I recently overheard someone talking on the phone about a bill being late. She claimed that she had contacted the company and they told her that they could not give any more extensions on the bill and the (electricity?) service was going to be cut off in four days if the bill was not paid. At first I felt sorry for the person but then I realized a few things:
* She had just bought pizza that day for lunch
* She had just gotten a manicure AND a pedicure
* She had just gotten her hair done that week

I immediately lost the sorry feeling as this is obviously someone who does not prioritize. I have heard this person talking about clothes and expensive purses that she has bought…yet here she was worried about finding money to pay a bill. This told me that she either did not have a budget or if she did have one she just was not paying attention to it.

I thought about my own finances and how I use a zero based budget. Every dollar (actually every cent) that I make has a job before the money even hits my account, whether that is to:

  • pay regular bills
  • reduce debt
  • increase savings
  • other

Now the first three categories speak for themselves because I obviously take care of my rent, electricity and so on. I include things like groceries in regular bills because I have set amounts that go towards each category as well. I also have a budget amount that goes towards paying debt and it is slightly more than the minimum on each credit card and loan. I have a second snowflake amount that goes towards debt but that is talk for another day.


image from femtalks.com

I classify my savings as a ‘bill’ that is pushed from my ING Electric Checking to a savings account in ING. Most people decide to view their savings as what they have when all the bills are paid..but I chose to designate my savings as a bill that has to be paid so this way there is really nothing left over at the end.

In the other category I have fun money which is a set amount that goes towards anything I want. I have a sub account in ING that is for fun money and if I want something not already in the monthly budget then I see if I can afford it. If for example I see a new outfit that I want (rarely happens) but have already spent my clothing budget for the month then I can take it out of fun money. Or if I go out for the weekend I can take food purchases out of fun money instead of my grocery budget. (This is NOT my emergency fund, though which is a bill.)

I make sure to overestimate bills every month so that I can budget for them. Any money left over (say I spend $65 on gas instead of the budgeted $70) simply rolls over to the overage fund and becomes a snowflake in a few weeks.

So my advice to ‘she of the freshly done hair and nails who buys lunch every day’, next time make your LIVING expenses be the priority in your life….after all you can’t see your new manicure in the dark!