My friend Todd has a great line in our Budgeting Made Easy class. It goes something like this “Christmas is planned the same day every year, December 25”. The idea is simple if you plan to spend money on gifts for December 25, start planning now to be ready to pay cash or have cash in the bank for your purchases. Do not even consider going into debt for an expense that you know comes every year! How do you manage this you ask? Simple – Budgeting!
If you have ever asked yourself, where did all the money go or I wonder if I will be able to pay rent this month, you might need a budget. If you stress about your car tires making it one more month or getting sick and missing a day of work, you might need a budget. If your retirement plan is to let the government provide, or if you would like to save for a vacation, you might need a budget. If you are going into debt even a little more and more each month, you might need a budget. The fact is, regardless of who you are and where you are in your walk of life – You Need a Budget!
In this blog, we will give you the tools to start budgeting and next steps you can take to become an expert at zero-based budgeting. Zero-based budgeting is learning to live within the provisions God has provided to us to manage and tell every dollar where to go at the start of each month. Prior to budgeting, it’s important to reflect on and think about what are your individual or family goals. These can change but the big ones are often a theme that will last at least a season in your life. How many people say they have a desire but never have the money to BLANK, but meanwhile will mindlessly spend an extra three dollars a day on coffee? The BLANK can be; pay off student loans, serve on a mission trip, save for retirement, give to a worthy cause, etc. By saving and investing those three dollars per day on coffee, you could have $3500 to take a trip in three years. In 40 years, you could have $421,000 towards retirement. Your budget should reflect your personal goals.
Basic zero-based budgeting – At the start of each month list your planned take-home income for the month including all sources. Then subtract all of your monthly payments such as utilities, rent/mortgage, savings, giving, debts, planned groceries, medicines, dr visits, etc. The balance is what you have left to plan for lifestyle choices. The key here is “planning”. This balance is then typically applied to any savings needed (for example your emergency fund), paying off debts, or funding accounts such as college and retirement. Before you finish the budget for the month, every dollar of income should be told where to go. Every dollar must be assigned. Your budget is now your plan for the month, reflecting your values. There are many tools online that you can use to assist you in pulling together your monthly budget or you might like to give ours a try. These documents also have a core list of expenses and may help you to identify what to include in your budget. You can link to them here –
Putting together your budget is the first step. Now comes the task of tracking your spending and staying within your budget. I normally make a weekly review to make sure we are staying on track and our family talks about any purchases not planned. If it is not in the budget, it's not being bought! But, if it’s important enough to us, we can look to work it into the budget next month. This has pretty much killed those impulse buys and has empowered us to make better-informed decisions. Tracking progress is a critical step where the work is done and you become fully aware of your spending.
The last step in the budgeting process is evaluating how things went last month, adjust and set your budget for the next month. Did your budget capture everything you needed to in your first month? Where there any surprises? Are you moving towards your goals or away from them? What changes are you willing to make to get on track? Once you have locked in your next month’s budget, continue by repeating the cycle. Do not let any initial setbacks stop you. It usually takes 3 months to get a full understanding of your actual spending.
Looking for additional help to get started, unstuck or have some tough questions? Why not join us this month at our next Budgeting Made Easy class. This is a two-hour course covering not only the basic principles of budgeting but also strategies to stick to your budget. This course has helped hundreds of people over the last few years. This class is normally held on the second Monday of each month. After you have taken the Budgeting class, we offer additional support in the form of one on one Coaching. For more information, or to register for these offerings, make sure to check out the Willow Creek Stewardship Ministry.
Written by Financial Stewardship Volunteer Jon Kotrba.