There Have you ever heard of “zero based budgeting”?
I consider myself pretty money savvy, so I know the ins and outs of budgeting. So when I started hearing about “zero-based budgeting,” I became curious to know more about it. I was taught expenses should be less than income. Then, any money you have leftover should be put towards your debt or a savings goal.
A lot of times people believe budgets are limiting, and there seems to be a constant struggle either to make more money or spend less money. Sometimes it’s both. I’m a firm believer in budgeting as a way to keep you out of debt.
First, some terminology. The folks at NerdWallet explain the idea of zero-based budgeting, or zero-sum budgeting centers around the idea that each month the difference between your income and your expenses would be zero. In other words, all of your money should have a job — either set towards your expenses, your debt, or your savings. No money is “leftover.”
In reality, sometimes this happens to us by default, right? Zero-based budgeting is designed to be this way.
Zero-based budgeting is pretty easy to start. You’ll want to begin by knowing your income and expenses for a few months so you have an idea of what is currently happening with your finances. If you are coming up with negative income, you can look at your expenses and see where you might need to cut back. If you are coming up with excess income and aren’t quite sure what’s happening to it, you’ll want to figure it out and start accounting for it. Are you spending a few dollars on coffee here and there or doing random Amazon shopping? Write it all down.
This method of budgeting seems like it makes a lot of sense, but as with everything, there are pros and cons. Some benefits of using a zero-based budget:
Some cons to be aware of if you want to give this method a try:
If this sounds like something that might be for you, I recommend you give it a try. If you find it doesn’t work or you are struggling to be consistent, there are other methods to try. Other popular budgeting methods are the ‘cash envelope system‘ which helps you curb your spending, the ’50/30/20 budget’ system which allows you to pay down debt (my money-saving planner is explained here), and the ‘pay yourself first budget’ which sets money into savings before paying expenses.
Ready to give zero-based budgeting a try?