The Dreaded Cashflow Budget and Why You Need One
Whenever someone mentions the word budget, instantly, an expression of fear, confusion, and exasperation can be seen on those who hear it. Creating and maintaining a budget can appear to be a daunting task. It doesn’t have to be that way if you follow a few simple tips.
John Maxwell (a well respected author and speaker) once said ” A budget is you telling your money where to go instead of wondering where it went”. It cannot be stated any more simple than that. Before that paycheck comes in you should know where your money is going to be spent. My wife and I use what is known as “zero based budgeting”.
Zero Based Budgeting is a budgeting technique that we learned from David Ramsey’s Financial Peace Course. Once you have your spending categories and line items created you apply your entire income to a line item until you have zero left to apply. Zero Based Budgeting aims each dollar towards a line item you choose. The idea, of course, is to apply as much towards debt as possible after you have taken care of the basic necessities.
When you first create you budget and you show it to your significant other do allow for feedback. If your spouse or partner says you are not allocating enough for one line item then add to it by taking from another line item that they choose. There has to be a sense of give and take and mutual understanding, after all you both should be on the same page as far as what the goals are going to be.
It’s interesting how well you will learn to communicate as you work on your budget. One very important thing to keep in mind is you budget will probably not work for the first three months. You’ll tweak here and there for 90 days until it falls in place.
Dave Ramsey’s web site has a Zero Based Budget that you can download. Click here to get it.
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