Zero Based Budgeting 101

The phrase “zero based budgeting” is used in both business and personal finance budgets. However, I’m going to discuss how it applies to personal finance rather than business.

So what is a zero based budget?

A zero based budget, simply put, is a budget where your income minus your expenses = zero.

Income – Expenses = 0

What this means is that you’ve assigned every single peso of your income to some kind of expense, which includes your utilities, miscellaneous expenses, living expenses, and savings.

What are the benefits of this kind of system?

• Every peso is accounted for.
• You’ve already ’spent’ your money on paper, before you actually spend it. So there’s less temptation to re-allocate money that was intended for bills into something frivolous (like a new, but unnecessary cell phone). For me, at least.
• If you get some extra income you didn’t expect (such as winning the lottery, a cash gift – not from Malacanang, I hope), it’s easier to spend that money on where you really want/need it (savings, retirement, travel, or entertainment), instead of watching the money fade away with unfocused spending.
• The problem with traditional budgets is that you often don’t account for the “fun” things. Since you have to spend all your money in zero based budgeting, you can set aside money for fun things – which hopefully makes you enjoy the budgeting process more.

How do you start with the zero based budget?

1) Write down and total all your income sources. This includes your paycheck, remittances from relatives (if any), and all the other places where you get your money from. I often don’t include interest from investments and accounts, because I spend the interest in the same place where they came from – such as my emergency fund or retirement savings.

If you’re a freelancer like me, your income probably varies month to month – so every time you budget you’ll be facing completely different figures.

You can use either net or gross income. Personally, I use my net income (after taxes, transaction fees, etc have been deducted – also known as ‘take home pay’).

So, basically, your list should look something like this:

• Paycheck 1 – P12,000
• Paycheck 2 -P8,000
• Garage Sale – P1,500

And so on. Since there are numbers involved, I highly recommend using a spreadsheet so that it’s easy to add and subtract numbers.

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Product Review: Savepak Dishwashing Liquid

I’m a Makro member and I frequently receive their catalogs. One of the things that caught my eye was this 1 Liter Savepak Dishwashing Liquid which costs only P46.00.

This was amazing to me because the Joy Dishwashing Liquid I use is P31.00 for 250 mL, meaning a full liter would cost around P124.00.

So when I went to Makro, I looked for the dishwashing liquid. The prices were a bit higher than the one in the catalog (which was outdated anyway). However, it would take a price raise of around P75.00  per liter for Savepak to match Joy’s price, so it was ok. Here are the prices I found:

• Savepak 1 Liter Dishwashing Liquid (in bottle) P68.00
• Savepak 1 Liter Dishwashing Liquid (in plastic pack) P49.00

I chose the one in plastic pack, because not only was it cheaper, but I have several bottles at home that I could use to store it. Besides, I wanted to pick the cheaper option because I was merely going to test the product. I didn’t want to spend more than I should for it, because it might not work as well as the usual dishwashing liquid I use.

Verdict: I tested the Savepak Dishwashing Liquid and although it doesn’t foam up as much as Joy, it foams up pretty well. It also smells good (I picked the lemon scented one) and cleans just like any other dishwashing liquid. For the tougher cleaning jobs, such as an oily frying pan or pot of tomato sauce, you’ll have to use more of the dishwashing liquid, but overall it works great. I have to admit that I expected to be disappointed with this product (as I was with the SM Bonus Dishwashing Liquid), but I was pleasantly surprised.

Rating: 4 out of 5.

Do you have any experience with this product? Please share them with us.

Disclaimer: This is the author’s objective review of the product. Frugal Pinoy is NOT paid to promote or endorse this product.

Image Source: Makro Catalog

Frugal Pinoy Site Redesign

I’m currently redesigning the Frugal Pinoy website.  It’s almost finished but there are still some bugs.  If you notice anything weird about the site design, or if certain errors come up, please let me know via the comments, and I’ll get right on it.

Thanks!

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