When using a zero based budget (Income – Expenses = 0), it is vital to avoid missing any expense categories. Surprises during the period can lead to swiping a credit card orvhaving to go into debt. Although our emergency fund is in place, it really isn’t for the purpose of funding a pair of shoes we forgot to add in the budget.
Here are the categories in our budget and we hope this will help you to refine or evolve yours.
Slide #1 (NEEDS): Fixed expenses are the items that will never change. We have little to no control over what is charged.
Slide #2 (NEEDS): These costs are needed but the dollar value can fluctuate and be controlled based on our consumption.
Slide #3 (WANTS): When funds are tight and we need to reduce our expenses, this is the section we cut back from.
Slide #4: We top up these categories only as needed. Each month our medical fund is replenished to $500 to cover any doctor bills or medication throughout the month.
Slide #5 speaks to our plans for the near future. Here is a quick breakdown of each option.
- Complete a fully funded emergency account with 6 times our basic monthly expenses.
- Start Investing to build wealth. This will be rolled out in small increments until we get a better feel and understanding of investing.
- Commit 15% of our 9 to 5 income to retirement.
- Plan and deposit small amounts of cash each month to cover future expenses (Sinking Funds). Our sinking funds will cover expenses such as house cost, car and contents insurance premiums, birthday and anniversary celebrations, back to school, Christmas, family vacations etc. We will also change all of our life insurance premiums from monthly to yearly in order to cash in on the annually payment discount offered.
- Increase mortgage payment in order to clear it by age 40 🤞🏾
The one important thing to note is that our budget covers multiple aspects of our life.
The past, present and future. Build a budget that aligns with your objectives and life goals.