perspective

How I use 'zero-based budgeting' to save money as a single mum

I started to get serious about budgeting in 2017, when I found myself in a mountain of debt and with zero savings.

Like many Australians, I was struggling to make ends meet. I knew something had to change.

My first own experiences with budgeting were painful. I'd set a budget, yet I was always finding myself coming up short and struggling to save money. In reality, the amounts I'd written down weren't accurate at all, which meant the budget didn't work.

Many years later, after trial and error, I've found a system that works.

With my savings of just under $50,000, and some more money from a redundancy payment, I now have $70,000 to put towards my goal of buying a home.

Budgeting is not just about restricting your spending. It's a tool to help you better manage your money and achieve your financial goals.

Here's how I do my budget — and how I found a system that works for me.

Why I use 'zero-based budgeting'

Budgeting can be difficult to get your head around at first, but there are many tools out there that can help you get started.

You don't need anything complex to create a budget, it can be as simple as a pen and paper, or even an app or spreadsheet.

There are a number of budgeting methods you can use, but I like to use zero-based budgeting.

It means every dollar is assigned a "job", such as for savings, groceries or an upcoming insurance bill. I get paid fortnightly, so I budget for each fortnightly pay period.

When I do my budget, I look at what needs to be paid in that next fortnight — as well as looking ahead to larger bills, birthdays and events I have coming up in the next several months.

This means that I'm always prepared for the future and the larger bills are broken up over several pay cycles, making them easier to manage.

The five steps to creating your own zero-based budget

1. Calculate your income

Write down all the regular income you have coming in from sources such as your job, your partner's job and Centrelink.

I only write down my regular income and don't add in anything that I expect to make in my side hustles (such as writing and dog sitting) just in case that money doesn't come in.

2. Write down your fixed expenses

These are bills that have a regular amount — such as rent, internet and daycare expenses.

3. Write down your variable expenses 

As the name suggests, variable expenses are the ones where the amount changes, such as spending on groceries, transport and socialising. These can be hard to predict ahead of time, so you need to make your best guess.

4. Put aside money into sinking funds for future expenses

To save for future expenses, such as yearly car registration, I utilise sinking funds.

To get started with a sinking fund, work out the number of pay dates until a bill is due.

For example, if my roadside assistance bill is roughly $100 and I have 10 pay days until it's due then I need to put aside $10 each pay. By the time the bill arrives, the money is already there.

I have a separate bank account for my sinking funds. I track how much is in the account — and for what bill — in a spreadsheet, but you can track it on paper as well.

5. Put aside some money to save, invest or pay off debt

Lastly, I add an amount to my savings account. Now I'm working full time again, I'm trying to save as much as possible. But whatever you manage to save is fantastic.

If you have debt to pay off, then ideally you should be paying off debt before saving.

How to handle unexpected expenses in your budget

There will be hiccups, so it's important to track your actual spending against your budget. That way, you can know where you've spent more or less than you expected and adjust your forecasts for next time.

A question I often get asked is: "But what happens if there's an unexpected expense?"

For these items, I have a line item in my budget for a "miscellaneous buffer" just to cover for anything unexpected or when something cost more than I thought it would.

By giving every dollar a "job", I’m giving myself the freedom to spend my money on the things that align with my priorities and goals. For me, the goal is to provide for my son, Ryan, and eventually buy a home for us to live in.

Personal finance is just that — personal — and you need to find what works best for you. 

Nataasha Torzsa is a 33-year-old executive assistant and freelance writer living in Brisbane. She has a three-year-old son, Ryan. You can follow her on Instagram @tashagetsfrugal

This article contains general information only. You should consider obtaining independent professional advice in relation to your particular circumstances.