7 Minute Read
In the classic Christmas movie Home Alone, Kevin McCallister made a blueprint for how he was going to tackle the intruders in his house. He knew all he needed to outsmart the Wet Bandits was a plan of attack. A little glue here, some glass ornaments there—and a couple of swinging paint cans for good measure.
What’s our point? Well, just like Kevin McCallister, you need a plan. The budget is your plan. It will lead you to success, but only if you follow it! Speaking of your budget . . . have you downloaded the EveryDollar app yet? Sign up now and you’ll be ready to start setting up your Christmas budget.
What Is a Zero-Based Budget?
The concept of a zero-based budget is simple: Income minus outgo equals zero. If you earn $3,000 a month, you want every dollar you spend, save, give, or invest to all add up to $3,000. That way you know where every one of your dollars is going. Not knowing where their money is going is what kills a lot of people’s money situations. They just look up one day and find they have no money—and no clue about where it went.
Here’s How to Make a Zero-Based Budget for Christmas:
1. Write down your monthly income.
Open up our free budgeting app EveryDollar and begin listing your income. This should include paychecks, small-business income, side jobs, residual income, child support, and so on. If it’s money and comes into your household’s bank account, write it down and add it up.
2. Write down your monthly expenses.
Before the month begins, write down every expense. Things like rent, food, cable, phones, and everything in between should be added to the list. But be sure to start your budget with the four walls—food, clothing, shelter and utilities, and transportation. After those essentials are covered, continue listing your monthly expenses. Your needs will vary from month to month, so you should make a new spending plan each month. And since we’re gearing up for Christmas, think about gifts, wrapping paper, decorations, and all the ingredients you need for your delicious Christmas dishes.
3. Write down your other expenses.
Think through the calendar year—what expenses will you have coming up? You know Christmas is in December every year, so there’s no reason to act like it suddenly snuck up on you. Start stashing away money for Christmas now! Go ahead and plan for the special occasions that happen throughout the year, every year. Birthdays, anniversaries and holidays are set dates that shouldn’t surprise you or your budget.
Next, think about irregular expenses that pop up. Plan for those too! Things like car tag renewal fees, property taxes, and even your insurance premiums can be budgeted for. If you set aside a little bit each month, you won’t feel the strain of an expense “blindsiding” you all at once.
4. Subtract your income from your expenses to equal zero.
Ideally, this number should be zero, but it might take some practice. Don’t be shocked or worried if they don’t balance each other out. This just means you need to do something to bring one of the numbers up, the other down, or both. But whatever you do, don’t spend anything that’s not accounted for. If you budget $100 for eating out and you’re already at $95, shop on the dollar menu. Don’t break your plan!
If you’re spending more than you make, you need to make some cuts so your income and outgo are equal. To reduce expenses, try buying generic at the grocery store, using coupons or the store’s app, making coffee instead of buying it, or catching a carpool to work. If you need to generate more money, start a side hustle or sell some things.
Here’s the deal with a zero-based budget: Every dollar must have a name! That means you must have zero dollars left to budget. If you fill out every item in your budget and come out $100 ahead (meaning you have nothing for that $100 to do), you haven’t finished your budget. You must assign that remaining $100 to something. Whatever you decide is up to you. But if you don’t give it a name, it will be spent carelessly, and you’ll end up scratching your head over that missing $100 you thought you had.
What If You Have an Irregular Income?
If you have an irregular income—don’t sweat it. You can still use zero-based budgeting! It is just as easy to make a plan for an irregular income as it is for a regular one. When you budget, base your income on the lowest earning month from the previous year. Then list your expenses in order of importance. Make sure you cover the four walls first (food, clothing, shelter and utilities, and transportation).
When you do get paid, take that amount and spread it out over the items in your budget. If your paycheck doesn’t cover everything listed on the budget, that’s okay. Cover what you can. If you get an additional check during the month, pick up where the last check left off.
Set Up a Christmas Fund
It’s easy to create your Christmas budget! Simply log in to EveryDollar from a desktop computer and click the “make this a fund” feature.
Take a look at how much you spent on Christmas gifts last year. Where did you overspend? Where can you cut back this year? Make a gift-giving goal amount and stick to it! You’ll be amazed at how quickly you can pile up a stash of cash when you just make a point to save.
Once you’ve determined the total you want to spend on Christmas gifts, divide it by three (the number of months left until Christmas). For example, if your budget is $1,000, save $500 a month for two months. Or around $330 from each paycheck for the next three months. EveryDollar will track how much you’re saving and how much more you need to save to meet your goal. In December, your Christmas savings will be fully funded and you can enjoy the season instead of feeling pinched for extra money.
Start Tracking Your Expenses
Tracking expenses through EveryDollar is easy! Just enter in the date and the amount you spent for the transaction. Then assign it to the category it falls into and EveryDollar with deduct it from your budget. And with EveryDollar Plus, you don’t have to do any manual entry since it’s already linked to your bank account. All you have to do is drag and drop the transactions! That’s it!
Does This Work?
Yes! Having a budget (your detailed spending plan) is the quickest way to make your money goals a reality! Saving for Christmas? You need a budget! Trying to get out of debt? You need a budget. Saving for retirement? You need a budget. Already a millionaire? Guess what—you still need a budget.
Remember, you’re the boss of your own budget. You get to tell every single dollar exactly where it will go each month. And don’t think of it as confining. Having a budget actually gives you the freedom to spend money! Who doesn’t love that? Especially during the holly, jolly Christmas season.
Did you know you can get transactions from your bank account linked directly to EveryDollar? Sign up today for EveryDollar Plus and start using the easiest online budgeting app on the planet.
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