Is it not an oxymoron to call a budget mindful?
Mindfulness is about being present. Whereby most traditional budgets focus on historical costs, extending them into the future.
And if by being mindful we’re talking about Zero Based Budgeting, then are we being gimmicky calling it mindful?
Yes. And No.
My Mindful Budget is about breaking down zero based budgeting and focusses on profit first (before expenditure) because we base it on current necessity and value rather than the historical costs. But if I say Zero Based Budgeting (or Profit First) to my clients, who suffer from financial anxiety, overwhelm, and infidelity – I’m not going to get the best out of them without using a softer approach.
Enter Mindfulness.
You cannot stress to a solution. So if, in the present moment you are worried about money, then your creativity is stifled. Outside the box thinking, etc…is not activated because the part of your brain that deals with stress, thinks there’s a lion to be fought! By working through various mindfulness strategies, we can train the mind to recognize that there is no danger lurking and the body can return to its normal state.
And rather than looking very far into the future and panicking about what it’s going to take, we chunk it into more manageable (monthly) chunks of time.
A Zero-Based Budget is simply a term used for when you assign everything that is brought in for the period for a net zero balance at the end (usually monthly).
Which means that you build your next month’s budget up from zero (repeating every month). Resetting your “past” budget into, well, where it belongs – the past!
Look at where you are presently with a short term look over the next 30 days rather than a whole year divided into 12 to create the monthly.
And that then means that there is:
- consideration
- intentionality
- consistency
- accountability
which are qualities that almost always achieve positive results.
Profit First is an approach where you calculate, Net Sales (Sales less Cost of Sales & any other direct costs) less desired Profit to let you know what you have to spend on your overheads.
To use Zero-Based Budgeting:
It is a simple 3 step system. I can’t guarantee that it’s always easy. It can take 3 months to get into the habit.
- Use a budgeting platform (spreadsheet or pen & paper will do too) to write down all the income you plan to bring in each month. Use visual balloons, a calendar – if spreadsheets scare you, use something else – even stickies on a window!
- Identify ALL the expenses for the month as well as your debt repayment planning, savings & investing. You do this by projecting your costs based on goals. You cut those that are no longer deriving financial reward or benefit.
- Repeat every month. However, check in during the month so you are held accountable week by week.
If you are very new to budgeting:
Definitely use your past spending as a guide.
Organize your statements for the past year by institution and by checking account and savings account. (we’ll do credit cards another day soon) If you have software that uploads your statements, print out a copy. Organise your spending into categories (which, if you have a software tool it’s probably done), however, just take the time to go through each and every line item in your statements. Use a highlighter to organise each expenditure. Consider every purchase. Get familiar with your outgoings. Tally up the totals in each category so you get an annual amount. You can choose calendar year, financial year, tax year or any consecutive 12 months.
Using a zero based and profit first approach to budgeting, you can consider using the envelope system to “hold” your money in the different categories. Remember, it’s a new way of controlling your money (rather than it controlling you) so be patient. Maybe start with one category every month and build your budgeting muscle over time.
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