Created: Sep 25, 2021 07:59 AM

Dave ramsey

Dear Dave,

I have a good job and make quite a bit of money, but I’m sick of always worrying about my finances and running out of money at the end of the month. I’ve heard you talk about getting out of debt and living on a zero-based budget, but what exactly is a zero-based budget?

– Edward

Dear Edouard,

The concept of a zero-based budget is simple: income minus expenses equals zero. If you bring home $ 4,000, you want everything you spend, save, give, and invest to equal $ 4,000. This way you know where each of your dollars is going. Not knowing where the money is going is what kills many people’s financial dreams. They think they know how much they’re spending and where they’re going, but they really don’t.

Here’s how to do it. List all your sources of income for the month. Your income should include paychecks, small business income, side jobs, residual income, child support, etc. If it’s money coming into your household’s bank account, write it down and add it up.

Then make a list of all the expenses you have each month. Rent, food, cable, phones and everything. Your expenses vary from month to month, which is why you set up a new budget each month.

Your donation budget could be high in December, as Christmas approaches. The car’s budget will increase during the months you pay for insurance or renew your labels. Focus on one month at a time.

Now subtract your expenses from your income. Ideally, this number will be zero. It may take a few months of practice, so don’t worry if it doesn’t immediately balance out. If not, it just means that you have to do something to raise one of the numbers, the other down – or both.

If you are spending more than what you earn, you need to cut back on your spending. If you need to make more money, find a part-time job or sell a bunch of stuff.

The deal with a zero-based budget is this: Every dollar must have a name. This means that every dollar has a designated job to do. If you fill out every item in your budget and take out $ 100 up front – meaning you don’t have to do anything for that $ 100 – you haven’t finished your budget. You have to find a job for that $ 100. It’s up to you to decide what it does, but if you don’t give it a name and purpose, you’ll end up blowing it up and wondering where it went.

Good luck, Edouard!

-Dave

• Dave Ramsey is a seven-time national bestselling author, personal finance expert and host of The Ramsey Show, heard by over 18 million listeners every week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992 Dave has been helping people take back control of their money, build wealth and improve their lives. He is also CEO of Ramsey Solutions.