Dave Ramsey says: Zero-based budget keeps finances in order

Sep 28, 2021, 11:30 AM
(Pexels Photo)...
(Pexels Photo)
(Pexels Photo)

Dear Dave,

I have a good job and make pretty good money, but I’m tired of always worrying about my finances and being strapped for cash at the end of the month.

I’ve heard you talk about getting out of debt and living on a zero-based budget, but what exactly is a zero-based budget?

– Edward

Dear Edward,

The concept of a zero-based budget is simple: income minus outgo equals zero. If you bring home $4,000 a month, you want everything you spend, save, give and invest to equal $4,000.

That way, you know where every one of your dollars is going. Not knowing where the money’s going is what kills lots of people’s financial dreams. They think they know how much they’re spending and where it’s going, but they really don’t.

Here’s how you do it. List all your income sources for the month. Your income should include paychecks, small-business income, side jobs, residual income, child support and so on. If it’s money that comes into your household’s bank account, write it down and add it up.

Next, list every single expense you have each month. Rent, food, cable, phones and everything in between. Your expenses vary from one month to the next, and this is why you make a new budget each month.

Your giving budget might be high in December when Christmas rolls around. The car budget will spike during months when you pay insurance or renew your tags. Focus on one month at a time.

Now, subtract your expenses from your income. Ideally, this number will be zero. It might take a few months of practice, so don’t worry if it doesn’t balance out immediately. If it doesn’t, it just means you need to do something to bring one of the numbers up, the other one down or both.

If you’re spending more than you make, you need to make some cuts in your spending. If you need to generate more money, get a part-time job or sell a bunch of stuff.

The deal with a zero-based budget is this: every dollar must have a name.

That means every dollar has a designated job to do. If you fill out every item in your budget and come out $100 ahead – meaning you have nothing for that $100 to do — you haven’t finished your budget. You have to find a job for that $100.

It’s your decision what it does, but if you don’t give it a name and purpose, you’ll end up blowing it and wondering where it went.

Good luck, Edward!

Dave Ramsey

(Pexels Photo)...
Christy Wright

If you want to start a business, 2022 could be your year

If you’ve been thinking about starting a small business for a while, then the upcoming year could be the perfect time. These five tips should help you make that dream a reality.
2 days ago
(AP Photo, File/Damian Dovarganes)...
Dave Ramsey

Dave Ramsey says: Set reasonable budget to cut costs during the holiday

Before you start shopping for the holidays, set a reasonable budget, determine what’s fair for each person and stick to it. And be sure you’re following realistic gift guidelines.
7 days ago
(Pexels Photo)...
George Kamel

Here are some of the pitfalls of DIY investing

DIY investing is one of the hottest trends out there right now, but there are some pitfalls.
9 days ago
(Pixabay Photo)...
Dave Ramsey

Dave Ramsey says: Finances for married couple should always be a ‘we’ deal

Would it be fair if only the person making money in a marriage is allowed a little cash to spend for fun once in a while? Of course, not. Marriage is not a "me" thing, it’s a "we" thing.
14 days ago
(Pexels Photo)...
Rachel Cruze

Don’t let retail therapy cause you to overspend for the holidays

It’s the most wonderful time of the year – for buying gifts. And while you’re at it, you might as well buy something for yourself, right? We’ve all been there. Remember in “Friends” when Monica bought those super expensive leather boots on impulse? She ended up regretting it because they really hurt her feet. Womp, […]
16 days ago
(Pexels Photo)...
Dave Ramsey

Dave Ramsey says: Get rules in writing before friend signs on as tenant

Doing business with friends always comes with the risk of running into a situation that can damage the relationship. If you rent out a home to a friend, sign an agreement, just like with any other renter.
21 days ago

Sponsored Articles


Thyroid issues: Here are the warning signs and what to do

In a 100-person office in the United States, an estimated 12 co-workers, employees and loved ones, will likely develop a thyroid condition during their lifetime. That’s because, according to the American Thyroid Association, more than 12% of the U.S. population will experience thyroid issues.
(Facebook Photo/NHTSA)...
Sweet James

Upcoming holiday season is peak time for DUI arrests

The holiday season may be the most wonderful time of the year, but it’s also the most dangerous time of the year to be driving. That’s why it’s important to remember to call Sweet James Accident Attorneys if you’re injured or arrested because of a DUI accident.
PNC Bank

3 cool tips to turn everyday moments into learning experiences for your child

Early brain development has a crucial impact on a child’s ability to learn and succeed in school and life. Research has shown that 90% of a child’s brain is developed by age five.
Dave Ramsey says: Zero-based budget keeps finances in order