Of all of the incredible things God allows me to do at Sunridge, leading FPU (Financial Peace University) with my wife Diane is at the top of that list. We just finished the fall 2018 9-week session as part of “Thursdays at Sunridge,” and it was so much fun! My favorite part is seeing those aha moments happen. This session we were able to witness that happen when a young couple finally understood that the key to FPU is doing a zero-based budget. Now if you have not attended FPU, don’t tune out. I know everything about that sentence sounds intimidating and maybe even awful. But, it’s not. It’s just a fancy way of saying that you are going to make a plan that tells your money where to go instead of wondering where it went. So, what’s the big deal? Where’s the aha moment? It was when this couple realized that they couldn’t simply make one budget and use it for each month of the year. It suddenly hit them that each month is different, and because of that, it will have different expenses and maybe even different income. That means your utilities will change based on usage for the month, gasoline will fluctuate based on price and driving patterns … you get the idea. Of course doing this takes more time, more planning, more discipline, and sometimes, more sacrifice.
If you are new to the idea of creating and using a zero-based budget, here are a few basics to get you started:
- Calculate your monthly income. Include all the types of income for the month; for some of you it may vary from month to month.
- Calculate your monthly expenses. This includes rent/mortgage, food, utilities, clothes, entertainment, Target runs, bills, giving, and anything that covers essentials.
- Determine seasonal and setback expenses. Here’s a shocker for some of you, Christmas is only a month away! Diane and I learned it’s better to sacrifice a little each month all year long by putting aside money for Christmas so that in December it’s not a crisis situation. That same idea works for other setback accounts like auto repairs, insurance, and even big ticket items that need to be replaced.
- Subtract your income from your expenses with the goal of zero. This is where the work comes into play. If you are spending more than you make, then it’s time to figure out where to cut back. If your income is more than your spending, then you need to tell that money where to go as well! PRO TIP: If your outflow exceeds your income and the situation goes beyond cutting back on all of the wants, always cover the essentials first: shelter, food, utilities, and transportation.
- Track your plan!
- Do this every month for the rest of your life! Actually, Diane and I do this every time we get paid, which is twice a month.
To learn more, here’s a link to Dave Ramsey’s site that covers how to make a zero-based budget in much greater detail. The next FPU class is coming up January 31, 2019 as part of the ongoing Deepen Faith initiative at Sunridge. Click here if you’d like to sign up for the next 9-week session.