Monday, February 9, 2009

Zero-Based Budgeting

Budgeting has negative connotations, but it can actually be very "freeing". You already know what is coming up and when. Basically, budgeting is just telling your money where it is to go. With zero-based budgeting you are telling every penny of your money where it is going. There are no categories for "miscellaneous" or "what if". There is a category for "savings", which will hopefully be able to handle anything unexpected that comes up. The goal of course is to live within your means and save as much as possible.

The other aspect to budgeting is keeping track of what you are actually spending. One of our problems has been that our budget was based on what we thought we were spending or what we thought we should be spending and not based on reality.

It always seemed like too much work to keep track of receipts and every little penny we would spend. However, I have found a system that I think is an easy and effective tool to aid in that process. PearBudget is an online program that keeps track of your budget and receipts and gives you various reports on your spending/budgeting. (You do not enter any actual account info, just budget stuff.) It is streamlined and not filled with a bunch of stuff I never use like Quicken.

One thing I really like about it is that I can enter receipts or tweak the budget from anywhere. So, when we go out for lunch or stop at the grocery store, I can immediately enter those receipts once I return to work. You can get a 30 day free trial membership at to try it out and see how you like it. After that it is $3/month or $30/year (2 months free).

Another realization I have come to is that our budget will be changing from month to month. It is not, and doesn't have to be, the same each month. For instance, our income in January was different than it will be in February because Brian didn't teach in January. Our income in March is going to be different than February because Brian will be off work for 2 weeks without pay (annual England trip). But each month we will be doing our best to make sure what is going out will not be more than what is coming budgeting.

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