August 2021 – Nurturing Cents

Envelope and Zero-Based Budgets Made Easy

Julie Boehlke Editor's Pick August 19, 2021August 19, 2021envelope method budget, future savings, household expenses, saving money, zero-based budget

With an unpredictable economy, these days it’s all about saving money. For some people, it’s easier said than done. Or it can be frustrating trying to figure out a method that actually works. Don’t fret! Let’s tackle this issue together!

There are two popular budget types that are gaining popularity. The Envelope Method and Zero-based budget. We’re here to talk about how they work so you can decide which one may work best for you.

The Envelope Method.

The envelope method is a budgeting style that allows you to track how much money you’ll spend using cold, hard cash. Once you create a budget on paper, take the cash out from a designated pay period or the month and place it inside an envelope.

It works best for household expenses minus your mortgage payment and utilities, which are often paid directly through your checking or savings account. But if you want to stash those funds in envelopes, you can. There is no wrong way to do it. When setting up your envelopes, some categories to include are:

Groceries
Entertainment
Personal expenses, such as nails, hairdresser, massage, clothing
Gifts
Gas
Restaurants

Once you have your categories set up, then add the amount you’ll need to spend for the allotted time frame. When heading to the store or out to eat, only spend what’s in that envelope. No exceptions!

The goal of the envelope method is to keep you on track, making it hard to overspend, but you have to really stick to it. Go over your budget in the checkout lane? Don’t reach for your debit card, put something back.

It is a great way to teach you discipline and self-control while keeping your main finances under strict control.

What is a Zero-Based Budget?

A zero-based budget in a nutshell is where all of your income coming in, with the exception of your expenses, equals zero. Your expenses must match your income for the month. This means that every dollar is accounted for and it has a job to do. It doesn’t mean you will be left with zero funds at the end of the month, it just means everything goes to something.

Having a plan for money is a good way to manage it easier. Here are some basic steps on getting started.

Jot down your monthly bring home pay.
List your monthly expenses.
What are your seasonal expenses? Include them as needed.
Subtract income from expenses to equal zero.
Track spending monthly.

The goal is NOT to have zero dollars left over in your bank account, but that every dollar spent has a place to go. For example, if you are up $100, put that money into savings or to pay down debt. Short $100? Go back and rework your budget.

The main goal with any budget is to take a closer look at where spending is taking place. Having money left over at the end of the month is a good thing! It will make simplifying money management that much easier!

Here’s to Saving and Thriving Daily!

Learn How to Easily Budget Like a Pro

Julie Boehlke Budgeting August 19, 2021August 19, 202150/30/20 budget, budget like a pro, envelope method budget, saving money, zero-based budget

When it comes to setting money aside and paying bills on time each month, do you often fall short? You’re not alone. With an unsettling economy, it’s hard to manage funds, when paychecks are unpredictable and expenses keep piling up. That is why being armed with some key budgeting tips and facts can transform your financial lifestyle. Here are some ways you can turn things around starting now.

Step1. Write Down Your Household Income

Seems easy enough. But really be sure to include everything. This includes you and your partner’s net or take home income, bonuses and any income from freelancing. Don’t forget about bonuses and child support income as well. This basic number will help you with creating a solid plan moving forward.

Step 2. List all Expenses

This can be a hard pill to swallow. No time for secrets here. Many people leave important information off of this portion of their budget plan. But it’s essential when it comes to having a successful livelihood.

Jot down all that you spend, including frivolous expenses related to shopping sprees or morning java. But be sure to list fixed expenses such as rent, car loan, retirement contributions, utilities, groceries, credit card payments and personal loans.

Step 3. List Disposable Income

This is easy. Add up bring home income and living expenses. Subtract from the two. This amount is your disposable income. Your disposable income should be roughly 50 percent or less of your gross pay for living expenses. Use this amount to pay toward wants, debt repayment and future savings combined.

Step 4. Pick a Budget Method

Try something like the 50/30/20 rule as a basic framework to get started. It’s a simple budgeting concept.

50% of your income is for basic needs.
30% is for wants.
20% set aside for debt repayment and savings.

List each amount, so you have goal numbers to work with each month. Don’t forget to always budget above your previous month. This includes groceries, lunches, utilities, house repairs and emergencies. This will prevent running out of money should something urgent arise. In the want category, don’t forget an additional emergency or urgent fund for things out of your control. Because let’s face it, life happens!

Step 5. Budgeting, Saving and Dispersing

So you have a basic understanding of how to budget like a pro. But what about the bread and butter behind it? How do you physically do it? This is vital to make this whole concept work, and it depends on you and what works based on convenience and lifestyle. One example is the envelope system. Where you cash out your paycheck each week and simply use envelopes to set money aside and then deposit it into the bank.

You can also track everything on a spreadsheet using a zero-based budget method. Having this connected to your bank and savings account is a must. Explore the two and decide which one works best for you.

Step 6. Budget Ahead

Find a time to budget that works for you. It’s typically best to do it a month in advance. This way you can easily go to your spreadsheet or phone app and see where your money needs to go.

This is also a good time to readjust for the month ahead. Inflation, new bills or an emergency expense can all affect your budget moving forward.

Budgeting doesn’t have to be complicated, and there are endless ways to do it. Don’t get frustrated with the process. Take it one step at a time. Getting the basics down pat is the best way to get in the routine of budgeting like a pro.

Here’s to Saving and Thriving Daily!