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How to Budget Using Zero-Based Budgeting

 A budget is always part of our being accountable when it comes to our finances. My husband and I will lay it out prior to every month so we can tell our money where exactly it has to go and not the other way around.

Know well the condition of your flocks, and give attention to your herds…– Proverbs 27:23

In our household, we make our budget using Zero-Based Budgeting by Dave Ramsey. If you are new to this method, this is explained by the formula:

Net Income – ( Tithes + Savings + Expenses) = 0

For example, your monthly gross salary is P 30,000 and your tax is let us say P 1,000. So you will have a net income of P 29,000 each month. Your tithe is P 3,000, desired savings is P 6,000 and the remaining P 20,000 is for various expenses.

Prior to our debt freedom, when it comes to our expenses, we prioritize our needs first, debts payment second, and things we can live without last. When you deduct the tithe, desired savings, and various expenses from the net income, the result should be zero.

The budget should be prepared prior to each month because it serves as the plan on how to manage the family’s finances for that particular month. Since there are usually different expenses to be incurred each month, we must prepare a different budget for every month.

Ok, so here’s how we do it. Below are the four (4) effective steps that we are doing in making a budget.

The Zero-Based Budget

1. List all of the income for the month.

Included all income for that month such as the following:

    • salary;
    • business profit;
    • commissions;
    • rebates;
    • professional fee; etc.

2. List all of the expenses for the month.

Usually, there are two (2) types of expenses namely, fixed and variable expenses.

Fixed expenses are those expenses that are not changing each month such as the following:

    • mortgage;
    • debt payment;
    • insurance;
    • cable;
    • car payment;etc.

Variable expenses are those expenses that may vary each month such as the following:

    • groceries;
    • electric bill;
    • gasoline;
    • water bill; etc.

3. Subtract the tithes, savings, and total expenses from the total net income.

The tithe is 10% of the gross income and this shall be given back to the local church that takes good care of us spiritually. The tithe is not ours, it is God’s so it is just right for us to bring Him back what belongs to Him.

Malachi 3: 10 says, “Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the Lord Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it”.

We can take 20% of the income and put it into our savings account. In our case, we prioritized our Emergency Fund first so that when an unexpected expense arises, we’ll have something that we can take out so we can deal with it without borrowing money or going into debt again. Now that the emergency fund is fully funded, we are now using that 20% to invest in our future and our children’s future.

Living below 70% of our total net income every month is our goal. Honestly, there were times when we spent more than 70% of our net income due to some unforeseen things. That is why after we got out of debt early in 2020 we worked hard to save for our emergency fund which is 6 times our monthly expenses.

4. Monitor the budget throughout the month.

Record all expenses, big or small on a notebook, paper, or google sheet. My husband and I are constantly recording all of our expenses every day. Even a single peso counts just to ensure that we are staying on top of our budget.

Catch for us the foxes, the little foxes that ruin the vineyards, our vineyards that are in bloom. -Song of Solomon 2:15

Well, that’s it. I hope that this will help you in creating your monthly budget. If you have some questions or if want to know more about how to take control of your finances,  reach us by filling out the form below. We will be happy to help you in the best way we can. God bless you!


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