Create Your First Budget

Now that you have your data imported and categorized, it's time to create your first zero-based budget. This is where you assign every dollar a job.

What is a Zero-Based Budget?

A zero-based budget means:
- Income - All money coming in
- Minus Expenses - All money going out (including savings)
- Equals Zero - Every dollar has been assigned

This doesn't mean you spend everything. It means you've intentionally assigned every dollar, including savings and investments.

Using Budget Averages Report

The Budget Averages Report is your starting point. It analyzes your historical spending and suggests amounts for each category.

Step 1: Navigate to Budgets

1. Go to Budgets in main navigation
2. Click "New Budget" button
3. Select the month you want to budget for

Step 2: Open Budget Averages Report

1. On the budget creation page, look for "Budget Averages" or "Use Averages" button
2. Or navigate directly to Budget Averages Report
3. Review the average spending for each category

Try it now: If you have demo data, view the Budget Averages Report to see average spending based on your demo transactions, then create a new budget.

Step 3: Review Average Spending

The report shows:
- Category - Spending category (tags)
- Budget Average - Average budgeted amount across past budgets
- Actual Average - Your historical average spending
- Delta Average - Difference between budgeted and actual

Review each category and decide:
- Does the average make sense?
- Should you budget more or less than the average?
- Are there categories missing?

Step 4: Create Budget from Averages

1. Click "Create Budget from Averages" or "Apply Averages"
2. The app creates a budget using your historical averages
3. Review the budget - it's not final yet!

Achieving Zero Balance

After creating the budget from averages, you need to adjust it until the balance equals zero.

Step 1: Check Current Balance

Look at the budget summary:
- Income: Your monthly take-home pay
- Expenses: Sum of all budgeted amounts
- Balance: Income - Expenses

Goal: Balance should equal $0.00

Step 2: Adjust Categories

If balance is not zero, adjust category amounts:

If balance is positive (you have money left):
- Increase savings categories
- Add new categories you want to fund
- Increase amounts for important categories

If balance is negative (you're over budget):
- Decrease spending categories
- Look for areas to cut back
- Prioritize essential categories

Step 3: Iterate Until Zero

Keep adjusting until:

Income - All Expenses = $0.00


Tip: Start with large categories first - they have the biggest impact.

Budget Categories

Your budget should include:

Essential Categories

• Fixed expenses (rent, insurance, loans)
• Variable essentials (groceries, utilities, gas)
• Minimum debt payments

Savings Categories

• Emergency fund
• Retirement savings
• Specific goals (vacation, car, house)

Lifestyle Categories

• Dining out
• Entertainment
• Personal care
• Hobbies

Giving Categories

• Charitable giving
• Gifts

Tag-Filtered Views

When building your budget, you can use tag-filtered views to focus on specific categories:

• "Essentials" - View only essential spending categories
• "Flexible" - View only flexible/discretionary categories
• "Savings" - View only savings categories

This helps you see where your money is going and make informed decisions.

Best Practices

1. Start with averages - Use Budget Averages Report as starting point
2. Adjust intentionally - Every change should be a conscious decision
3. Achieve zero balance - Every dollar must have a job
4. Include savings - Savings is an expense, not leftover money
5. Review regularly - Budgets aren't set in stone; adjust as needed

Common Mistakes

Mistake: Not Including Savings

Problem: Budget only includes spending, not savings

Solution: Create savings categories and assign money to them

Mistake: Unrealistic Amounts

Problem: Budget amounts don't match reality

Solution: Use Budget Averages Report and adjust based on actual spending

Mistake: Forgetting Annual Expenses

Problem: Annual expenses (insurance, subscriptions) not budgeted

Solution: Divide annual expenses by 12 and include monthly amount

Mistake: Balance Not Zero

Problem: Positive or negative balance left unassigned

Solution: Adjust categories until balance equals exactly $0.00

What's Next?

Once you've created your first budget:
- Module 5 will teach you to fine-tune TagMatcher for better categorization
- Module 6 will show you how to add scheduled transactions and goals
- You'll learn to track and review your budget daily

For now, you have a working zero-based budget! Every dollar has a job, and you're in control.

Key Takeaway: Use Budget Averages Report to create your first budget quickly. Then adjust category amounts until balance equals zero. Every dollar must be assigned - including savings. This is the foundation of zero-based budgeting.