Zero-Based Budgeting: A Beginner’s Guide

zero-based budgeting |



Let’s try this: Let’s look at budgeting as a spending plan as opposed to a don’t-spend-any-money-and-be-miserable plan. Can we do that? Zero-based budgeting is an excellent method for getting your finances in check. The cash envelope system of budgeting (read more about the cash-envelope system of budgeting here) is very similar, or a type of zero-based budgeting.


Choose a method that works for you. Remember that doing nothing and having no control over your finances doesn’t help anyone. Sometimes just having an app on your phone allows you to keep to your budget. (Look at all the people who walk so much now because their wristbands are telling them how many steps they have taken!) Make it work for YOU.

Is using pen and paper the only way for you to stay organized? I’ve got you covered. Do you need your phone or your computer to enter data and keep track or your life? I’ve got you covered.


A zero-based budget means you account for every single dollar coming in. At the end of your monthly budget, the amount leftover is zero.

First, fill in all the bills that are constant like your mortgage, rent, car payment, cable bill, cell phone bill, etc. Next fill in what you think your budget should be (or if you’ve been paying attention – what the amounts are) for other expenses you will undoubtedly incur over the month, like groceries, gas, dining out, pet care, etc. Whatever is left over is not just to spend however you want, you need to give it a budgeting category – and in this way, you create a budget where your spending is under control, and YOU are giving each dollar a place to go. It’s liberating, really! You choose what is most important and work from there.



Decide. Figure it out. What do you NEED? What debt do you have and how much can you pay back (or how much do you NEED to pay back every month) and how much do you want or need to save? WANTS come last.



A 401K contribution, directly from your paycheck is KEY for long-term savings. You get the benefit of pre-tax dollars being saved, and you never have the money in your hands to decide if you want to go out for dinner a few more times this month because you work hard and you deserve it. (You HAVE earned it! But you deserve a stable savings contribution so that the “future you” will enjoy a more relaxed retirement one day.)

I have a Vanguard Account that I have on an automatic monthly withdrawal from my bank account. This makes the savings, no matter how large or small, NOT an option, no matter what is going on at home. I find automatic savings the way to go (I also use Stash, and Acorns – but these are for a different post on a different day!) The money just isn’t there for me to use or decide to move around within my budget.


If you have never made a budget before, my suggestion is to go through your old bills by 3-6 months, or a year if you are super motivated. Approximate. Don’t worry so much about being perfect – there is NO way you will stay EXACTLY within your budget the first few months – if you do? Please let me know – so I can look up to you and tell you how fascinatingly wonderfully budget-y you are!

Everyone will have different categories that need to stay, everyone will have different categories that serve no purpose being on their radar. Some will have certain things that will be much higher than others. For example, someone who needs to be dressed in “nice” clothes for work needs a larger clothing budget than someone who works from home.

Income: If you have inconsistent monthly income, you’ll need to approximate. My suggestion would be to enter a lower amount than you “think” you’ll be making, just in case. The income you enter should be your net income, this is the amount you are bringing home after taxes.


50-30-20 BUDGETING

The 50-30-20 budget system really works and is a great tool to use when figuring out your budget, especially when this is all new to you. The 50-30-20 budget system says that 50% of your income goes to what you need (groceries, housing, transportation, etc.), 30% goes to what you want (travel, entertainment, dining out, etc.), and 20% goes to savings. For some they put the debt repayment in the “need” category, others put it with savings. I personally like to put debt repayment as a need and try to save as much as I possibly can. At first, 20% may seem like too much to account for savings. So start smaller, but plan on increasing, even if by 1-2% every month! You won’t feel that as much.

You can read more about the 50-30-20 budget system here.



The premise is that we set up this budget before the month starts, stay within our budgeted numbers for the month, monitor our progress during the month, and acknowledge the difference between what you planned for and what you have spent at the end of the month. Next month’s budget may have very different numbers.
Also feel free to always move a little money from here to there in the middle of the month. In other words, if you realize that you overbudgeted for gas, and you underbudgeted for groceries (this is for real, not because you overspent carelessly at the supermarket) move some of those numbers around. Minus $25 from the gas category and add $25 to the groceries category. This is ok!


Your budget is a “living” document, always changing and growing as you and your family change and grow. Be open to that, and at the same time be honest with yourself about where you are overspending – or when you are putting a true “want” in the “need” category. To save for retirement, for your next vacation, for the next time your fridge is on the fritz… budgeting is the key.

Getting in the habit of writing where every cent is going takes time. Practice. You will thank yourself later. You can download the PDF for keeping in your pocket or in your bag if you would rather use paper and pen than your note-taking app on your phone. Otherwise, I have created a google doc. Please remember to create a copy before you start using the Google Doc. See links below.

Whichever you choose – there isn’t an option of “writing it down later.” I promise this doesn’t work. Write it down EVERY time you spend money. If you don’t have your smart-phone available at all times, then print out a few of the Spending Lists (links below!) and keep them with you. Once a day, update your budget spreadsheet with the new amounts.

This is your first step. Keep track of every penny. It’s essential, and it’s not punishment, it ends up being very freeing knowing where your money is going.



Don’t worry that you won’t be perfect at this for a while. Until you are indeed following every dollar (which is not difficult if you keep a budget), you really have no clue as to where your money is going. And that’s ok. But it’s time to start paying attention. Over the long term, keeping a budget leads to manageable debt, room to indulge more frequently, and savings in which to retire comfortably. Makes sense, we just have to do it. You have several options of how to organize yourself and your finances. Be in charge of your money. Your future self will thank you much. Give every single dollar a job.


Go and start a zero-based budget! You got this!


Compounding Joy Zero-Based Budget SPENDING LIST PDF

Compounding Joy Zero-Based Budget Spreadsheet PDF

Compounding Joy Zero-Based Budget Google Sheet

Compounding Joy Instructions for Zero-Based Budget Spreadsheet

This post may contain affiliate links. You can read more on the disclaimer page. Please know I will never promote or suggest any product that I haven’t used and/or continue to use, and that I enjoy using in my own life.

5 Simple Tips for Beginners to Learn How to Invest and Save Money

personal finance | compoundingjoy | 5 simple tips for beginners to learn to invest and save money

INVESTING FOR BEGINNERS – simple tips for beginners to learn how to invest and save money

This post may contain affiliate links. You can read more on the disclaimer page. Please know I will never promote or suggest any product that I haven’t used and/or continue to use, and that I enjoy using in my own life.

This article is for all the people that think because they know nothing about their money they will always know nothing about their money. Here are simple tips for beginners to learn how to invest and save money. I’ve got news for you, it’s not hard to learn and it’s fun! I am not an accountant, a financial advisor, or a professional investor. However, I LOVE learning about money and finances. I also love my budgeting app (I use YNAB), and I am proud to say I haven’t paid a penny in credit card interest in YEARS. When we don’t know anything about how we spend or why we spend or where our money is going (if any) for the future, we keep ourselves hidden away from an entire subject that could be interesting and NOT (promise!) difficult to manage. Just because you aren’t paying attention doesn’t mean you are spending appropriately. Ignorance isn’t bliss.

The following are five personal finance ideas to move you forward in your awareness of your money and your spending habits.

1. Start using a personal finance app

My go-to personal finance app (for tracking net worth) is Personal Capital. At any time of day, you can sign on and see the money that has come out of your checking account, any credit card account, or your investment accounts, etc. If you are concerned about security – think about this: if you can see what’s happening in your accounts at a moment’s notice chances are you will spot something “fishy” much sooner than if you were in your “I don’t pay attention to that stuff” mode. Knowing your net worth is terrific. You will feel more in control of your life. (Really.) Especially as you pay attention and start saving, even a little bit, it’s very encouraging to see the numbers go UP as you watch instead of PLUMMETING when you look every once in a blue moon.
Again, I use YNAB on a daily basis to keep track of where my money is going, and since it works a lot like the envelope system of budgeting, I will know exactly how much money I have left for groceries this month, dining out, gas, etc.

2. Chat your way to cheaper utility bills

Once you start using a personal finance app and paying attention to your spending, it’s easy to see where your hard-earned money is going every month. If you’re like most of us, two of your most significant expenses after home and auto (never buying a new car will be a topic for another day) are probably your cable and wireless phone bill. I never want to do this – I can’t stand to make the call and be on hold and wait until I have to finagle a better deal with someone. I would instead not make the call and keep paying the same high price. BUT – Look for the chat icon on a vendor’s website! Usually, someone comes on to chat with you (it’s like texting back and forth) immediately. Ask about options to cut your expenses. (Telling them you found a better price elsewhere is something most people do, but it works.) There are usually new “promotions” that we would NEVER know about unless we checked. Ask about them!

Ask neighbors. I recently had a neighbor, who saw oil being delivered to my house, call and ask me if I minded telling him how much I paid for my fuel. I was happy to share that information because perhaps one of us can save more money if our costs are different. (Ended up that I was paying WAAAAY less than him.)

3. Check your credit cards

Obviously, if we are getting a handle on our finances, the last thing we want is credit card debt. For that reason, if you DO have credit card debt, make sure you are using a card with the lowest interest rate you can find. Now let’s say you do not have credit card debt. You should still be keeping an eye out (at least once a year) on what card you are using and see if there is something that would be more beneficial for you. Look at the NerdWallet information on the side of this page – they have WONDERFUL calculators that can help figure this information out. (Comparing benefits, yearly costs, and interest rates.)

4. Investigate no-fee and low-fee trading platforms

Investment allocation –

This may sound confusing, but it’s not. There are stocks, bonds, international, domestic, large, small, real estate, etc. types of investment options. Allocation just means how much of your money is in each “type” of investment. To keep things simple – think INDEX FUNDS!

Here, in a nutshell, is index funds described in the book “The Bogleheads’ Guide to Investing” (John Bogle is the founder of The Vanguard Group), “Index investing is an investment strategy… It takes very little knowledge, no skill, practically no time or effort – and outperforms about 80 percent of all investors.

In Benjamin Graham’s classic “The Intelligent Investor” he writes, “What then, should the intelligent investor do? First of all, recognize that an index fund – which owns all the stocks in the market, all the time, without any pretense of being able to select the ‘best’ and avoid the ‘worst’ – will beat most funds over the long run.”

By far the most straightforward book I read while inhaling everything I could on personal finance was “The Coffeehouse Investor” by Bill Schultheis. (I will share more of my favorite books in the fifth section of this article.) He writes, “The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock market. The problem with having your entire common stock portfolio invested in one ‘entire-stock-market’ index fund is that eventually, someone at some backyard barbeque, you will cross paths with a Wall Streeter who, upon learning that your entire portfolio consists of only one mutual fund, will argue that you are way under diversified and will pay for that mistake the next time the stock market drops.
Just smile and say please pass the potato salad.”

Vanguard: the best low-cost index funds around – (John Bogle, founder.) Check them out here.

Stash: This is a fun app. Firstly, you can set it to automatically invest – I put a small amount on automatic each month to go into my portfolio. You pick your funds based on your where your beliefs align, where your interests are, etc. I use Stash and have my money invested in their “Roll with Buffett” account. HELLO? How awesome is that? It is interesting just to look at how they set up different accounts. Are you into Defending America? There’s an investment account for that. Health-care your thing? There is an account called “Live Long & Prosper.” Robots? Water? You name it – it’s pretty cool.

compoundingjoy | acorns | save money

Acorns: I like it. It’s a sneaky way of tricking yourself into saving a little bit every day. What the Acorns app does is round UP the amount of any purchase (you pick what accounts (bank, credit card) you want to be involved. So if you spend 13.41 at the diner? Acorns will round up and take the $0.59 and put it in your Acorns account! Once you get to $5 Acorns invests the money for you – This app is more general for choosing your investments than Stash – You decide between aggressive, moderately aggressive, moderate, moderately conservative, or conservative. They do the rest.
Again, it’s fun, and you do start seeing the amounts add up! (I have mine set now to 2x round-ups, so instead of the $0.59 it will put $1.18 in my acorns account. Woop! Woop!

5. Read.
Just read! The following are the books that taught me the most –

The Bogleheads Guide to Investing – Taylor Larimore, Mel Lindauer, and Michael Le Boeuf. I have also listened to this on audio. This book is an excellent baseline for new investors – Bogleheads’ forum is fun too.

The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life – Bill Schultheis

This book is little and is a quick read. If you are nervous about getting into a more extended finance book – this is the one for you. It’s written by a guy who would meet friends in a coffee shop every week. Loaded with useful nuggets of information for the beginner.

All About Asset Allocation – Richard A. Ferri, CFA
I LOVED this book. I learned about all the different types of investments, and how to arrange what was right for my family and me. I frequently go back to it as a resource. Another great book to read cover to cover. (Not thrilling to read, but a wonderful foundation.)

The Intelligent Investor -Benjamin Graham
This book is not for you to read first! (Although beginners will get a ton of knowledge from it.) If you are into reading, and you are getting more interested in your finances, you don’t want to miss this one for sure. I listened to it on audio. The sheer size of the book (you know, THICK with teeny tiny letters) is scary if you are a beginner – but it is SOOOO worth it. I will put a link to the audio version as well as the written book.

The Four Pillars of Investing – William Bernstein
Foundation. Foundation. Foundation. This book is wonderfully written and in my opinion a must-read. This is another book that I return to as a resource whenever I have a question. What are the four pillars?
• The Theory of Investing
• The History of Investing
• The Psychology of Investing (this is soooooo interesting!)
• The Business of Investing
You will feel brilliant when you finish this book. (Well, I did.)

Get a handle on your finances today.

I have worked hard (and read carefully) to make sure investments are not something of which I am clueless. I also would like to save so I don’t have to wait to retire when I’m in my 80’s! Don’t be afraid of investing, and certainly don’t worry about not knowing anything. I started here in my 40’s! It’s never too late.

Go get ‘em…

Any other apps or websites you use for your finances? Other ideas you have regarding simple tips for beginners to learn how to invest and save money? Please comment below or send an email to