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16. Zero-Based Budgeting: What It Is and Why It Works · The Money Clarity Podcast

• 0:00
  Today I wanna talk about zero based budgeting, what it is, why it works, and my favorite tool to help you get started Before we dive in.
• 0:10
  Hi there.
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  If we haven't met before, I am Lindsey and I love budgeting and I am here to help you see money as a tool to help you live your greatest life.
• 0:20
  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 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 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 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 at what you spent last month.
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  You look at the money you have in your bank account right now and 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, and you give every one of those 100 or $1,000 jobs until you get down 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, 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 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 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 cell phone bill that comes out in just a few days, maybe you really don't have that $20 available for lunch, and it is
• 2:52
  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 like they're unexpected, but they are actually something that we can begin to prepare for.
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  These are irregular costs, like car repairs, vet bills, 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 incon inconvenient time by setting aside a little bit each month for these into what I like to refer to as sinking funds,
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  you can turn a potential financial disaster into a non-event because money is just sitting there waiting to be spent on that expense.
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  It's 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 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 changes, because life will change, and having a tool that can help you 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.
• 4:48
  But also if you are ready for the next step, I have a free beginner's budget guide that will teach you the four numbers that you must know before you fully dive into budgeting.
• 4:59
  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.