Use a zero dollar budget to keep an eye on those dollars right across the whole year

Every work area, not matter how small, has a budget. It’s critical to understand how much of your resources you have left in order to make any kind of financial decisions. It also provides a guide to where your focuses are – the biggest budget should logically be for your biggest focuses.

It’s exactly the same in personal life. Having a good budget can assist in making the everyday, small financial decisions that all add up, as well as informing the big purchases. You can also plan ahead to put your money where your values lie and spend much more intentionally.

I’m a big fan of having a zero dollar budget (as championed by Dave Ramsey). If you’re not familiar, each dollar is assigned to a particular spending category upfront. You take your income, assign all expenses to specific categories (including ‘fun’ money), then assign whatever is left to savings. It helps me commit to whatever savings goals I have right from the day I get paid, and forces me to live within my budget no matter what.

A typical zero dollar budget is made each pay day, however this requires you to add up ‘seasonal expenses’ such as utility bills, and spread the cost out. I found this part a bit tricky to estimate, added to the fact that I spent three years working under contracts with a somewhat irregular income. I didn’t get paid any sick pay or holiday pay, and in the end found it easier to create a budget for the entire year.

An annual budget also allows me to map out what is achievable for me to put into savings, and I can see the progress that I’m expecting to make over the year. This is really useful when you have multiple savings goals. I can also instantly see what the impact over the whole year will be of increasing or decreasing spending in particular categories, allowing me to weigh up the benefits and see whether or not it is worth it.

In 2020 my focus was my personal finances, and creating this annual budget was one of the ‘boulders’ or large, one-off tasks that helped me achieve success. Completing it, and monitoring formed one of the ‘pebbles’ – the smaller, consistent habits.

The template has three tabs – instructions for setting up the budget and completing it each payday, the budget tab, and the archive tab for recording actual expenditure. It’s just a template, so you will need to adjust your own expense and savings categories. There are also a couple of conditional formatting rules – the ‘balance’ for each payday turns green when it is zero or above, and the ‘tracking sums’ for savings targets turn green when they are budgeted to be achieved.

Hope this is of help to someone – please let me know how you go in the comments!

I am not a financial professional. This blog anecdotes my personal story and should not be interpreted as advice.