The Beginner’s Guide to a Fool-Proof Zero-Based Budget

I used to think that after subtracting all of our bills for the month if I had money leftover we were doing good. What I didn’t realize was that meant I wasn’t planning on how I was going to spend all of that money. Because I wasn’t making a plan, I was spending it however I wanted and it often left us overdrafting or pulling money from our savings. Now I know better. This is a total beginners guide to creating a fool-proof zero-based budget that works! That means you are going to learn how to be completely in charge of every last dollar you make. I have covered all the bases so you are sure to succeed.

*This post contains affiliate links through which I may make a commission. All thoughts and opinions are my own.

3 Major Zero-Based Budget Mistakes

Leaving items off the budget

I did an entire post about major items people often forget in their budgets. In this post, I am going to break them down a little bit more and tell you exactly how to fix them.

A lot of times when people first start their budget they do it like I did by taking into account their take-home pay, mortgage/rent, and their bills. For staters, this is leaving out two major sections of your budget:

Gas
Groceries

On top of these two major budgeting necessities, people often leave out all the mnior ones too. Things like:

Clothing
Emergencies
Fun money
Sports
Car repairs
Holidays

Not planning for additional income

By the time we had moved into our “big house” (you can read about our downsize here) I had already built up a big client base for my photography business. Moving into a bigger house meant bigger studio space, more clients and a bigger income. The major problem was that I didn’t manage this money wisely at all! This is terrible if you own your own business and when it comes to creating a budget for your family.

If you are working side jobs, even if it’s just babysitting occasionally or selling things on Etsy, you should definitely be adding these things to your budget.

If you have any inconsistent income or a side hustle, you should be treating this as an equal to your major income source!

Not expecting the unexpected

Dave Ramsey says one thing you can expect from life is the unexpected. You know at some point your car is going to give out on you. It’s common knowledge that your washing machine won’t last forever. This means that no mishaps in life should be surprising to you. They are expected to happen. Are you planning for them? Things like:

New tires
New appliances
Car repairs
Home repairs
School fees (if you have children)
Medical expenses
Vet bills

Chances are if you are not setting money aside for these each month in your budget you are getting totally blindsided when they do happen. And they will.

The truth is, it’s hard to put money aside for something you currently can’t see. Do it anyway.

Planning for the future is tough when all you see is the present. In fact, studies have shown just how damaging this can be. Read my post all about it. Starting to be financially wise now is the best way to ensure a financially stable future.

So, how do you plan for what you can’t yet see?

How to budget for gas and groceries

In order to start a zero-based budget, you can’t forget things like gas and groceries. To calculate these budgeting areas you are going to need to:

Go through your last 3 months of spending.
Add up the total amount spent over 3 months.
Divide that number by 3 to get the average amount spent per month.

So it will look a little something like this:

Month 1 + Month 2 + Month 3 = Total
Total divided by 3 = average spending

Do this separately for gas and groceries to get your individual amounts. Now you know your average total for each of these areas. This is also a great way to take notice if you are spending way too much in one of these areas. **Don’t forget to include restaurants, fast food, and coffee shops as a part of your grocery budget!**

Now that you have these totals, you can sit down and do a $0 based budget. You can use the simple budget in my Fun Sized Budget Bundle along with my other budget and finance printouts or try Dave Ramsey’s EveryDollar app. It’s a $0 based budget app that you can easily do online or from your phone.

When you don’t have enough money

If you have added up all of your expenses and find yourself having more expenses than money coming in, then it’s time to take action! Here are the next steps to take:

Where can you cut back?

- Reduce your grocery spending. Our family of 5 does $100 a week on average and eats healthy too!
- Cut the cable bill. More families are opting to cut the cable and get a digital antenna. Depending on your cable costs, this could save you over $1,000 a year!
- Cut back on fast food and eating out. If cooking is not your specialty and you don’t even know where to begin, try the $5 Meal Plan. It’s designed to help you get healthy, budget-friendly meals together and even puts together a grocery list for you!
- Memberships. Have a gym membership that you rarely use? Try the Aaptiv app FREE for 30 days for at home workouts.
- Drive less. This may be tougher depending on your commute or where you live, but opting to take your bike instead of your car is a great way to get your workout in and save on gas!

If you’re in debt

Truth be told, you may have already cut the cable, eat for cheap and rarely drive yet still find yourself coming up short on your zero-based budget. Chances are this is due in large part to your debts.

The method we used to become debt free was the Debt Snowball. Check out the 3 step process explained in only 5 minutes!

Related posts

When to find a side hustle

Paying off credit card debt and still being able to pay for your bills can be a draining experience. It very well may be that your best bet is to find additional sources of income. If you are being as frugal as possible but still can’t manage to squeak by, the best option (and possibly only option) is to start looking for ways to make some extra cash.

Start a blog – Starting a blog almost single-handedly allowed us to become debt free! I have created a course that completely guides others through how to start, promote and make money with a blog. Get it today and save $230!
AirBNB – Host your home, room, apartment or loft with AirBNB and starting bringing in another stream of income. Check the AirBNB calculator to find out how much people are earning in your area.
CrateJoy – Create your own subscription boxes for your business! From creating your own website to getting your subscription boxes sent out! There is a 2 week free trial with no credit card necessary!
Sell on Amazon – Check out this beginner guide to learn how to get started selling with FBA.
Instacart – Get paid to shop! Set your own hours and choose how involved you want to be! Get started today!
QKids – No degree? You might be in the clear. With QKids you can earn $16-$20 teaching English online and if you have experience with kids, you may qualify!
Rover – Watch dogs or walk dogs and get paid for it!! Or get a $20 credit for your dog!
SayABC – Earn up to $21 per hour, set your own hours, and teach English online! Apply today.
Teachable – Create your own courses and start selling them online with Teachable! See all offers.
Uber – Become a driver with Uber. Set your own schedule and get paid up to 5 times her day along with chances for additional incentives in your city. Check it out!
UberEATS – Earn extra money when you need it, day or night and deliver food instead of people! Check if UberEATS is in your area.
VIPKid – If you have a bachelor’s degree you can make between $17 and $22/hr by teaching English online in over 32 different countries!

There are really so many great ways to make an additional income these days. Sometimes it just takes a little creativity.

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If you have money left over

If you have money left over after accounting for your bills, gas, and groceries you are off to a good start! Here are some other expenses you may not have considered:

Savings
Giving
Sinking Funds (discussed a little later)
Fun money

The best savings account

If you haven’t started yet, it is super important that you start building savings! My top recommendation for a savings account is the Savings Builder with CITBank. It’s only $100 per month and you will gain 2.45% compounding interest on any money you put in! That means the bank will PAY YOU to save money! Sign up online.

An emergency account

Having an emergency account in place is a wise safety net to have when unexpected expenses pop up. I will talk about starting an emergency fund a little later. Besides an emergency account, there are other things to consider if you find yourself with money leftover:

Start putting 10% into savings
Find charities and organizations to give to
Create steady sinking funds
A budget for “fun money” each month

How to Budget for Inconsistent Income

If you are bringing in additional part-time income as I do, here are some ideas on how to better manage it.

Don’t spend before you earn:

The number one thing that doesn’t work when you are making an inconsistent income is jumping the gun. I would have photography clients booked for the entire month.

I would add up how much money I would be bringing in. This is not a bad idea. It’s good to be prepared and know what money you potentially have coming your way. That way, you could make a successful plan for it.

That’s not what I did. Instead, I planned on that money coming in and would spend it prematurely.

I bet you can guess what happened next. You know it… those clients would cancel or have to reschedule. So many times I spent money before I had it and then we’d be left scrambling to stay afloat.

Always plan ahead:

Planning ahead does work. Keep track of the money you have coming in and start making plans for where you want it to go. It’s very important that you do not spend it before it comes in!

A wise idea would be having a separate account for your extra income. By doing this, you can keep your additional income separate from your main source of income. At the end of the month, decide where you want to spend or save this money. Do not spend it as soon as it is in your hand without having a plan first!

Plan for what hasn’t happened yet

Do not let life’s little surprises surprise you. If you do not plan for unexpected events, then you will most likely find yourself blindsided and searching for money to help you get through it. Avoid this by planning far in advance. The best way to do this is by using an envelope system or Sinking Funds.

The first thing you’re going to want to do is to get a list together of all the events coming up in the next year that you will need money for. Things like:

Christmas
New tires
Vacation
Birthdays
Field trips
Kid’s sports

Create an envelope system

Now, get an envelope system together for these expenses. Christmas, for example, if you plan on spending $500 on gifts and events, you are going to want to figure out how much money you’ll need to set aside each month.

500 divided by 12 = $42 total amount needed per month

Once you have figured out how much you’ll need to set aside each month, give each category its own envelope and start breaking your expenses off into these envelopes each month.

An emergency fund

If you still have debts you are working toward paying off, it’s very important to still have this emergency fund in place. Having your emergency fund set up will prevent you from having to dig further into debt during hard times. Once you have your $1,000 in place, it’s time to shift your focus toward paying off your debt.

You made it to $0

Once you have managed to tinker with your budget until you are at a $0 balance at the end of the month, give yourself a pat on the back. You have a zero-based budget!

Working at maintaining a budget like this is actually a highly rewarding experience. You will find yourself having more money…even if you don’t actually have more money.

Taking the time to tell your money what to do can be a very liberating experience if you allow it to be. Creating a zero-based budget allows you to be more in charge of your money and your life. Which is just the way it should be!