Take Control of Your Money with Zero-Based Budgeting

Individual financial responsibility is one of those things that is disappearing here in America. With all of the loose credit and low interest rates, money has never been “cheaper” to borrow. You can also add free money from the government in the form of welfare to that list.

But, thankfully we are farmers and ranchers. That also means we are business owners.

We are Business Owners

I like that term, business owners. It’s a loaded term, something not to be taken lightly. But, more often than not, we don’t see ourselves as business owners. We need to change that.

One of the best ways to go about taking your business and finances more seriously is to start actively managing them. It takes work, it takes planning, it takes discipline and most of all commitment. All of these attributes come naturally to us. BUT, there is something missing.

I put out a message on Facebook the other day about “Zero-Based Budgeting” and I asked folks if they’ve tried it and if not, what type of system do they use to manage their money. I got a lot of responses. However, the ones that stood out to me were responses like; “Just spend less than what you earn! It’s that easy.” I’m here to tell you that, no, it’s not that easy.

While the “spend less than you earn” is a great mentality to have when it comes to money management, it’s simply not adequate. Yes, you could argue that this system “works” for you. Maybe it does. But, do you actually know where your money is going? What are you spending your money on and what are you saving your money for? What happens if your house burns down? What are you going to say to your spouse when they want a newer car/truck? Do you have enough money to cover the cost of the truck AND the vacation you promised your kids this year?

As you can see, there are many variables. We don’t know what will happen tomorrow. So, let’s make a plan today, to keep us financially safe should something unexpected occur. Furthermore, let’s figure out where our money is coming from and where it’s going.

The Budget

My wife and I have always been financially responsible. But, we didn’t really plan where our money was going, we just saved more than we earned. Sure, it worked for a while.

But… what was the money in the savings account actually for? Were my wife and I on the same page? Maybe she was thinking that money was for a weekend getaway and I thought it was for replacing the tires on the car.

This is how I used to keep track of our finances. It’s just a spreadsheet with all our banking transactions on it. We knew where our money was going, but we weren’t able to decide beforehand where we wanted it to go.

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As you can see, we could spend an unlimited amount of money in one category and only realize what we had done until after the purchase was made. There was no defined budget set for each spending category until we switched to Zero-Based Budgeting.

Welcome to Zero-Based Budgeting

In ZBB you give every dollar you make a job.

You “spend” every single dollar. You can “spend” dollars to your savings account. Or, you can spend dollars on a nice dinner. The main point being, each dollar has a job and is allocated toward something.

The first step to using ZBB is to setup spending and savings categories.

Let’s start with the savings account.

Within your savings account, you can have different categories or savings goals.

“Savings Goals is the main category and “Car Repairs,”  “Birthdays” and “Emergency Fund” are sub-categories.

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You can see from the image above, we have a total of $550 in our savings account. However, each one of those dollars has a job. My wife and I are now 100% clear on what each dollar is for. The totals in each category are carried over to next month and always will be until the dollars are given a new job or you make a purchase. If you have an excess of $20 in the “Car Replacement” category, that $20 will carry over to the next month.

Here’s what next month’s savings account looks like. We were only able to save a total of $300, so we allocated it to categories we felt were the most important; Car replacement, emergency fund and vacation.


As you can see, we now have a total of $850 in our savings account. Last month, we had a total of $550. Once again, each dollar has a job.

Alright, but how does this work for your checking account?

Using ZBB for Checking Accounts

The first step to using ZBB with your checking account is to setup categories, just like we did for savings.

Here are our categories for Monthly Bills

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These are our monthly bills. Categories like water, electricity and gas are estimates.

Next, you can setup your other monthly expensesScreen Shot 2014-01-27 at 2.06.28 PM.








Now you should be getting a sense for how you categorize expenses.

It’s also important to prioritize your expenses as well. You’ll obviously want to pay for things like groceries and fuel BEFORE you budget money for spending or restaurants.

Making ZBB Easy and Fun

Yes, ZBB is actually fun. Why? Because you gain confidence that you’re actually in control of your money! It’s really an indescribable feeling.

ZBB can be a bit confusing at first, luckily I found a great software program called “You Need a Budget” or YNAB.

YNAB is a program that syncs with “the cloud” meaning your budget is stored online. Don’t worry, it’s secure and safe. Another benefit of cloud storage is that my wife and I can access real-time information about our budget from anywhere, anytime.

It’s compatible with your PC, smart phone and some tablets. I have a laptop and iPhone. My wife has an Android phone. YNAB works with all of them.

Lets get into more detail with using YNAB.

Accounts and Budgets

The two main components of YNAB are accounts and budgets.

As you’ve already learned, budgets are for things like “Food” or “Fuel.” Accounts are your checking account or savings account.

In order to budget your money into categories in YNAB, you need to put money into your checking account. No, not through your bank, but within the YNAB application itself.

I’ve selected the “Checking” account. You can see that there is “Income for January” under the category. We made $2,000.

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Now it’s time for me to get paid again, so I’m going to click “Add a new transaction.”

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The $1,000 I just added needs to be budgeted. Remember, every dollar needs a job.

I will click over to the “Budget” section of the application next.

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Now you can see that there is $1,000 available to budget.

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However, all of my expenses are taken care of this month. So, that $1,000 will be available to budget for next month.

I can now take that $1,000 and start budgeting for next month’s expenses, which is February.

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Remember we prioritize our expenses. The first thing that I need to budget for is rent/mortgage and food.

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As you can see, I have enough money to pay the rent/mortgage and $100 worth of food. This is OK. When I get paid again, I will budget that money at that time to the other categories. You can see that I have $0 available to budget.

That does it for Part One of this series on Budgeting. What budgeting tips or tricks do you have?


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  • Hugo van den Berg

    assign every dollar to a job that it must do. Never seen this concept before, Brilliant! Won’t use it for myself though, not a farmer and no immediate need, but it is definitely something to remember.