Episode 16
16. Zero-Based Budgeting: What It Is and Why It Works
Are you tired of checking your bank account and playing a guessing game with your money? In today’s episode, we are diving into the world of Zero-Based Budgeting.
In this episode, we cover:
- What Zero-Based Budgeting actually is: Hint: It’s not about having $0 in your bank account! It’s about giving every single dollar you have right now a specific job to do before you get paid again.
- Why it’s a total game-changer: We talk about how this method eliminates that stressful "mental accounting" we all try (and fail) to do in our heads.
- Embracing your True Expenses: How to prepare for those "unexpected" costs—like car repairs or the vet bill for your favorite fur baby—so they become a total non-event.
- Flexibility and Clarity: Why a budget isn't a "restriction," but a roadmap that allows you to move money around when life happens (because it always does!).
- My favorite tool: Why I use YNAB (You Need A Budget) for my personal household and both of my businesses to stay in total control.
RESOURCES MENTIONED IN THIS EPISODE:
FREE Beginner's Budget Guide: https://www.theexuberantelephant.com/guide
ADDITIONAL RESOURCES:
Blog Post: Mastering YNAB’s Four Rules for Budgeting
Blog Post: The Five Questions That Transform How You Budget
YNAB Made Easy Course: https://www.theexuberantelephant.com/ynab-course
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DISCLOSURES
By using the affiliate links above, I may earn a small commission if you decide to purchase anything. Thank you for your support :-)
YNAB Disclosure: I am a YNAB Certified Budgeting Coach, which means that I have been trained to coach people on using YNAB software and the YNAB budgeting method. I have met select requirements of You Need a Budget LLC in order to receive this certification, which means that I have the ability to competently coach YNAB to others. I am not an employee of YNAB, and all non-YNAB related opinions and recommendations are my own. My views do not reflect the views of YNAB and its employees or affiliates.
Transcript
Today I wanna talk about zero based
budgeting, what it is, why it works,
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:and my favorite tool to help you
get started Before we dive in.
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:Hi there.
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:If we haven't met before, I am Lindsey
and I love budgeting and I am here
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:to help you see money as a tool to
help you live your greatest life.
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:And maybe also hopefully
learn to love budgeting.
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:So let's go ahead and dive in.
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:First of all, what is
zero based budgeting?
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:At its core, zero based budgeting is
the practice of giving every dollar
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:a job and only the dollars you have.
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:So if you've been in my world for any
amount of time, you may be familiar with
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:this phrase of giving every dollar a job.
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:I actually mentioned it in just a
few episodes ago when I was talking
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:about YNAB's original four rules.
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:That was episode 14.
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:If you wanna go ahead and go to
go back and take a listen to that.
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:And what this means is that
instead of just looking back
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:at what you spent last month.
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:You look at the money you have in
your bank account right now and
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:decide exactly what it needs to do
for you before you are paid again.
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:So if you have $100, you
have $100 to work with.
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:Or if you have a thousand dollars,
you have a thousand dollars to budget,
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:and you give every one of those 100
or $1,000 jobs until you get down
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:to zero, nothing more, nothing less.
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:Every dollar gets a job.
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:Another way to think about
this is by asking yourself,
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:what are the absolute necessities
like rent, groceries, utilities?
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:What are these things that I have to
pay for before I get paid a again?
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:This could also be money for gas to
get yourself to work and maybe have
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:a few groceries to keep yourself fed.
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:Right.
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:These are necessities.
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:Once those expenses are handled, if
you still have money left, you can keep
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:assigning it until you are down to zero,
hence the term zero based budgeting.
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:So why does this work so well?
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:Few reasons.
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:The first is it eliminates
mental accounting.
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:So mental accounting is where you
take peek at your bank account.
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:You see a thousand dollars
in there, and you think.
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:Surely I can spend $20
on lunch today, right?
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:But if you forgot about the rent that
needs to be paid on Friday and your
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:cell phone bill that comes out in just
a few days, maybe you really don't
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:have that $20 available for lunch, and
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:it is just too much to try and
keep all of this in our head.
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:So using a zero based budgeting tool
will solve this problem for you.
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:Second.
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:It helps you embrace your true expenses.
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:So what I mean by that is life
is full of expenses that we feel
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:like they're unexpected, but
they are actually something that
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:we can begin to prepare for.
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:These are irregular costs,
like car repairs, vet bills,
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:or even holiday shopping.
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:I mean, you know, they will come
up eventually, but you don't know.
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:How much or when, and like I said,
they always seem to pop up at the most
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:incon inconvenient time by setting
aside a little bit each month for
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:these into what I like to refer to as
sinking funds, you can turn a potential
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:financial disaster into a non-event
because money is just sitting there
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:waiting to be spent on that expense.
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:It's
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:zero based.
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:Budgeting also gives you
total flexibility and clarity.
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:One of the biggest myths is that
budgeting is restrictive, whereas
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:in reality, zero based budgeting
allows you to make changes as needed.
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:So if you overspend on groceries by $20,
you simply shift it from another category.
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:You are in control and can make
real time adjustments as your life
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:changes, because life will change,
and having a tool that can help you
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:easily adapt is key to making it.
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:If you're like a seamless event that
doesn't derail all of your progress.
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:. But also if you are ready for the
next step, I have a free beginner's
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:budget guide that will teach you
the four numbers that you must know
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:before you fully dive into budgeting.
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:You can grab that for free at
theexuberantelephant.com/guide.
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:Of course, that link will
be in the description below.
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:Alright, that's all I have for you today.
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:Remember, your biggest, wildest
dreams are within reach.
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:I will talk to you next time.
