The budget you worked on in Part One of this series was simply a snapshot of what you are already spending on. It’s a look in the rear view mirror and, if you answered the questions at the bottom of the post you may have found that where you spend the most money is not where you WANT to spend the most money.

But if you spend your whole life looking in the rear view mirror, you will either get lost or more likely get into a wreck. It’s a terrible way to budget! What we are going to use from now on is a process called Zero-Based Budgeting. You are going to create a brand new, unique, Zero-Based Budget every month, before the month begins. Why? Because every month is different. Sure, some things remain the same each month but in reality, a lot do not. Some months have holidays in which you will plan to spend money for, and others have birthdays.

In the next post we will get into the meat and potatoes of the Zero-Based Budget, but for now just understand that you are going to have this budget completed before the month begins. You can use an online tool like, a spreadsheet like Excel, or good ol’ pencil and paper. It’s your choice. Here’s how it works: you list your household take-home pay at the top of the page. Then, you allocate money into the various categories, spending that take-home pay line by line until you get to zero. This becomes your Spending Plan for the month.

But make sure you work on the budget with your spouse if you are married. And here’s a revelation: it doesn’t matter who makes what kind of income or if one spouse stays home and does not bring any income into the house – you BOTH work on the budget together. You BOTH have an equal vote into where the money will be spent. While it will probably be natural for one person to initially prepare the budget, you should both come together for at least 30 minutes, at least once a month and decide how much money to allocate in each category. And then once you have your plan in place where every single dollar of income is spent, on paper, on purpose, the two of you (if married) must shake hands and agree that you will both stick to this plan. It is your household operating document for money! “But what if ‘something comes up’?” Well, make sure you have a Miscellaneous category for starters, but don’t put too much in there. $100 is what Christie and I do each month. And if you really feel you need to change something during the month? You both have to agree on it.

If you are married, handling your money this way will most definitely improve your marriage. We hear that exact comment All. The. Time.