What would you do to have some more money in your life? Seriously, what would you sacrifice? If you are now contemplating in your mind the sacrifices you would make, you may be overthinking the question. It’s not always the case, but people usually create misery and unhappiness themselves.
Money is a mindset and a tool. Wealth is not a state of possessing a lot of materialistic items. You can get 10 cars if you want. But you will spend a fortune on maintenance. And if you don’t drive a car for long periods, it will internally degrade.
The things you own, end up owning you – and costing you more money.
Wealth is the state of not wanting things. Money is a tool that allows you to have more options in life. Consider these diametrically opposed sayings:
“Money talks and B.S. walks.”
“Beggars can’t be choosers.”
How many times has your life mirrored the meaning of the second quote? Life is always hard for working-class and middle-class people, whether or not there is a pandemic or skyrocketing inflation to deal with.
The average American salary ranges between $35,000 to $51,000. When one must consider the costs of raising a family and owning a home, this is not a lot of money.
What would you sacrifice to make more money? You could start with your mindset about money.
Acknowledge money is a tool. Differentiate between needs and wants. And budget your personal life strategically.
Zero-Based Budgeting
Before tackling zero-based budgeting, you should first master traditional budgeting.
Traditional budgeting helps you to get a sense of how much money comes in and out of your household. It also shows you how you are spending your money.
Before you start a traditional budget, start by keeping a purchase diary. Keep a record of everything you buy in a week. Then expand upon it by making a list of your income, expenses, debt, and spending habits. Well-calculated math rarely lies – you will learn quickly if you are too frivolous with your income.
You can then excise non-essential expenses and strategically save money. Here is a great place to budget templates. Remember to reassess your budget weekly or monthly and update it as needed.
The only drawback to traditional budgets is that they are like a Rorschach test for financial literacy. It’s hard to look in the mirror and admit that your financial mindset could be the cause of most if not all of your money problems.
While a traditional budget tells you how well or badly you spend money, a zero-based budget helps allocate all of your money for future use.
In a zero-based budget, you can take your monthly salary and then allocate every penny towards an expense, debt, bill payment, or savings plan. You allocate every penny of your salary until there is no money left.
However, the best way to develop optimal allocations for your lifestyle is to perfect the traditional budget first.
Here is a sample zero-based budget template. Let’s pretend you are a single working professional and you make $3,000 monthly.
- Rent – $1,000
- Bills and Utilities – $350
- Debts – $300
- Groceries – $300
- Insurance – $200
- Gasoline – $200
- Entertainment – $100
- Emergency fund – $200
- Savings – $200
- Miscellaneous – $150
- TOTAL – $3,000
With zero-based budgeting, every dollar and penny has a place. There is no room to waste money.
Adjust such a budget to your personal finances and see how it makes your salary stretch a little farther.
Zero-based budgeting won’t maximize your salary overnight. It may or may not work depending on your circumstances. Talk to a financial adviser to learn more about it.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.