.
Zero based budgeting is where you take your income then subtract all of your expenses and savings leaving the balance zero. Scary right? Not really, you get used to it very quickly.
I have lived on a budget where after all my bills were paid, I had about $20 for food that needed to stretch for two weeks. Ouch!
My Story
I was in college working part time and going to school full time with rent, utilities, car insurance, gas, books, etc. as bills. I had a choice to make. I could go full time at my job and continue with school full time at night or ask my parents for help.
Fate intervened in this case because my mom came to visit me. We live about 200 miles apart. I was at work when she arrived and went looking for a snack. Ha! What she found was minute rice, peanut butter, canned beans, and ramen noodles.
Next, she went to the refrigerator where she found mayo, ketchup, mustard, and a pitcher of Britta water. I was not around for her frenzied freak out but she informed me later quite thoroughly.
My mom went to the store and bought enough to fill my cupboards with staples such as bread, pasta, canned vegetables, etc. and my refrigerator with a few basics such as milk, butter, cheese and lunch meat.
She went home and told my father the way I was living and after dinner that night he took their leftovers and put them in the freezer. My mom asked him what he was doing and he said, “feeding Christin”.
I visited a couple of weeks later and to my surprise I had a cooler full of freezer meals to take home with me. We lived like this for a couple of years and then my car gave out. I opted to work full time and finish my last bit of school at night so I could afford a new car and food.
This was my first budget at the beginning of the month:
Let's talk about what you see above:
Income Column
The income column is the total amount of money I brought in each pay period. I had a 1st and 15th budget.
- From SAV – Money from my savings account.
- Person 1 – Money I earned from employment.
- Carry Over – Money I saved from one paycheck to pay the bills in the next paycheck.
- The first of the month required more money than I brought in so I needed to save money from my second paycheck to make sure that the first of the months bills got paid in full.
- Other – Consisted of bonus pay, gifts and tax refunds. Essentially any money that I did not earn but received was considered “Other”.
I totaled my “Income” column, in this example it amounts to $562.50. Next I check to make sure it matched my “Budget Total” column $562.50. This is an example of a zero based budgeting system. Every dollar is accounted for.
Payment Method Column
The payment method column tracks how I paid my bills. At this time in my life I did not pay my bills on a credit card so everything came out of checking.
Category Names Column
Category Names are vital to having a successful budget. They describe the money you plan to spend. Most of my category names are obvious. I created Entertainment to included a variety of spending items. I considered this movies, dinner out, bowling, coffee bar, etc.
Try not to include too many items within the same category name. If too many spending items encompass one category it might be hard to see where you are spending large chucks of money.
Sometimes it makes sense to break Entertainment out on a granule level to determine where the bulk of spending is is happening within a category. Examples of making it more granular would be Breakfast Coffee, Lunch Money, Dinner Out, etc. By breaking this out you will know how much you are spending on these items and where you might want to cut back.
It is important to plan where your money is spent to make sure it doesn’t just disappear.
Budget Column
The budget column is the amount I allocated to each category per pay period based off what I spent in previous months. The Budget Total MUST match total income brought in for the pay period.
Income $562.50 – Budget Total $562.50 = ZERO $0.
Actual Column
The actual column is how much I spent in each category. I added this column so I could get a good picture of how much I spent for the two weeks. This helped me plan my next budget. I analyzed my spending habits every three months to see if I needed to make adjustments to any of the budget categories.
Remaining Column
The remaining column is money I did not spend or amount I over spent. I am sure you are wondering why I felt a need for this extra column. The reason is because I needed to know how I did overall with a quick glance. This column quickly tells me if I ended the two week budget with a gain, balanced or a deficient.
End of month budget example:
In this example I came out ahead for the month. I would add up the $5.07 and $21.22 and place the total $26.29 into my savings account. I would usually spend this money on “Entertainment” eventually. Sometimes this extra money was pulled from savings when I had a bad month and “blew the budget”. It happens to all of us. There is always next month!
Actual Monthly Spending
Actual Monthly Spending
I used the actual monthly spending spread sheet to track my monthly spending. This helped me remember what I spent in previous months. As time went on I built up a lot of data around my spending habits. This was great because it meant putting my monthly budget together was super easy.
When you create your budget for the first time you will have success and failure but with this sheet you will get it down to a science year after year.
Try it yourself!
I created a google doc where you can create a copy in your personal google drive to customize your monthly budget. Once the google doc is open go to File > Make a Copy > OK.
You must be logged into your google account in order to save this document in your personal google drive. Once saved, start to edit in your own private google doc. Please note once you make a copy I cannot see it so don’t be nervous because your information is NOT on display for the world to see!
