A What? A Budget?

4 Tips to Conquer the Zero-Based Budget

Ah, the zero-based budget. Like tackling any new skill, it can feel totally overwhelming at first. Of course, we know—and you know—that if we give ourselves time to master it, the zero-based budget becomes almost second nature. And then, it’s no longer a burden but a total blessing.
Unfortunately, some members give up on the zero-based budget before it reaches the blessed, second-nature state. That’s too bad, really.
Because we’ve found that the zero-based budget is where it’s at when it comes to winning with money. Not budgeting at all is bound to produce problems, and a basic budget may produce results, but it’s the zero-based budget that gets things done!
It’s not just theory either—we’ve got numbers to back it up. In a nationwide survey of Financial Peace University (FPU) class graduates, we discovered that people who do a zero-based budget (versus those who don’t) pay off 19% more debt and save 18% more money!
That’s why we made the zero-based budget a big focus of the nine-week FPU. If you haven’t seen the new version yet, we think you’lld be pleasantly surprised to find that Dave talks about the zero-based budget in every lesson. Each week, members are asked to dive back in to their budgets. This way, they learn the why and how of zero-based budgeting long before they ever leave your leadership.
So, encourage your class to keep working the zero-based budget. Share the numbers above as a practical reason to continue. Then, share the tips below to help avoid setbacks.

1. Every single dollar needs a name.

   Sure, Dave says this in FPU, and you’ve likely repeated it to your class often. But here’s where many members get tripped up: the leftovers. They’ve covered every bill and all categories that might require money during the month ahead. But they’ve still got $120 left over. It seems like a victory!
   Unfortunately, leftover money provides a false sense of security and allows members to not really stick to their budget after all. That $120 needs a name. Even if it goes in a “spend as you please” category, it needs a name. Maybe it can go toward the emergency fund, Christmas savings, or extra vacation spending. We don’t really care what you do with it as long as you plan to do something with it before the month begins.

2. Just because every dollar gets a name, that doesn’t mean you have to spend it all this month.

   Some zero-based budget newbies assume that planning your spending before the month begins means you have to spend it all before the month ends. This is not so! You can plan ahead for as little as one month or for as long as a year—or more!
   Remind your class that they’ll need to think of large, irregular purchases in addition to small, monthly purchases when planning their budget. If car-repair savings or your clothing envelope gets bigger each month, that’s a good thing. You’ll eventually need that money and will no doubt be glad it’s there. So don’t sweat it!

3. Track any budget mishaps as you go through the month and correct accordingly.

   Do your members find themselves at the checkout counter, ready to pay for an item, but they have no envelope to pull that money from? These no-man’s-land purchases can feel pretty discouraging. That’s why Dave says it takes a good three months to get a handle on the budget.
   Encourage your class to simply write down any budget mistakes that show up and correct them at the next month’s budget committee meeting. If the mistake is a pretty dire one, they can always call an emergency meeting with their spouse or accountability partner to make sure everything is covered and that it all leads back to zero.

4. Consult Dave’s Complete Guide to Budgeting.

   What more could your class want than a free, downloadable PDF on all things zero-based budgeting? The Complete Guide to Budgeting is the perfect resource for answers to questions on the envelope system, irregular income, budget mistakes and so much more!