Make Zero Your Budget Hero
February 9, 2024
Have you resolved to stick to a new budget, but you’re not sure where to start? We recently highlighted the envelope technique, an easy, effective way to start a new budget. Here’s another method you can try: zero-based budgeting.
That’s right, the goal is getting to zero! Each month, you assign your income to cover 100% of your expenses and savings goals, so that your budget lands on zero.
This simple three-step process provides a useful framework for developing an intentional spending and saving plan. It can help prevent you from spending more money than you have and ensure every dollar you earn is going to a good purpose.
Step one: Calculate your monthly income.
If you’ve got a predictable salary, that’s easy. If you’ve got variable pay, say from contract jobs or seasonal gig work, you’ll want to review the last several months and do your best to estimate a realistic income for the months ahead.
Step two: Calculate all your monthly expenses.
This includes rent, groceries, gas, utilities, and other bills, as well as smaller, frequent purchases, such as coffee at your local café. These add up over time. If you’re saving for a specific financial goal, like a vacation or down payment on a house, you should treat that as a monthly expense. This is particularly helpful for people who are not natural savers.
Step three: Subtract your monthly expenses from your monthly income.
Ideally, the result will be zero, meaning all your financial needs are covered.
If the result is a positive number, great news! You’ve got extra income to use however you choose—whether that’s a fun movie night or building an emergency fund. If it’s a negative number, that means you’re overspending. You’ll need to reassess your monthly expenses and see where you can cut back to get to zero. Or you can look for opportunities to increase your income to achieve a zero-based budget.
By understanding your income and expenses—and focusing on zero—you can be the hero of your financial journey.
Visit RCU’s Financial Education Center to find more useful resources.
PPP Forgiveness Application Deadline
Congress passed The Economic Aid Act which changed the deferment period from 6 months post covered period to 10 months post covered period. For example, if your covered period ended June 30, 2021, under the new guidelines the earliest your first loan payment wouldn’t be due until April 2022, and you have until then to request forgiveness. Please use the following calculation to help you identify when your forgiveness will be due:
- PPP borrowers may select a covered period anywhere from 8 weeks to 24 weeks.
- RCU is automatically calculating your loan due date based on a 24-week covered period, if you intend on using a shorter covered period please inform us immediately as this will impact your due date.
- Your correct deadline will be reflected in your online banking account.
If all or part of your PPP loan is not forgiven, your first loan payment will be due the first of the following month after a decision is made by the SBA.
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