Beating Broke

Personal Finance from the Broke Perspective

Is Zero-Based Budgeting Only for Control Freaks?

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zero-based budgeting
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If you’re trying to create a budget, there are several methods that can help you get started. One of which is zero-based budgeting. This method is very detailed and helps you put each dollar to work. However, it is very precise, and some may say that only control freaks use this method. Here we’ll help you determine if zero-based budgeting is for you.

What Is Zero-Based Budgeting?

Essentially, with zero-based budgeting, you start from scratch every month. Instead of looking at past expenses to allocate funds and determine your budget, you assign every dollar a job until there is zero left unassigned. So your income minus expenses must equal zero, and if you overspend in one area, you must take it from another.

So, as you can see, zero-based budgeting is a little rigid. There is no wiggle room with this type of budgeting, and you must justify every expense. Plus, since you’re reassessing your budget every month, you are constantly reevaluating your spending habits. This may be why zero-based budgeting gets pegged as only being for control freaks. Is this really true, though?

Is Zero-Based Budgeting Only for Control Freaks?

Zero-based budgeting isn’t just for control freaks. This type of budgeting forces you to be intentional with your money and not overspend. However, it is a lot more work since you’ll have to create a new budget each month. It is for people who want clear control of their money. If you need to prioritize a goal like paying off your debt or you want to avoid being short on cash at the end of the month, zero-based budgeting might be right for you.

Other Types of Budgeting

If you hate the upfront work of zero-based budgeting, other methods may suit you better. For example, the 50/30/20 rule may provide more flexibility, and you won’t have to track everything. In the 50/30/20 rule, you’ll assign more broad categories and use 50% of your income for needs, 30% for wants, and 20% for debt and savings.

You may also want to experiment with cash stuffing or the pay yourself first method. Cash stuffing uses envelopes to divide cash into categories for spending. With pay yourself first budgeting, you save or invest a fixed amount before any other spending. If you find that you really hate budgeting, you may even consider the anti-budget. With an anti-budget, you only set aside enough money for your bills and savings, and then spend the rest as you wish. It’s the most flexible method, but not the most effective.

Choosing The Right Budgeting Style

There are so many ways to budget, and it’s not one-size-fits-all. It’s best to try out different budget types to see which one best fits your lifestyle and personality. If you pick a budgeting style that best suits you, you’re more likely to stick with it. Then, you’ll be able to reach your financial goals more easily.

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10 Things the Middle Class Can’t Afford Anymore

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10 Things the Middle Class Can't Afford Anymore

The economic landscape for the middle class in many countries has undergone significant shifts due to factors like inflation, stagnating wages, and changing societal norms. This has resulted in a reevaluation of what is considered affordable for the average middle-class family. Here, we explore ten items and experiences that have become increasingly out of reach.

1. Single-Family Homes in City Centers

Single-Family Homes in City Centers

Owning a home in the heart of the city has become a distant dream for many middle-class families. Urban real estate prices have skyrocketed, driven by high demand and limited supply. The dream of a backyard and a white picket fence now often requires a move to the suburbs or accepting a smaller living space, such as a condominium or an apartment, as urban single-family homes drift out of financial reach.

2. College Education Without Debt

College Education Without Debt

Higher education costs have risen dramatically, far outpacing the inflation rate and middle-class wage growth. As a result, attending college without incurring significant debt is becoming increasingly unrealistic. This financial burden often forces students and their families to rely on loans, which can have long-lasting impacts on financial stability and wealth accumulation.

3. Comprehensive Health Insurance

Comprehensive Health Insurance

Healthcare costs have become one of the biggest financial concerns for middle-class families. Comprehensive health insurance plans that cover a wide range of medical needs without high out-of-pocket costs are becoming rarer and more expensive, pushing more people to opt for high-deductible plans that only provide basic coverage.

4. Retirement Savings

Retirement Savings

Saving for retirement is a growing challenge as many middle-class individuals live paycheck to paycheck. Factors such as higher living costs, the need to support aging parents or adult children, and the lack of employer-sponsored pension plans contribute to the difficulty in setting aside adequate funds for the golden years.

5. Leisure Travel

Leisure Travel

Leisure travel is becoming a luxury that not all middle-class families can afford. The costs associated with vacations, including flights, accommodations, and activities, have increased, making it harder to budget for travel. This shift has led many to seek alternatives like staycations or short, local trips instead of more extended or exotic vacations.

6. New Vehicles

New Vehicles

The average price of new vehicles has increased substantially, making it difficult for middle-class buyers to purchase them without taking on burdensome financing arrangements. Many families now opt to keep their older vehicles longer or are turning to the used market, where prices have also been rising but remain more manageable compared to new cars.

7. Private School Education

Private School Education

Once a staple for the aspiring middle class, private education has become prohibitively expensive. With tuition fees climbing each year, many families are forced to rely on public schooling, which varies widely in quality depending on geographic location, further exacerbating educational inequalities. The escalating costs have made private schools an option only for the upper echelons, pushing many families to seek alternative educational opportunities or supplemental programs to enhance public education offerings.

8. Investment Properties

Investment Properties

Buying a second home as an investment or for rental income is increasingly unrealistic for the middle class. High property prices, tighter credit conditions, and the substantial initial investment required make this wealth-building strategy less accessible than in previous decades. Additionally, the ongoing property management and maintenance expenses can deter middle-class families from investing in real estate as a secondary income source.

9. Long-Term Care Insurance

Long-Term Care Insurance

As life expectancy increases, so does the potential need for long-term care, which can be incredibly costly. Long-term care insurance, which can help cover these costs, has become increasingly expensive and out of reach for many in the middle class, leaving them vulnerable to future financial strain.

10. Disposable Income for Luxuries

Disposable Income for Luxuries

With the rising cost of living, disposable income has shrunk, limiting non-essential purchases such as high-end electronics, jewelry, and dining out. Middle-class families focus more on saving and budgeting for necessities, reducing spending on items once considered routine indulgences.

The Middle Class Can’t Afford What It Used To

The Middle Class Can’t Afford What It Used To

The shifting economic conditions that make these ten items less affordable reflect broader challenges facing the middle class. As the cost of living continues to rise without a corresponding wage increase, the middle class has to adjust expectations and reconsider what it means to live a “middle-class lifestyle.” Addressing these challenges will require not just personal financial management but also broad-based policy solutions to restore affordability and economic security.

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Make Improving Your Finances Your Part-Time Job

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Imagine you give all the money you make in a month to an accountant and ask him to manage the money for you.  However, at the end of the month, he can’t tell you where the money went, just that it’s gone.  You’d likely be highly upset and fire the accountant.  Yet, that’s how millions of people handle their money.  You can’t fire yourself, but you can educate yourself and make improving your finances your part-time job.

Make Improving Your Finances Your Part-Time Job

Are You Like Most Americans?

When is the last time you took a vested interest in your own finances?  Do you make a budget every month?  Do you track how much you spend each month and on what?  If you don’t, you’re not alone.  In fact, approximately 60% of Americans don’t have a monthly budget (Business Insider).

How much time have you spent reading personal finance books and articles in the last year?  Learning about investing?  If you’re like the average American, the answer is not much.

Instead, many of us spend time doing activities that really don’t help us much in the future—scrolling through Facebook and Instagram, watching our favorite tv show, having a Netflix binge, talking on the phone or texting.

Make Improving Your Finances Your Part-Time Job

What if you used just a fraction of that time to improve your finances?  How different would your financial situation be a year from now?  Five years from now?  Ten years?

If you’re finances aren’t in the shape you’d like, why not challenge yourself to make improving your finances your part-time job?

What Is the Weekly Time Commitment?

Don’t worry, improving your finances isn’t going to take a lot of time.  I’m just asking you to set aside two to four hours a week to improve your finances.  You won’t be sorry.

Make Improving Your Finances Your Part-Time Job
Photo by Kelly Sikkema on Unsplash

What can you do in that amount of time?  Plenty.

  • Set up a budget
  • Track your spending
  • Pay your bills
  • Call your credit card company to get your interest rates reduced
  • Investigate refinancing your student loans, and if doing so will save you interest, actually refinance them
  • Read a personal finance book
  • Call your internet and cable provider to get your monthly bill reduced
  • Investigate house and vehicle insurance costs and change companies if you’ll save money and get the same coverage
  • Get an assessment on your home to potentially lower your property tax bill
  • Learn about investing
  • Take free online personal finance classes
  • Invest some of your money
  • Sell some of your unused items on Craigslist or Facebook
  • Listen to personal finance podcast
  • Start building passive income (stocks are good for this)

This is only a small list of things you can do when you start your part-time job of managing your money, yet you can reap serious financial rewards.

Tools to Use

If you’re new to taking an educated, methodical approach to improving your finances, there are many places to go to learn more.  There are also many tools available.

You Need a Budget (YNAB)

For the last four years, I’ve been budgeting using You Need a Budget (YNAB).  I’ll admit, there’s a bit of a learning curve to using this software, but there are many free online trainings you can watch that cover every aspect of how to use the software.  There’s also an active Facebook group, YNAB (You Need a Budget) Fans, where you can find quick answers to many of the questions you might have about the software.

If you’re interested in trying YNAB, you can sign up for a 34-day trial for free.

Morningstar Free Investing Classes

Don’t know the first thing about investing?  Don’t worry.  That’s how everyone starts.  When you make improving your finances your part-time job, investing is an important concept to master.  Morningstar offers a number of free classes that cover a wide-range of topics:

  • Stocks,
  • Funds,
  • Portfolios,
  • Bonds,
  • ETFs,
  • Retirement, and
  • Planning

To access these free courses, simply sign up for a free Morningstar account.

The Library

Make Improving Your Finances Your Part-Time Job
Photo by Devon Divine on Unsplash

Another excellent, free place to learn more about money management and investments is the library.  You can find so many books there that will teach you about improving your finances!  Some of my favorite money management books include:

I Will Teach You to Be Rich by Ramit Sethi,

The Money Book for the Young, Fabulous and Broke by Suze Orman,

How to Make Your Money Last by Jane Bryant Quinn, and

Is Your Child a Money Master or Money Monster by Sunny Lee (excellent book for teaching your children in a natural way about money management)

All of these are available on Amazon, and if you get a copy of the book, the site will get a small commission that will help keep the lights on.

YouTube

You can find many money management and investment videos on YouTube.  Just be sure to first check the credentials of the person offering advice.  Anyone can put up a YouTube video.

I sometimes enjoy watching Dave Ramsey videos (though not when he goes on tangents).

If you’re new to budgeting, there are people on YouTube who share their budgets every month.  One person that many people find inspiring is The Budget Mom.  She shares her budget each month and also does a recap at the end of the month.

Make It Fun

If the idea of spending a few hours a week on personal finance makes your eyes glaze over with boredom, try to make the time fun.  Set aside a certain time, maybe Saturday morning, or a few minutes every day.  Get comfy and make your favorite drink and settle in to work.

Investing Time Now Means You’ll Save Time Later

Remember, as you increase your financial education, you won’t need to spend as much time on your finances.  Maybe initially you’ll spend four hours a week or 16 hours a month, but a year or two down the line, when your finances are better and you know more, you may only need to spend two hours a week or eight hours a month.

As your financial situation improves, you’ll likely have more incentive to keep spending a little time each week working on your finances.

Try it.  What do you have to lose except a better financial future?

How much time do you spend every week working on your finances and growing your financial knowledge?