I've tried every budgeting method and platform Under the Sun but I've never shown you exactly
how I do my budget and trust me what I'm about to show you could literally make you a millionaire
I have tried every budgeting method and platform under the sun but I've never shown you how I do
my budget and trust me…what I'm about to walk you through could literally make you a millionaire.
What is going on everyone I hope you are all having a fantastic day. So this video is not
a review of any specific budgeting platform and while I am going to reference the tools that I
use, the tools themselves are not as important what's important is the methodology and then of
course the fact that you actually need to make your budget. But the core principle that is the
foundation of my budget that has literally set me on the path to being a millionaire is what's
called zero based budgeting. This is a concept that I've talked about many times before and
you may already be familiar with it yourself and while the formal definition is a budgeting method
in which all expenses must be justified for each new period, the simple way of thinking about zero
based budgeting is allocating every single dollar of income whether that's towards your expenses,
your savings, you're investing, or anything in between. So I’ll walk you through the tools that
I use to implement this budgeting strategy but I want to make it very clear that zero
based budgeting does not mean that you are living paycheck to paycheck and have $0.00
left at the end of the month. I think that's a very common misconception but all this means is
that you are giving every single dollar a purpose including your saving and investing so that does
not mean that you are spending every single dollar that you earn. Alright if you're falling asleep
already because budgeting isn't the most exciting topic in the world…wake up and let’s walk through
exactly how I do my budget every single month as someone who has used and reviewed nearly
every single budgeting tool strategy and method under the sun. So some of you already know this
but for my banking I use the SoFi checking and savings platform and for my budgeting I
use the every dollar budgeting app and I found this to be a fantastic combination but you can
use whatever combination of tools you feel works best and I actually recommend that you try out a
few different options because everyone is going to have slightly different needs. But I would
recommend that you get a dedicated budgeting tool outside of you're banking platform because even
SoFi’s dedicated budgeting platform, Relay, isn't robust enough to truly create a budget on its own.
Now I’ve reviewed a lot of these tools but some of my favorites have been Mint, YNAB, good budget,
Personal Capital, and of course the tool that I now use, every dollar. To be honest they all work
in a very similar way with slightly different user interfaces so check out the many reviews I've done
on these platforms and choose what's best for you or just keep your budget in a spreadsheet
what's important is that you know your numbers and you're able to track them consistently.
Alright now for the good part. At the beginning of the month before the month begins I create
our zero based budget and after you do this for a few months, creating your monthly budget shouldn't
take you more than 5 minutes because a lot of your recurring income and expenses are going to
stay pretty much the same month to month. So you can see here in my every dollar app that I have my
mortgage, all of my utilities, gas, groceries, restaurants, insurance, and pretty much every
single expense that I have each month. Now some expenses may not occur monthly maybe they're
quarterly or annually and I'll show you how I deal with that later but regardless of what tool you're
using, you need to input every single expense that you anticipate having in the upcoming month. Then
you're also going to input any and all savings goals including setting money aside for investing,
putting money into your emergency fund, saving up for that car that you want to buy and in my
case I take care of those categories first which is referred to as pay yourself first but again
everyone's a little bit different just make sure that you are setting money aside for your saving
and investing. Now as part of your budget you of course need income so you'll want to input
any and all sources of income that you anticipate having in the upcoming month. Now in my case this
is a little bit challenging because my income is so inconsistent so what I do is I actually
create my budget based on last month's income. So what you're looking at is my budget for
November of 2022 and the income that is in here includes what I paid myself out of my business
last month since that is inconsistent, and then additional paychecks that I and my wife anticipate
receiving in November which are much easier to estimate since they are fairly consistent.
Once all of your income, expenses, savings, and everything you can think of is in there,
it's time to start tweaking those numbers as much as possible until your income minus your expenses
equals zero hence the name zero based budget. Now if you're way under budget and you have a ton of
money leftover…thats a great problem to have and you can throw that into investing or put
it towards your next savings goal or in the case of my wife and I we just dump any extra income
into a mortgage payoff fund to pay off our home early. But of course you may also be over budget
and if that's the case then it's time to cut back on some of those discretionary categories
like restaurants or lifestyle and that doesn't mean that you need to go bare bones and have no
life but there's certainly a balance and having this type of budget will force you to find that
balance because without doing this you would just continue spending as is not realizing that you
might be over budget by a few $100 each month and eventually that's going to eat into your savings
and catch up to you. Alright next I want to talk about how your banking platform ties into this to
help budget for those large annual expenses but stick around to the end because we haven't talked
about the most amazing advantage of budgeting that I've never shared before here on the channel. But
like I said what about those large quarterly or annual expenses…how do you budget for those on
a monthly basis. Well let's take property taxes for example. I know that my property taxes are
due every year in August and I know that they're going to be roughly $5000. Well if I just budgeted
as is then suddenly August would roll around and I would be smacked with a huge $5000 expense that
was not in the budget and while I may have the savings to cover that, it would completely throw
off everything you’ve worked to balance so instead we want to divide that expense across 12 months
in the year and make that part of our monthly budget. So in the case of our example I know
that I'll owe $5000 each year which divided over 12 months means I need to be setting aside about
$417 each month as part of our zero based budget. Property taxes is a pretty boring example but this
also applies to my insurance which I pay annually I also use this for some of our utilities which
are billed on a quarterly basis but you can also use this to save up for something whether that
be your next vacation or buying a new car. If you wanted to buy a $20,000 car for example then most
people would go finance that and pay interest for years so instead, if you want to buy that
12 months from now then you need to be setting aside roughly $1,667 per month in order to buy
that $20,000 car in 12 months. You get the point the sky is really the limit with this
one but where my bank ties into this is using SoFi’s vaults savings feature and autopilot
tools. Now again you can go about this however you want but what my wife and I have done is set
up automatic transfers from our checking account into respective savings of vaults for each of our
savings goals and annual or quarterly expenses. So if we jump into my sofi app and head over to the
vaults section you can see that I have my annual auto insurance which I have divided over 12 months
so I have to set aside $84 a month and then the $1000 bill comes for next year, I’ll have to full
amoutn already saved. Same thing applies to our home insurance, and we even have our quarterly
utlities and our Roth IRA investing contributions meaning our direct deposited income comes in,
it gets automatically divided across all of those preset expenses, investing, and savings goals,
and any remaining income we allocate where my wife and I feel is necessary in order to reach that
zero base budget each month. Alright…deep breath I realize that this may seem like a lot of work
but again just remember that what's important isnot that you pick the perfect budgeting tool
but that you're actually making the effort and trying to create an effective budget. I'll be
honest with you, I really didn't budget at all until recently and when I did start creating a
true budget it sucked for a few months and that's probably going to be the case for you. It's gonna
take you a little while to become efficient at this and in my case it took me a few months to
get on the same page with my spouse and align in our long term financial goals so give yourself
some grace and just know that by putting 1 foot in front of the other you are making a huge
difference financially because budgeting really helps you keep your eye on the prize for those
long term goals and gives me immense peace of mind and permission to spend money so if
you're a natural saver like myself then by doing your budget and telling your money what to do,
it becomes a lot easier to spend that money even on discretionary things beacuse it again
gives you permission to spend and will change your relationship with money because at the end of the
day money is nothing more than a tool to achieve the goals that you want to achieve and of course
help and bless those around you. Beyond that it's just green pieces of paper that you can’t
take to the grave. I'd love to know what budgeting tools and strategies you use down in the comments
section and if you would like to sign up for some of my favorite financial tools then I will leave
links for those down below the like button. Take it easy and I'll see you in the next one!