What is Zero-Based Budgeting?

If it isn’t obvious to you yet, budgeting is my jam. I can spend hours poring over expenses and spreadsheets, helping people look for ways to best allocate their money and meet their financial goals. I love it when people have a realization of how they can use their money more effectively. Those little ‘aha!’ moments keep me going. I’m passionate about this because I believe it’s crucial to your ability to manage money. Budgeting just makes everything easier and more organized. In my coaching practice, I help people get organized and on a path to winning with money. And it’s a blast.

I coach people to use a zero-based budget. I think it’s the best method, but I recognize that it’s just one of many paths to success that are also viable and helpful. I want you to make a budget and I want you to win with money. Above all, I want you to make the best decisions with your money. To help with this, I’m going to describe some of the best money-management methods out there, starting with zero-based budgeting. As I go through these, think about how they might help your life and finances.

What is Zero-Based Budgeting?

Zero-based budgeting is an accounting method in which all expenses must be justified for each new period. This type of budgeting starts from scratch, or a “zero base”, and causes you to decide if you really have a need for all your expenses. It’s typically used in organizations, but you can apply it to your finances as well.

The other key component of this type of budget is that you spend all your money on paper. You allocate everything down to the last cent to make sure you are spending intentionally.

Let’s look at these two pieces in greater detail.

1. You start from scratch, and nothing is safe.

With a zero-based budget, your job is to put your goals first by getting rid of or cutting the expenses you don’t need. Every time you sit down to write your budget, you assess what you need to keep or let go of in order to win with money. Could you meet your goals a lot faster if you stop eating out, or switch to biking instead of driving, for instance? What if you downgraded to a cheaper apartment and groceries at your local supermarket, instead of shopping at Whole Foods? These are the questions you’d ask yourself when building your zero-based budget. It’s not to make your life miserable; it’s to give you more options when prioritizing the things you truly want.

Why this matters

The benefit to this is that it gets you to re-evaluate your values on a regular basis. It gives you the opportunity to address any frivolous spending and to ask yourself if the things you are spending money on are really investments in yourself and the life you want to live. By starting from scratch every time, it gives you the opportunity to put yourself first. It won’t matter what kind of budget you had before this new one – you get to start fresh and do better.

2. Your budget must equal zero

When you make a zero-based budget, you plan to use all your money. You don’t have to plan to spend it all (in fact, I don’t recommend this), but you at least need to allocate every cent. For instance, if you bring home $2,500 after taxes during a pay period, you need to plan out how you will use all $2,500 dollars. You need to know what you’ll be spending on food, transportation, gas, utilities, etc., and have your plan in place to save or use the rest.

You’re being very intentional with your money.

Why this matters.

Making a zero-based budget is your opportunity to be proactive with your money. Even if you give away most of your money to bills, you still get to make the plan of how you will do this. It puts you in the drivers seat, giving you some control over your financial situation. You get to make your money work for you, instead of being disorganized and at its mercy.

Additionally, this is another way to make sure you are using your money efficiently and effectively in service of your goals. If you don’t have a plan for your money, you’ll be much more likely to waste it and wind up in a bad spot financially. The last thing you need when you are working to accomplish your goals is to have your money slip through the cracks. Hell, that’s the last thing you ever need.

Final thoughts

Zero-based budgeting is an incredibly powerful system. Given that it forces you to confront your values AND your habits, I’d say it’s the best system for personal change/long-term growth. But, of course, I’m biased. I’m happy to talk more about your situation and see if we can work together. More than anything, I’d encourage you to find the system that works best for you. Your overall success is what matters most.

Let me know what you think of zero-based budgeting. Did I miss anything? Are there other systems that work better?

Best of luck and happy budgeting!

Why Pen and Paper Budgets are Best

Technology has advanced tremendously in the last one hundred years; so much so that our way of life would be drastically different to a person alive in 1920. While I appreciate my cell phone and the other improvements brought about my technology, I can’t help but notice that technology can 1) complicate things and 2) make us forget our personal power.

For example, I used to rely on physical maps when I traveled around the city. Now I just use Google Maps. It’s awesome and is usually convenient, except for when I want to find a Chipotle less than an hour before they close and the app won’t work to save my life (I’m not bitter at all). I also struggle navigating my city without Google Maps; I get nervous sometimes when I try getting around without it. The point is, the technology is great, but if we rely on it we become dependent and forget how to get to our destination on our own. WE forget what works and has worked for years.

I feel this way with budgeting. While I love making Excel spreadsheets as much as the next nerd, I can’t help but notice that I rely on it. So, for anyone who is thinking of budgeting but doesn’t want to use a spreadsheet or a piece of software, know that you can be still successful without them. In fact, as I alluded to above, there are benefits to using a pen and paper budget over other types. So today, I’m going to give you some reasons why a pen and paper budget could be the way to go for you.

Paper budgets are free

You can make a pen and paper budget at any time with no cost to you – you don’t need to rely on software or pay for a subscription to a budgeting program. Your budget will be simple, but it will be able to do exactly what you need it to do: track your finances. This shows you that you don’t really need all the bells and whistles when it comes to making and keeping a budget.

Paper budgets are great for beginners

If you’re new to budgeting, apps and software can actually get in the way of your learning. I started with a pen and paper budget in order to understand the most important elements of a budget, and to get hands-on experience with it. You don’t have to go through that, but you may find it helpful for you, too. Later down the road, after you’ve spent time with your budget and feel confident you understand how it works, you can look into more sophisticated tools.

Paper budgets force you to do all the work

When you use a piece of software to budget for you, it does all the math on its own. However, when you do it by hand, it’s all up to you. You have to make sure all the amounts add up properly, which can be tricky for even the most diligent among us. You’ll need to focus and face your fear of math with this type of budget. It forces you to pay attention to everything in your budget, which leads us to the next point.

Paper budgets force you to re-evaluate your finances

When you re-write and update your budget by hand, you are forced to copy the information over and over again. This gives you an incredible opportunity to re-evaluate your finances and make sure they are what you want and need them to be. You are forced to re-write what is and isn’t important to you on a consistent basis, giving you tons of chances to make changes as they come up.

Paper budgets give you extra motivation

Since your budget is paper, you can easily put it on your wall if you wanted to. This ensures you never forget what you budgeted so that you stay on target with meeting your financial goals. It serves as both motivation and inspiration, especially if times get tough.

If you’ve never budgeted, I recommend trying a pen and paper budget. It isn’t perfect but, for the reasons I mention above, it’s a great option for anyone who is ready to start managing their money. Another great option? Working directly with me through one-on-one coaching. I’ll make sure you have the support you need to make you – and your budget – shine like a diamond. No matter what, just get started!

Good luck, and happy budgeting!

Specificity: The Key to Achieving Your Goals

“I’m going to pay off at least $21,500 in student loan debt next year”.

My heart skipped a beat. My palms started sweating, and it wasn’t because of the summer heat; my mind and body was sending me signals that I couldn’t do it.

“Hey,” I said to myself, cutting off the negative mental chatter. “I’m going to pay off at least $21,500 in student loan debt next year. I can do it. It will work”.

I was giving myself this pep talk last August on the eve of paying off an $8,500 debt. This seemed like a lot to pay off when I set the goal in December 2018, yet I managed to do it in nine months. It got me thinking of what else I could do.

“HEY! Listen. You can do this. You can reach this goal. Focus in and get serious”.

The part of me that was scared finally got on board and helped me break the goal into more manageable pieces.

“I’d need to pay off at least $1,791.66 each month. That’s $447.92 per week”.

“I’d also need to work at least 6 hours per week at my part-time job, as well as any overtime hours at my full-time job that I can get”…

The more specific I got with my goal, the more I believed I could do it. The specificity gave me objective proof that it was possible: the numbers showed me exactly what I needed to do to succeed.

Even though the goal was lofty to me, I knew beyond a shadow of a doubt that I was going to achieve it if I followed my plan. The path ahead was as clear as day*.

Making your goals specific

You’ll need to set goals to better your finances. Whether you want to save money or pay down debts like me, you’ll need to decide what you want and come up with a plan of action. I think your goals should stretch you a little bit. If you always feel comfortable with your goals and plans, you aren’t growing as much as you could. So challenge yourself to go for the dreams that seem out of reach. You’ll be asking yourself to do something you’ve never done, and you may feel resistance as a result. If this happens and you start thinking of excuses for why you can’t reach your goal, get specific.

The great thing about goals is that you can break them down into the steps you need to complete them. You do this to create actionable steps that help you succeed. I didn’t have $21,500 on hand to pay off my debt. I knew if I wanted to succeed, I’d need to make $21,500 over the course of the year. That meant breaking my yearlong goal into monthly and weekly goals, and then figuring out how many hours I’d need to work each week. I even went as far as developing a spreadsheet to calculate this information in real time.

The end result was that my goal stopped being overwhelming and became doable. It put responsibility back on my shoulders by making my success or failure up to me.

When looked at in their smaller pieces, your goals will appear more manageable, too. From there, it’s just a matter of accomplishing the smaller tasks until you get what you want. If you’re ever feeling stuck, ask yourself how you could break what you’re trying to do into even smaller pieces. I can guarantee that by figuring out those smaller steps, you’ll feel more empowered to accomplish your goal.

Good luck, and happy budgeting!

*Unfortunately, I couldn’t predict COVID-19 or the effect it would have on the world. My industry has ground to a halt and, like everyone else in the world, I’ve been forced to put my life on hold. This includes pausing my goal. I’ve switched to using my emergency budget to protect my finances against economic further changes and I am using my time to learn about business and finance. When this ends, I’ll be ready to pick up where I left off. My plan may have changed but my goal has stayed the same.

The Number One Thing To Understand About budgeting

Remember to save finished version on my personal desktop computer

Most people want a quick fix. Don’t be like most people. Our culture promises instant results and immediate solutions to problems. But these quick fixes leave out the growth that comes with longer paths to success.

We get so focused on results that we forget that we can gain a ton from the process of reaching our goals. Yes, we want the end result; that is why we are starting the process, after all. But I argue that you can learn from the process and still get your result.

The lessons you learn along the way to your goal change you and make you better. Consider someone who wants to lose weight. They could hire a plastic surgeon to make them look fit and trim, but they’d lose out on the knowledge, experience, and confidence that comes from natural weight loss:

  • Lose weight cheaply
  • Learn to prepare meals and eat properly for their body type,
  • Learn how to exercise to lose weight and build muscle,
  • Learn to set and achieve fitness goals,
  • Learn to stick to a plan even when things get tough,
  • Learn to fight through their mental barriers, and
  • Gain the confidence of knowing they can succeed if they put in the effort

On top of that, they would actually be healthy and good-looking on the inside and out. Sure it would take longer, but I’d argue that the benefits of true change outweigh the downsides of the time it took to get there.

The thing to understand about budgeting

You could win the lottery. You could inherit money. You could win a court case. You could be the number-one draft pick in the NBA. Those can be amazing gifts in their own right, and I wouldn’t want to take away from anyone who has the skill or luck to find themselves in such a situation. But none of those scenarios will teach you about managing money. Budgeting will, though. So will understanding your relationship with money. So will learning about personal finance so you can make choices that better serve you and the life you want to build.

If you want to get rich quick, this isn’t the website for you. But if you want to learn how to manage your money so you can be financially fit on the inside and out, stick around. Fully commit to your financial growth. Take your time. It will be time well spent.

Learn to enjoy the process as much as the product, and you’ll make sure you have the tools to use your money wisely and achieve the life you envision for yourself.

Most people want a quick fix. Don’t be like most people.

5 Excellent Ways Accountability Partners Help You Succeed

Your journey to financial fitness is personal, but you don’t have to travel alone. While your relationship with your money is personal, as are your motivations for getting control of your finances, you will benefit from the support of other people. I know a lot of you may hesitant to discuss your money with others because of shame or regret or ‘it’s none of your dang business’, but one of the best things you can do is ask for help from people. You can learn so much and achieve so much more than you can on your own.

There’s no shame in needing help from others. For one reason or another, we may lose motivation, get stuck, or fall short on our goals. In those moments, having support will make sure you get back on track. One of the best ways to get help with managing your money is to get an accountability partner. An accountability partner will help hold you to the financial commitments you set for yourself, while also supporting you in your overall success. You will get to do the same for them, as this is a mutually beneficial relationship. You will help each other get what you want.

In this article, I’ll give reasons as to why you should work with an accountability partner. You will see that the benefits they provide are well worth it.

Your accountability partner will:

Keep you honest

Your accountability partner will tell you the truth about how well you’re doing. If you’re slacking off or making excuses, they will set you straight. It’s nothing personal, it’s just to help you achieve the goals you set for yourself.

Keep you on track

Your accountability partner will keep you focused on your budget and your financial goals. There’s no way to avoid your budget if you have someone holding you accountable for sticking to it.

Help you learn

Your partner will know things you don’t, and you can benefit from their knowledge. They will have access to different information and resources that they can share that will help you manage your budget and finances. You can also learn from their journey by not committing the mistakes they’ve made, while copying their successes.

Keep you motivated

Your accountability partner will understand your goals and why you want them. Thus, if you ever feel unmotivated or discouraged by a failure, they will be able to remind you of what you want and why it’s so important to you. Then, when you succeed, you can celebrate your wins together.

Help you achieve more

We have a tendency to become lazy and complacent. We may fail to work as hard as we can if we are seeing success. Your accountability partner will be able to challenge you to break out of that rut and push you to strive for more. They will be able to see your blind spots and help you find ways to overcome them. They will know when you are selling yourself short and will challenge you to work harder.

Accountability partners are truly your best resource in your journey to debt freedom. What’s more: Not only will your accountability partner help you; you’ll be able to help them. All those problems that you experience – the lack of motivation, the confusion, the self-delusion, the complacency – they will experience as well. You get to push them to grow in the same way they do for you. As a result, you’ll get the pleasure of seeing them become better and knowing you played a huge part in their success.

By collaborating with an accountability partner, you’ll get the support you truly deserve, while succeeding so much faster. In future posts, I’ll talk about how you can build your own accountability partnerships. In the meantime, if you want support in your journey to take control of your money, I can help you with that.

Good luck, and happy budgeting!

The 3 Benefits of a Good Budget

Piggy bank with coins

Not all budgets are created the same. The longer you work at your budget, the more it will help you solve your financial issues and meet your goals. It may take a while to perfect your budget, but it will pay off big time in the long run. To learn how a good budget will benefit your life, read on!

Good Budgets take the guess work out of finances

Budgets make spending and saving easy. Once your budget is set, you simply follow the plan you created for yourself. Since you’re deciding in advance what you want to spend, all you have to do is stick to your budget and you’ll be all set. You won’t have to worry if you are spending the right amount or doing the right things for your long-term growth.

Good Budgets are objective – the numbers won’t lie (even when you want them to)

Your budget will keep you honest. As long as you input the correct information, your budget will show your true spending habits in relation to your income. This will allow you to assess how well you are doing and make changes in order to improve your finances. You can fool yourself and others, but your budget will always tell you the truth. In this way, your budget will help you make important decisions if you have trouble making it on your own. It’ll show you the cold, hard facts; it will never, ever lie.

Good Budgets make you better with money

If you properly update and monitor your budget, it will show you an accurate record of your behaviors and spending patterns. You can use this valuable information to modify your behavior in ways that help you improve your spending habits. Further, budgets become a partner in monitoring your finances, helping you see those problem areas and creating opportunities for growth and change. This, with a good coach or accountability partner, will practically guarantee that you’re able to reach your goals.

A well-crafted budget is a worthwhile investment. It will help you take the guess work out of your finances and will make you better with money through their objectivity. These are just a few of the benefits. What other benefits did I miss?

If you need help making your best budget, check out my budgeting guide, or schedule a coaching session with me. There are also a ton of other helpful articles here at Let’s Make a Budget.

Good luck and happy budgeting!

Why You Don’t Budget (and what to do about it)

Woman with her hand out saying 'no'

What’s holding you back from budgeting?

Everyone has their reason for starting a budget, as well as their reason for avoiding doing it. I personally started budgeting because I decided it was better than being broke and confused about my finances. It was one of the best choices I’ve made to date.

I think budgeting can change everyone’s lives and relationships with money for the better, but not everyone wants to budget. It’s your choice either way, but I want to support you in your journey if you want to learn to be a better money manager. So if you’re at least curious about budgeting but are struggling with getting started, let’s look at some reasons why.

You don’t think budgeting is worth your time

“I don’t think budgeting is effective, I’m doing fine enough as it is”.

You don’t see a point to budgeting money because you’ve never seen anyone’s life get better from budgeting. You’ve had friends cancel plans or suggest cheaper options because it “wasn’t in their budget”. Or you go out together and they order appetizers and soda. That’s not your idea of the good life. You can spend all the money you want of what you want and have enough left to spare. You aren’t broke, and you have no problem paying your bills. Therefore, you don’t think budgeting is very effective or useful. Why go through all that trouble to restrict yourself if you aren’t going to see any real results?

What you don’t see is that your friend has a plan. Your friend is spending what they have budgeted for entertainment, and they aren’t going to break that plan. Why? Because having an emergency savings account is more important to them than drinks at the club. They are focused on their long-term goals, not their short-term fun. Therefore, it’s nothing personal, but they aren’t interested.

Budgeting is like dieting. You have to set your goals, make your plan, and stick to it. You may not see a ton of results right away. You may have to deny yourself from some fun experiences along the way. But eventually you’ll see your efforts pay off, and you’ll be glad you put in the work.

You don’t care enough about money to make a budget

“There is more to life than money”.

You’ve decided to not spend your time worrying or focusing on money. You don’t want to take part in a system that hurts and disenfranchises people in the pursuit of profit. You’d rather help people and focus on the things that really matter to you.

You can still benefit from learning about money because you most likely live in a society where you have to depend on money to survive. You still have a job and need money to make ends meet. Therefore, understanding how to budget will help you manage the money you have so you can go back to focusing on the things that matter. It sounds counter-intuitive, I know, but you can lessen the impact of money on your life if you understand how it functions.

You’re worried your budget will show you something you don’t want to see

“I do not want to see how much I truly owe. I’d feel embarrassed and ashamed at the depth of my financial woes”.

You know you need to make changes with your finances, but you can’t bring yourself to get started. You know you won’t like what you see. You’ve been neglecting some of your bills and things may be past due. You don’t want to know how much you owe. Or you know you won’t like to see how little money you have left over after paying bills, because you wish there was more.

Money is a difficult topic for a lot of people. We sometimes develop values and habits around money that tell us we should be ashamed of where we are financially, or that we aren’t doing well enough in relation to other people. The problem is, those thoughts hold you back and keep you doing poorly. They are not your friend and they do not help you grow. If you choose to accept where you are financially, you can take action and begin to make changes. Your progress may be slow, but you will make progress. You will change your habits and your life. You just need to believe it can be done.

So why don’t you budget?

Some people don’t want to budget because they think it’s not worth their time, they don’t want to face the truth of their finances, or they don’t care enough about money. If there are other reasons why you/others don’t budget, let me know. I think it’s worth understanding your motivation for your choices either way, and doing what is truly best for you.

If you are ready to learn to budget, you’ll find the resources you need here at Let’s Make a Budget. Please reach out; I’m happy to help!

6 Incredible Reasons to Make a Budget

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Budgets are incredible financial tools that help you manage your money and meet your goals. If you’re looking to bring more order to your financial life, you could benefit from making a budget. Here are six reasons why making a budget is the right choice.

Your finances will improve right away

The moment you complete your budget you’ll immediately get a better sense of how you are using your money. There’s no way around the truth of how you spend and save when it’s all laid out in front of you. From there, you’ll be able to choose to spend more wisely, and you’ll see your finances change in front of your eyes.

Budgeting will save you time and energy with your finances

With your financial plan laid out before you in a budget, you’ll be able to think less about money as you go about your day. As long as you follow your budget, you’ll know you’re making the right choices with your money; you’ll have thought through how much you want to spend and on what ahead of time, so there will be no reason to worry. That means more time for the things that really matter to you.

You will make better choices with your money

Your budget will help you assess your spending habits and help you put your money toward your goals, allowing your money to do what you most want it to. Want to save more? You can add more money toward your savings goal. Want to pay off a student loan? You can take extra money from one category and put it towards that bill. By being more intentional with your money, you cut out waste and use it more effectively.

Budgeting is the best investment you will make

Because you make wiser choices with you money, you accomplish more of your financial goals faster. Because of this, your savings will grow larger faster; you’ll be able to invest more; and you’ll be able to live comfortably without debt.

Additionally, your journey to money mastery and financial independence goes through budgeting; it’s the foundational step in controlling your money and your spending habits. This knowledge and experience will pay dividends in the long run as you apply those lessons and values to investing, running a business, and any other activities that require more complex skills and understanding.

You have time to make a budget

Budgets don’t take a lot of time to make. Even if you aren’t planning on making it during this quarantine, you will be able to make it at any point, in a matter of minutes. Creating a budget is super simple if you have all your materials and set aside the time to do it. Sure, honing and revising it will take additional time, but you can set up your initial budget in under an hour.

It’s never too late to learn to manage your money

Time is always a factor when it comes to saving and investing; the earlier you begin, the better. However, that’s not to say that you shouldn’t start today, wherever you may be in life. You can always benefit from learning to manage your money, for the skills and habits you gain will always have a positive impact on your life. There’s no way around that truth. In order to start benefiting from budgeting, you simply have to decide to get your finances in order, and then take action.

Make a budget today

Making a budget is one of the best choices you can make to improve your finances. If you want to get started with your budget, check out my budgeting guide. If you want personalized, in-depth support, consider money coaching with me.

Good luck and happy budgeting!