Beginning our Zero Based budget

Well, even at the ripe old age of 40, I hadn’t ever tried to work my finances off of a written budget. It sounds like an simple idea, and I wasn’t sure it would make that much difference, but I was so wrong. Just sitting down with Elicia and writing the budget out took hours. We had the advantage of using a pre-made budget form that we printed from Dave Ramsey’s website that you can download here.

Here’s our budget in full.

He has suggested percentages of your take-home income that each category should consume. For example, his suggested percentage that our house payment should take up should be between 25%-35% of our take-home pay each month. Ours is $1,196, which is at 33% of our take-home pay, or right in line with his suggestions. I don’t take his suggestions as gospel, but its nice to see if our spending for each category is somewhat inline with what is prudent. Some categories we went over on, and many we went under on. The category that we were over on the largest was “Personal’, because between the two of us we have 9 children, and Christmas along with birthdays gets pretty expensive. We came in at 13%, his suggestion is that we should top out at 10%.

We have also implemented an envelope system to help us avoid the temptation to use our checking cards unwisely. I’ll go over that in more detail in a later post. Simply stated, its where we have categories in our budget that we have envelopes labeled for that purpose. We put cash from our paychecks into the envelopes and put the envelopes into the safe. When we need to spend for, say, kids clothes, we go to the safe and withdraw the envelope for that purpose. When we spend from the envelope, we are limited to the amount of money the envelope contains. When the envelope runs out of money, we are finished spending for that category until next month when that envelope’s budget renews. We are still very green to the system, and are discovering that if we don’t think about what we may need to purchase on a trip out, we are stuck spending from our small pocket money fund, and having to reimburse ourselves when we get back home. If anybody has any advice or pointers on a better way to work the envelope system, I’m all ears and would love to see your ideas in the comments.

The concept of the zeo-based budget is to have all your money spent before you even receive it, that way no money falls between the cracks during the month, ending each month with zero money laying around as extra. Making sure every dollar you bring in is given a job, and is sent where you choose to spend it. Its amazing how easily little spending can effect your bottom line. Spending that you don’t think twice about. If you stay within the zero-based budget, you’ll know exactly where all your money goes and you’ll be left with a surplus to put toward your debts. Its you telling your money where to go and what to do, rather than allowing it to tell you where to spend it. Its amazing how money has the power to spend itself and to take wings and fly away if you don’t control it.

The Beginning of Our Debt-Free Reslution

I’m James, and my girlfriend/fiancée is Elicia. We both carry debts into our relationship from past marriages and mistakes, as well as unwise financial choices. Elicia is a free spirit, and the idea of budgeting her money felt like she was being strangled. I’m more of a planner, and the idea of freely spending money with no budget or plan felt like I was being horribly irresponsible. How could we ever get along financially.

A few years back, I read Dave Ramsey’s book, The Total Money Makeover, after hearing him on the radio. Before reading the book, I felt like I was going to be in debt my entire life, never get out from under my mortgage, and probably have to work until I died just to make ends meet. After reading the book, my outlook completely changed and I believed that with dedication and hard work, I could get all of my debts paid off and retire with plenty of money to live and thrive on, and also have an inheritance to leave my children when I die. 

Elicia was largely living in denial of her debts and her financial condition. Her debts (largely student loans) were out of sight and out of mind, but they were starting to call her for them and it ate away at her vision of her future. She recently read the book, and her vision opened up, just like it had for me, and we began to set up our budget and plan the debt snowball. 

We are just a few weeks in to the process, but Dave always says that a person needs to write their goals down in order to achieve them. If you don’t write a goal down, you’re not going to have a target to hit and nothing to aim for. This little blog is my personal way to write my goals down and to give us a target to aim at. 

I intend to list our debts and detail our progress. I’ll also show our budget in a generic way, to give you some idea of how it’s working for us. My goal is to use this blog to be accountable to the process, and hopefully to provide information to others who feel helpless and buried under a mountain of debt.