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Here’s a simple question for you: Are you spending more than you earn each month?
Let’s get even more specific: Are you spending exactly what you earn each month?
If you create a zero-based budget, that’s precisely what you’ll be doing. Believe it or not, it’s a simple budget plan that guarantees you’ll spend every penny you make each month in a productive manner.
Sound scary? Trust us, it’s the furthest thing from it. We explain exactly what zero-based budgeting is and how this budgeting style can help you.
What Is Zero-Based Budgeting?
The zero-based budget — also known as zero-sum budgeting or ZBB if you’re hip on corporate finance — is a method of monthly budgeting in which every dollar you make is spent or saved in line with your goals and expenses.
Zero-based budgeting is a popular approach in business, but you don’t have to be sitting in the boardroom for the annual budgeting process to make it work for you. You can start using the wisdom of this budgeting method to start getting a handle on your personal finances.
For instance, If you have $4,500 coming in this month, you’ll allocate exactly $4,500 across all your bills, discretionary expenses, savings funds and financial goals.
How to Make a Zero-Based Budget
Budgeting gets a bad reputation. But the fact of the matter is that set a great budget doesn’t restrict you — it actually sets you free. And compared to traditional budgeting, the zero-based budget is the most customizable and flexible budget out there.
Here’s how to make a zero-based budget that fits your finances, lifestyle and goals.
Step 1: Determine Your Income
The first step to figuring out your zero-based budget is to track exactly what you earn each month. That means all your side jobs, bonuses, tax refunds, gifts, irregular income — everything. Any deposit that’s made to your checking account should be accounted for.
For many of us, this will vary month to month. Do your best to…
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