How to Name Every Dollar
- Determine how much income you’ll have for the upcoming month.
- List all your expenses and their dollar amounts. (Remember to include money going into savings, too.)
- Keep a running total as you subtract each expense from the income.
- Don’t stop until your running total equals zero.
- Adjust the figures to get the balance to exactly zero, so that the destiny of every single dollar is determined in advance.
Be Prepared to Re-name Dollars when Necessary
Actually, that adjusting will continue at least a little throughout the month. You know, normally your phone bill is $55.00 but your service provider upped it to $58.21. You’ll need to take $3.21 from some other budget item to keep the balance at zero.
On the other hand, if you pay less for something than you anticipated, you’ll need to reassign the money that wasn’t spent. Otherwise, the difference become “un-named” dollars and un-named dollars often disappear without a trace.
Benefits of Naming Every Dollar
Here are some of the benefits we’ve observed as financial coaches when you decide in advance how you’ll spend every incoming dollar:
- It feels like you have more money
- Anxiety levels decrease dramatically
- You get a sense of being in control
- You know what you can and can’t afford
- It’s way easier to make your spending match your values
- Achieving financial goals actually becomes possible
If you’re ready to give it a try, you can use the Steam Engine Budget form to create your own zero-based budget.
We just recently held our online BREAK FREE workshop where we walked people through the process of creating—and following—a budget, as well as how to use that tool to get out of debt and/or build up some cash. Let us know if you’d be interested in that webinar and we’ll look at scheduling another one.