Zero Based Budgeting and Personal Finance

If you are reading this because you want to get your finances in order, there are two things you need to know up front.  The concept you are getting ready to read about is simple.  It can change your financial future.  It can get you out of the debt hole that you dug and fell in.  It can make you wealthy over time.  The concept you are getting ready to ready about is also difficult.  It requires self discipline and work.  People may treat you like you’re weird.  Understand up front that the mental math is easy, but the change in behavior is difficult.

The math behind a zero based budget is easy.  You start by prioritizing how you will spend your money.  When you prioritize, it should be in the following order:

1. Food
2. Clothing
3. Housing
4. Transportation
5. Utilities
6. Savings
7. Bills

Most people reverse these priorities.  People pay bills first and then try to eat and pay for gas for their car on what is left.  Most people wonder where their money went.  There is nothing left over to save.
If you are tired of wondering where your money went, take control and tell your money where to go!  After you prioritize, take a sheet of notebook paper and write down the amount of your paycheck, or any other income that you receive.  Spend the entire amount on paper until nothing is left (it’s a zero based budget).

After you have written it down, go to the atm or take cash out of your check when you deposit it to cover expenses that you don’t have to write a check for or have deducted from your account.  Using the example in the picture above, you should take out cash for food and gas.  Take envelopes and designate what each is for.  Put the cash in the envelope.  Nothing comes out fo the envelope unless it is for the designated expense.  If it’s not on the list, you don’t have the money.  If your grocery bill is $305.00, put something back (this is the difficult part referred to at the beginning).  If you need something, find a way to come up with the cash to pay for it or wait until your next check and put it on your list.
It will take practice until you get it right.  Certainly many will argue that “there isn’t anything left, and I still have bills to pay!”  The response to this is that you have to eat.  If it comes down to being able to provide food, clothing, housing, transportation, and utilities or paying the credit card bills (you should cut your credit cards up, but that’s another article) the credit cards can wait.  You will be in control of your money for the first time.  It may require a temporary second job to clean up and pay all of the obligations.  However, you will never gain need to wonder where your money went.  You will also have money in your bank account.