Skip to Content

Easy Steps to Implement Zero-Based Budgeting

It has been a lifelong struggle for parents to take complete control over their family’s expenses. It could even get more challenging when you know that a baby is coming.

Being a new parent is exciting, but it could also be overwhelming. A lot could change from your routine to your budgeting.

Do not worry about your finances, as long as you know how zero-based budgeting works. It’s known to be one of the most effective ways to take charge of your finances.

What is Zero-Based Budgeting?

Zero-based budgeting is one of the unique ways to manage your finances. It’s where you track your income and guess your future expenses. And you will use those records to plan for your costs in the following months.

It is budgeting used for business, though you can also use it in managing household finances. This planning will be your guide to help you build financial stability and to meet your and your child’s needs.

To use this technique properly, you must stick to its formula: “Income – Expenses = Zero.”

zero based budgeting word highlighted on the white background

Steps to Implement Zero-Based Budgeting

Now that you know the formula used in the Zero-Based budget, it is now time for you to start implementing it in your household. Don’t worry because here are the steps to implement zero-based budgeting for new parents like you.

Record Your Monthly Income

Before implementing this technique, you have to know how much income you earn first. You can use a traditional way to track down your monthly income using pen and paper.

Using the spreadsheet is also another way to record your income. But the most convenient one is to use a finance app on your device.

Include all your income, such as your paychecks, small business income, and residual income. Make sure that you add other income that you receive every month.

Track Your Monthly Expenses

The next step is to track your monthly expenses. You have to write the cost of all the fees you expect to pay for the whole month. Include all the baby items that you think you will need.

To track your expenses easily, you can categorize them into three types.

Fixed Cost:

These are expenses with fixed costs such as rent, mortgage, childcare, etc.

Semi-Fixed Cost:

Bills vary a little every month, such as electricity and other utility bills.

Variable Cost:

Regular expenses like groceries, entertainment, clothing, and shoes. You can also include baby clothing, diapers, wipes, and more.

Allocate your Income According to Your Expenses

First, divide income by fixed expenses. Then allot a budget for the semi-fixed costs. Since semi-fixed prices vary, try to base it on the highest amount of expenditure from the past three months.

Then allocate a certain amount for the variable cost. Make sure that you focus on the needs of your coming child. Use what’s left to spend on your savings, investment account, or pay off your debt.

For instance, you took a loan from Cash Mart, a licensed money lender in Jurong that needs to settle. Among all the lists, you should prioritize paying it.

Maintaining this technique focuses more on your fixed cost and less on your variable expenses.

Adjust Your Budget

The first month of your zero-based budgeting is the most crucial one. It will serve as the basis for your future expenses. It is where you can assess this method’s flaws and good points.

You may discover that the amount of your income does not cover all your expenses. The good thing about this plan is you can make some adjustments.

Reduce your allocated budget for variable expenses by prioritizing the essentials first. Then, let go of all the non-essentials such as restaurant and entertainment budget.

Make sure that you track your budgeting progress at least once every week. Then make it a habit to improve your budgeting until you reach your target goal.

Encourage Family Member’s Participation

Getting every family member to this kind of budgeting could be the most challenging part. But non-participation from one member can be a hurdle to balancing your budget.

So, as much as possible, make him understand this budgeting technique. Tell your partner that it will help both of you as you prepare for parenthood. Please encourage them to strictly follow this method so that you’ll get a positive outcome.

Pros of Zero-Based Budgeting

Sticking to zero-based budgeting could give you several advantages, and here are some of them:

  1. Zero-based budgeting will help you monitor your expenses easily. It gives you financial transparency where you can see where your money goes. Aside from that, it also gives you a heads-up of your future expenses.
  1. This method will give you a sense of financial control since you can maneuver where your money will go. Try to practice this method habitually. In the future, it will prevent you from making your expenses take over your budgeting plan.
  1. Zero-based budgeting is flexible since you can adjust your budget allocation easily. You can alter your budgeting plan ahead of time, which will give you a picture of where you want your money to go.
  1. There is software available for zero-based budgeting in the market. You can access the software on multiple devices, such as your computer, smartphone, or tablet.

Cons of Zero-Based Budgeting

There are no perfect budgeting techniques. At some point, you will encounter some flaws in it. So, here are some drawbacks that you may encounter while implementing zero-based budgeting.

  1. This method may make you aim for unrealistic outcomes. And when you do not meet your goals, this might stress you out. To prevent this from happening, keep in mind that it is okay not to reach your expectations first.

What’s more important is that you are close to your budgeting plan. And it will take time for you to reach your goals finally.

  1. Zero-based budgeting may be hard to implement if your income is not constant. To get into this method, try to lower the amount of your estimated income. From there, base all your monthly expenses on your income.
  1. Variable expenses can be an obstacle to implementing this method during the first few months. It can ruin your budgeting plan but continue applying this technique. And in due time, you will bet to predict the costs of your future expenses.

Zero-based budgeting can be tricky during the first months but never think of giving up. As new parents, keep your eye on your goal. And that is to be able to sustain the needs of your future child.

Instead of giving up, practice this technique religiously. What’s more important is for you to get a healthy financial mindset. Apply this with persistence, and you will indeed have that financial freedom.

It is even more rewarding when you don’t worry about money and can still provide for your family’s needs.

error: Content is protected !!