Our household has been using a pretty intense budget process for about a year and a half now. We use a zero-based budget because I`ve used it successfully in the past when I had a tight budget and clear financial goals (e.g. paying off a big loan).

A good description of zero-based budgets comes from Simple Mom. I can`t describe it better than she did in her post:

“Zero-based budgeting is basically putting a name to every dollar that comes your way. It starts with your income side of the equation, and line by line, the total subtracts as you allot amounts to each category, until you are down to zero.“

There are tools out there you can find to help you manage your budget. I am comfortable with Excel and had a budget used by a non-profit agency that I used as a template. We`ve customized it for our household and it`s super-detailed. For example, there are five lines for different types of income, and more than two dozen lines of types of expenditures including different categories of savings.

As described above it’s really about tracking expenses more than limiting spending, which is probably how some people think of a budget. The biggest benefit to this system is that it makes saving as important as any other expense. In fact, after accounting for fixed costs (e.g. mortgage, insurance etc) we started our budget exercise by setting a goal for savings for the year and then allocating the remainder of our money for variable expenses (e.g. food, entertainment.)

By making almost all of our purchases with a debit card or on a credit card (paying off the balance at the end of the month) it makes it much easier to track what we’ve bought and just copy and paste it into a notes tab in our budget.

We do our big planning/forecasting at the end of the year for the following year but we revisit it whenever we know something is going to change, so the budget is constantly evolving.

Moving to a new house creates big changes in our budget. One of my tasks is to continue regular monitoring of the budget and to add lines for home maintenance, travel, cleaning and daycare. So far this year I’ve managed to be consistent, updating the budget every week or two, making it easier to keep up. I foresee some challenges in the few months where we have overlapping expenses between the house and the condo and then me returning to work. But if I can make it over that hump I think we’ll be in good shape.