Do you feel hopeless about money? Have you already tried to create a household budget in the past, but you failed? In this article we will closely examine how to organize family finances to regain control of your life and money.
Before working on your Personal Financial Plan (PFP), start with creating your zero-based budget.
What does it mean «zero-based budget»?
Zero-based budget is a budget in which all revenues are allocated to different budget categories without leaving any unspent funds.
At this stage you should understand that you can’t afford to live one more month without a budget. This is the difference between spending one hour to create a budget and the rest of your life where you can’t realize all your dreams. The absence of a budget can make you trapped by your unloved work that brings you money covering only indispensable needs. Remember: a financial planning will release you forever from questions like: “Where to take money?” and “How to save money?”.

Depending on your wishes, you can manage your personal finances using a pen and a notebook, Excel spreadsheets or a mobile application. Whatever method you chose, try another one to be absolutely sure that a selected method is the most convenient for you.
Fundamental principles of budgeting:
- First and foremost rule of a family budget – it should be easy to manage! That is why choose the most practical way of budget management for you.
- Each month you should revise your household budget and adjust it in accordance with current situation. Why? Some expenses are seasonal (for example, change summer tyres to winter ones), while others remain stable from month to month. In order to never forget anything, you need to control your budget. Choose a day in a month, set up a reminder on your phone and manage a budget.
- Create convenient expenses categories perfectly adapted for you. Add and remove categories depending on your lifestyle.
The main categories you can take as a basis or integrate completely to your list:
Home meals
Out-of-home meals (in restaurants, in cinemas, quick bites)
Housing and utilities – accommodation, internet
Auto and public transportation
New clothes and shoes
Beauty, hairdressing and nail salons, makeup accessories
Sport activities
Education
Gifts
Leisure and fun
Home supplies (cleaning supplies, home maintenance)
Services and healthcare
Technical and electronic devices
Disappeared money (God knows where and how!)
Wish from PFP 1
Wish from PFP 2
Wish from PFP 3
- If you have already thought over your Personal Financial Plan and have determined your wishes, include it in a budget and focus, first of all, on these categories while putting money aside.
- Identify your biggest expenses and purchases that you can’t afford with only one salary and split it across 12 months. Establish a special category, writing down the name of a desired purchase, and put a certain amount aside each month. In such a way, when time comes to go on holiday, you will always have in your budget necessary funds, saved during the year. In addition, some useful tips, helping you to save money on vacation, will make your holidays even more enjoyable.
- First of all, based on your opinion, distribute the money; think over and decide how much money you need for each category. It’s important to use zero-based budgeting and divide all amount of money until the moment when you come to zero. If it seems to you that you spend too much money on clothes and not enough on gifts to your relatives, note it down in your table. Create a perfect image showing a distribution of your funds.

- Keep in your budget things you are keen on! The most unexpected idea, isn’t it? You were thinking that you would need to economize to the max, but this isn’t the case. A budget is an intelligent distribution of the money. That is why if you are fond of eating in the restaurants and not of taking food with you to have a meal at work, keep it in your budget. If you are pleased with going to the cinema of Friday – no matter! Keep it too! This point will motivate you and will help you not to feel like Scrooge, who wasn’t allowing himself to buy stuff he dreamed to have.
- Make a table and include in your plan all planned expenses, next to it write down your real spending. So that you will know which category is over the limit.
- Most likely you already have an idea of how much money you spend per month and in which way. But be honest with yourself: “approximately $1,000 spent on food” and in reality “$1,200 – on home meals and $500 in restaurants” are like apples and oranges. Thus, track all your expenses, in order to understand how you spend the money. Control yourself if you realize that you throw money away where it isn’t necessary at all.

- Make automatic all possible payments – charges for internet and mobile phone, bank transfer on the special account for your wishes, housing costs. Do not exert yourself on things that can be automatic. You’d better focus efforts on discovering new sources of additional income 🙂
- Compare the final amount of all expenses, you should have zero in the end. If you still have some money on hand – transfer it to the wishes of your Personal Financial Plan.
- If you see that in some categories you spend not enough or extra money, adjust the table after the first month of expenses calculations and budget management. Add spending that you probably forgot and blot out extra categories.
- After a little while you will have a full understanding of the way you spend the money. Your financial management should be flexible enough in unexpected and crisis situations, while in all other circumstances you must respect your budget plan.
Potential problems
In the first few months of budget management the following problems may arise:
- Your expenses in one or several categories are less than you planned.
Solution: If you intentionally want to increase your expenses in these categories (for example, you want to buy more books), it can’t be helped! Spend the money to buy books. If you don’t want to raise your spending in this category, feel happy! You have extra money that can be allocated to other categories, where you don’t have enough, or that can be used to increase your funds for the Wish from PFP.
- Your monthly spending in one or several categories exceeded the planned amount.
Solution: Was it do-or-die situation? If so, continue to follow the existing plan, the average will flatten out over time. On the contrary, if your expenses in this category were not indispensable, take care of it and keep eye on your purse in the following months. You need to save money in this category.
- Your spending in one or several categories exceeded the planned amount over several months.
Solution: Were these expenses indispensable? If so, adjust your plan and make it closer to reality.
If not, be fair with yourself and STOP WASTING MONEY. Answer to a simple question: is it more important for you to be ruled by momentary pleasures or do you prefer your dearest wishes, that seemed to be inaccessible, to become true. Limit your visits of the restaurants, don’t buy absolutely useless stuff, do the shopping consciously, start riding a bike and look for extra income sources.