The foundation of any good financial plan is also something most of us hate doing: a budget.
When was the last time you made a budget to track every dollar you spend?
The biggest wealth building tool you have is your income. It is best to start making a budget before the month begins. If you make $4,000 a month and you only budget for $3,500, what happens with that extra $500 for that month? For most, it disappears, and we don’t really know where it went. For others the numbers turn red each month and we rely on debt to get us through.
The Zero-Based Budget Method
So how do we do a zero-based budget? For starters, you need to know how much income is coming in each month. Don’t count overtime, that’s extra. You never want overtime to become a part of the daily living needs. In fact, this is one of the biggest pitfalls I see in first responder budgets.
After you know how much you have to work with, itemize every expense you have. There are some basic expenses like house/rent payments, transportation, food, etc., but dive deeper. Break out everything down to include every dollar including haircuts, childcare, entertainment, clothing, every category. Remember this is a zero-based budget so every dollar has to be accounted for not just some of the dollars!
The Zero-Based Budget in Action
Now put your budget to work. Track what you spend and make sure you are staying truthful to your budget. Did everything go as planned or do you need to make some adjustments? Are you going over budget or under budget? Your budget needs to balance, so consider adjustments when necessary.
With some practice, you’ll find yourself spending less time worrying about your money because every dollar will have a purpose. The amount of time you spend on it monthly will decrease as it starts to become second nature. Your stress levels will start to come down as you work the budget. You’ll instantly see if you need to find another source of income to pay some debt off to make your budget balance, or if you have some excess to start saving for retirement!
If you’re ready to take control of your finances, schedule a free 15-minute discovery call today.
Registration does not imply that the Firm is recommended or approved by the United States government or any regulatory agency. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply any level of skill or training. IFP may only transact business or render personalized investment advice in those states and international jurisdictions where it is registered, has notice filed, or is otherwise excluded or exempted from registration requirements. The purpose of this website is for information distribution only and should not be construed as an offer to buy or sell securities or to offer investment advice. Past results are no guarantee of future results and no representation is made that a client will or is likely to achieve results that are similar to those described. An investor should consider his or her investment objectives, risks, charges and expenses carefully before investing. Please refer to IFP Advisors LLC ADV Part 2 for additional information and risks.