Pwn Your Finances with the Zero-Based Budget

zero-based-budget-nurse-millennial

The Zero-Based Budget is perfect for summing up your expenditures. Fortune 500 companies use this when reviewing an annual budget. When I was being frivolous with my money I couldn’t even tell you how much I spent every month. Not knowing how much I spent basically meant I didn’t know how much I could save.

At first I thought that after doing this budget I’d have zero dollars in my account, false! This kind of budget simply accounts for every dollar you earn by putting them into spending and saving categories.

With every incoming paycheck I hash out a budget. We have biweekly pay periods so I take a look at what’s due or what I need to buy within the next two weeks and budget accordingly. To be successful with this you have to cut out unnecessary expenses. Read about what I no longer spend money on here.

Write out your budget and see if this can help organize your financial obligations.

Necessities

When budgeting from your paycheck you should always start with the necessities first. This includes:

  1. Food
  2. Clothing
  3. Self-care
  4. Rent
  5. Utilities
  6. Phone bill
  7. Medical expenses

Cutting down on going out to eat is extremely hard for me so I always leave a buffer in case I go out too much…

I’m lucky to be living with my mom right now as I pay down debt, so on my worksheet rent and utilities remain blank.

My dog Leo is 11 years old and needs cyclosporine eye ointment twice daily, so I include his medication in the medical expenses portion. Side note: check out his highlights on my Instagram account @_katsalgado. HAHA shameless proud dog mom.

Transportation

  1. Car payment
  2. Gas
  3. Insurance
  4. Registration
  5. Maintenance

A car payment and gas are more consistent to budget for, but keep in mind when you do have an upcoming insurance, registration, or maintenance coming up.

Frugal tip: I budget $35 for gas a week and not a cent more. If I’m coming up on empty and it hasn’t been a week yet I drive less and keep the mileage low. Oh, y’all wanna go out to the OC? Maybe next pay period…

It’s difficult to account for a fixed gas budget in Los Angeles since gas prices are frequently fluctuating and looking like summa cum laude GPAs with the 3.90 dollars per gallon mess.

Make note of when you fill up your tank, see how much will get you by for the week, and try as much as possible to stick to that amount.

Savings

  1. Emergency fund or Fully funded emergency fund
  2. Sinking fund

For those who are paying off debt, keep $1,000 in an emergency fund.

For those who are debt free, a fully funded emergency fund should be equal to 6-9 months of your living expenses. And you, my friend, are a unicorn millennial! You’re rare and financially fabulous. People make frappuccinos about you!

If something comes up and you do use a portion of your emergency fund, replace the funds with the next pay period. Also keep this account separate from your debit account to remove the temptation of spending it.

Since creating a budget and having an emergency fund I’ve noticed I haven’t had to use it *knocks on wood*. By carefully budgeting you’ll find that you’re more prepared with whatever financial emergency will come your way.

A sinking fund is money you’re saving up to spend in the near future. Last year I saved up $300 to get my eyebrows microbladed! I felt that it was hard earned because I set aside $50 each paycheck for 6 pay periods instead of charging it all on a credit card with the risk of having to pay interest on top of it. Call that delayed gratification! Now that my eyebrows are on fleek I put 10% of each paycheck into my sinking fund.

Debt

  1. Student loans
  2. Credit cards

Yuck. My monthly student loan payment is equal to a mortgage payment. It’s sad how I could be using this amount for something I really want like a fully funded emergency fund or a cutesy little house. If you’re a unicorn millennial and have no student loans you probably only have consumer debt. Whatever your debt is, make it a priority to pay it off. Read about how I’m getting out of debt here.

Other expenses

  1. Subscription
  2. Membership
  3. Investments

If you have any other expenses than the above-mentioned categories then it shall be deemed a luxury! I have a monthly subscription to Audible and a membership to 24 Hour Fitness.

Audible is $14.95 plus a free book per month. In my opinion self-learning always has a rate of return that is invaluable. I like that once I pay my monthly $14.95 fee I can choose any book; most of my choices would be around $30 regular price.

My gym membership is $45 a month. To be honest my diet is crap and my family has a predisposition to diabetes and hypertension so you know I try to offset this risk by working out (and eating healthyish)!

When you’re paying for a monthly membership or subscription always do the math to see if it’s affordable and has a good rate of return. Ask yourself, Is it worth it? Lemme work it. I put my thang down flip it and reverse it.

For unicorn millennials with no debt, set aside an amount for other investments you may have that are separate from your 401K or similar retirement accounts.

Tally it up

Total expenses – Paycheck = 0

Enter the total of your expenses and compare it with your incoming paycheck. The total should be equal to zero. Don’t be scurred, this doesn’t mean you’ll have zero dollars in your bank account! You’ve already accounted for your savings.

The day before payday I’m able to view my paycheck online, so every other Thursday I’m going in on my budget. If you don’t know what your incoming paycheck will look like, take the average of your previous paychecks and adjust the totals once your check comes in.

The Benefits of Zero-Based Budgeting

Once that direct deposit hits, don’t even flinch. Commit and pay your dues as planned! Your budget will be off at first, but you’ll see great results after doing this for a few months. Read how I paid off $36K in 6 months here.

This type of budgeting will make you realize that every dollar counts. You’ll budget like a pro with a mindset of managing the finances of a Fortune 500 company. You’ll be able to monitor your spending habits, correct overspending, focus on debt repayment and boost a savings fund.

I really hope this helps you pwn your money like it helped me. Share with us what other categories you include in your budget! Though you may not have any control over your income, you do have 100% control of how you use the money.

Millennial Challenge

  • Try out the zero-based budget with your next paycheck to help jumpstart your financial goals
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  • […] Everyone who is successful with their money has a budget. Even small businesses and Fortune 500 companies can’t function without one. Read about Zero Based Budgeting here. […]

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