64. Zero Sum Budgets Don't Always Add Up

In this episode, the host, Laura Sexton, discusses zero-based budgeting and addresses common misconceptions about its effectiveness, inspired by a critique of Dave Ramsey's financial principles. The host emphasizes the importance of allocating every dollar with purpose and provides practical tips for creating a successful zero-based budget.

In this episode we’ll learn:

.     to allocate every dollar

.     flexibility and adaptation

.     emotional intelligence in decision making

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Transcript

Laura: 0:02

Hello and welcome to the Accelerate Your Legacy podcast. I'm Laura Sexton, your trusted financial coach and money mindset specialist. Join me as we explore the world of money and money mindset while also paving the way for a lasting legacy that extends far beyond money. Together we'll eliminate stress, amplify freedom, and ensure you stop paying for your past so you can start saving for your future. If you're seeking peace in your finances, more margin in your budget, and a legacy that inspires generations to come, you're in the right place. Hey, accelerators this week, I wanted to talk to you about 0 base budgets and how they don't always add up. I saw this headline about how Dave Ramsey's policies just don't work for people and I had to click it. You know, I had to click it and I had to see what they were talking about. And 0 base budgets. Just don't add up. It really got me thinking. I was like, what is it that this person is talking about? And so I read through the article and what I found was this person has probably made a budget one time and it didn't go exactly according to plan and therefore it's a horrible idea and we should never do it. Or at least that's what it looked like in the article. So I wanted to talk to you about the best way to have a 0 based budget and how to do it in a way that it is definitely going to work for you. You see, when we make a 0 budget, one of the things that we want to do is we want to make sure that every dollar you have coming in has a mission. So that is why Dave Ramsey has a budgeting software called every dollar. We're giving every dollar an assignment. Every dollar is going to be allocated to something that is important to you. So, when you make these budgets, we start with the necessities that is food, shelter, clothing, transportation, and then we move on to things that are non negotiable. So we go from necessities to non negotiables, and then we move on to things that make life go round, and we move on to paying off debt, and then we move on to the luxuries and the nice to haves. Why do I put non negotiables in there? Because they are a value for your family and you have to have them. For my family, my kids go to private school. That is a non negotiable and it will happen regardless. So with your 0 base budget, you are going to put your income at the top of the page or website and then you're going to subtract out the necessities. The non negotiables, the nice to haves, the debts, and you're going to go down and make sure that everything that you need to spend your money on is spent on paper, on purpose before you even get that money in. And the reason we do that is because sometimes we get the money in our bank account and we're like, Ooh, we have extra money. I'm going to go spend it. And that is not what you need to be doing with your money. You need to, in a moment of calm. When you are not hungry, angry, lonely, or tired, you need to make a plan for your money. And what this is going to do is it's going to help you stay on track. Because you're not making an emotional decision, you're making a thoughtful, mind focused decision. Now when we're looking at our zero based budget, the question can come up, what happens if unplanned Events occur, you have a car accident, you blow a tire, you have an unexpected medical expense, something comes up and you need more money. For a category that's not in your budget at all, for an example, my children had gone to the doctor earlier this year, because they both had ear infections and we still had a little bit of money left in our deductible. And so we got a bill in the mail for those unplanned medical expenses, and I, I was a little. Shocked. I was like, Oh, my goodness. I don't even remember. This is how many times how much has been going on in my house right now. I didn't even remember that we had gone this year, this calendar year. It, it had escaped me. I thought that was last calendar year. So I thought that it was covered and it wasn't. So I now have to find 380 dollars to pay this medical bill. I look at my zero based budget and I go, okay, so here are the categories I can take out of. One category I can very easily take out of is extra money that I've been putting into savings. I just reallocated that money, took it out of the savings bucket and put it into the medical expenses bucket. And hey, look, now it's covered. The person that had written this article said that you're going to turn your budget into a hot mess. That's literally what they called it, a hot mess. And I get that. My plan didn't go according to life. Isn't that funny? Because my life very rarely goes according to plan. So what I needed to do was sit down and look at my plan and adjust it. There is nothing wrong with making adjustments to your budget. There is, however, a problem with always adjusting the budget to fit you at this current moment. If that is the situation that you find yourself in, we need to sit down and have a talk. We need to make sure that you have a plan in place and somebody to hold you accountable to stick to that plan. Things come up for you. Like this medical expense that I had. Like a blown tire. Things come up. But going out to eat or buying a new couch is not a thing that comes up that you need to rearrange your budget for. Here are some other ways to keep yourself from having a blown budget every month. Have a miscellaneous category. This is one of my favorites. It's one of the easiest things to add to your budget that keeps it from going all kinds of wonky. Have to buy paper towels. Miscellaneous category. Medical expense. Miscellaneous category. Went for a shopping trip to Target. Miscellaneous category. There are ways to incorporate the miscellaneous category into your budget so that it covers some of the things that you were not necessarily expecting. Another way to cover is the emergency fund. You should have at least 1, 000 sitting in an emergency fund to cover you in case something were to come up. Eventually, when all of your debt is paid off, we want to make sure that you have three to six months of expenses set aside in a fully funded emergency fund. This is your buffer between you and life. The other thing, That is really going to help you is having a sinking fund. Sinking fund is set up to hold money into a, in a savings account or things that, you know, are going to happen, you know, that you're going to have to get your oil changed on your car. You know, that your car is going to require routine maintenance. You know, that. So, start putting a little bit of money aside every month. You know that you're going to have birthdays coming up. You know that you're going to have anniversaries. Set money aside for gifts every month. You know, beyond a shadow of a doubt, that Christmas is coming on December 25th every year. It happens every year. So, set money aside every month for Christmas. If you're not already doing that, it is March. Let's go, my friends. Let's put some money aside into a Christmas sinking fund. That way nothing's going to sneak up on you and you're going to be able to use this money for that. I recommend having a health care sinking fund. Money put aside every month to cover unexpected medical expenses. Keep up to your deductible every year in that account. And then if you get to the end of the year and it's full and you didn't use it, praise God. Then roll it over to next year. And the next year, you're able to keep putting money aside, put money aside, put money aside, make sure that you were covered in your life. The last thing is learn to pivot. If things don't go according to plan, it's okay. Learn to make adjustments. In a good state of mind, I said it earlier, when you make a budget, you want to make sure that you are not hungry, angry, lonely, or tired. If you are making any decisions in those feelings, it's probably not a good decision. If you were driving down the road and you see a drive through and you're like, I'm going to stop and get something to eat. You're probably just hungry. Think about it. Am I making this decision because I'm hungry or because that food is going to nourish me? How are you feeling in this moment? Am I making this decision because I'm in a heightened emotional state? Am I angry? If you are, that's not a smart purchase that you are making. Am I lonely? My friends called me up and they're going to go out for margaritas and I just want to join them. That's not an excuse to change your budget. Am I tired? I've said this before many, many times. Amazon makes the most money between the hours of 8 and 9 p. m. When people are tired, they're probably a little hungry, they're probably a little lonely, they're laying in their beds and they're scrolling on their phones and they're just buying stuff on Amazon because they are not in a good emotional state. If you are tired, you do not need to make that purchase. Here's another really good thing that I did not think of that. I'm going to throw in just here last minute. Zero base budgets do not mean that you have 0 dollars in your bank account at the end of the month. Give yourself a buffer. I personally have a 300 dollar buffer in my account. There's 300 dollars in my account at all times. I have not overdrawn my account in 8 years. I have not even gotten close to that buffer. In 7 years, why is that buffer there? It just makes me feel better to look at the account and not see it so close to 0. Now, my budget will get down to 0. My budget has gotten down the other day. I was at 31 and I had a 30 bill that I knew that I was going to have to pay. It made me sweat. But I had that 300 buffer, I was not concerned, and I had already gotten paid early for my next paycheck, which started the next day. If you pay attention, you can plan ahead. You are going to be okay, my friends. Your zero based budget is coming soon. May not always add up, but I promise you if you stick to it and you do it the right way, you do it when you're in a good headspace and you make sure that all of your categories are covered, I promise you that your budget will make you feel more in control and it will in the long run add up. All right, my friends, that's it for this week. Go out and make a difference. Thank you for investing your time with us today on the Accelerate Your Legacy podcast. Remember, your legacy isn't just measured in dollars and cents, but in the tools, habits, mindset, and reputation you leave behind. Don't just listen to the show, but take action on what you've learned. Share this wisdom with a friend who can benefit and help us spread the word by rating and reviewing the podcast. For questions or encouragement, reach out to me on Instagram at Accelerate Your Legacy or explore the resources listed in the show notes. I will be back with you next week. Until then, build your legacy with intention.