Changes you need to make when budgeting gets tough!
A budget can never be complete, unless it has failed you several times, and you had to modify it several times!
Losing hopes, getting fed-up, spitting frustration over your money, self, and habits in the midnight hours, can barely come of any help.
What you should do rather, is cut out spending completely, if required!
Or, stop saving money for the time being, and focus totally on mandatory expenses.
Do whatever may, but you have to build or manage your budget, anyhow! That should be your determination.
Guess, no one tells us, that whining has no place in the scripts of finances.
You always get suggestions regarding, what budgeting strategies are best, or how to budget, or how to have the best budget worksheet, and all!
But, rarely do we see a well explained article post that tells us, how to manage a budget, when a budget plan fails.
This blog post will be portraying budget in its simplest way possible!
After going through this post, you should be able to take budgeting at a very flexible level, and make changes and modification, whenever you like, wherever you like, without any hassle.
This post will be limited only to only one specific type of budget, for the ease of explanation. To know about various budgeting strategies in the consumer market and personal finances, please refer here.
This budget normally goes by the name of Zero-Based Budget. Fancy name, but it has been ranked the most adequate budget of all, by the top financial advisors.
A glimpse of Zero-Based Budget, what it is, and how it works?
The very name of the budget indicates, that something has to be zero! This Zero is nothing else, but the result of your “income - minus - expenses”!
I have chosen this budget, because it is the most prominent bare bones budget anyone has ever seen, and it gives importance to all the expenses one generally has.
Hopefully, you don’t have to do much either in a Zero-based Budget. All you need is one paper and one pen. That’s all!
On top of the page, you make a tag line called “Income”.
Beside that, you write the total number of your monthly paychecks, if your income comes on a per day basis, biweekly, fortnightly, or anything as such..
Beneath it, you will be writing down, one by one, all the expenses you have to take charge of each month.
The Zero Based Budget Worksheet, for a month, should look somewhat like this:
(example is based on imaginary numbers)
- Grocery cost- $600
- Gas cost and transportation- $400
- Utility bills (total)- $500
- Personal savings amount- $500
- Credit card debt payments- $1000
- Mortgage payments- $1200
- Netflix- $15
- Cell phone bills: $50…….. and, so on.
Result = (Income - Total Expense).
How to manage this budget, if it starts to fail?
Usually, the Zero Based Budget has never been a failure. The rule to apply in this budget is very easy to understand.
You just got to keep on adding expenses till the Result comes to Zero.
If your expenses are exceeding your income, then you have to strike out the low priority expenses first. These could be movie tickets, Netflix, the weekly Beer fix, and so on.
If still, your expense amounts are getting out of hand, then you got to marginalize them. Like, you can go low on the grocery cost.
Or, you can completely give debts and bill payments the prime priority, and hence cut down on the savings and nominal expense part.
A little shuffling is all you have to do, if the income-expense ratio is not balancing. Just remember to attain Zero. For Zero is the new Hero!
Did I just hear something, called a debt payment strategy?
We all have to admit, that debts make up the most notorious list of expenses.
Only making minimum payments on them can never let you erase them. The interest rates, that the credit cards carry, are typically low, but very dangerous.
Thus, a good payment strategy, served as a salad with the main plate ‘Zero Based Budget’, will make things more merry looking for you.
We have two feasible options to help you pay off debts. One is the Debt Snowball, and the other is the Debt Avalanche.
Check out this infographic, to compare both of them, and see which is best for you.
Snowball targets the lowest debt first, whereas Avalanche is concerned about the debt that has the highest interest debt.
In both the cases, you will be making extra payments toward the targeted debt.
Once, you have cleared your debts, you get more room to fit in other expenses, or build extra savings.
So, give Zero Based Budget a try. See, where you are standing after putting in your best effort. For further queries, suggestions, and/or opinions, please comment below, or become a member of DebtCC Forum, for free!
Looking forward to hear from you!