zero-based budgeting

If you are in our finance group on Facebook you’ve heard us talk about budgeting about two gazillion times. We firmly believe that if you want to be successful with your money, you have to have a plan for where you want it to go, and you have to stick to it. 

But some of you might be unfamiliar with the concept of a zero-based budget. A zero-based budget is simple. The idea is to make sure that each dollar has a job and a place to go. 

Let’s look at a none zero-based basic budget:

Income +2,000
Rent/mortgage  -400
Utilities  -100
Insurance  -25
Groceries  -300
Gas  -50
Personal Spending -100
Misc.  -200
Total left 625

Of course, each budget will look different but in the above budget, you see that there is $625 leftover in this budget. 

Now let’s look at a zero-based budget. 

Income +2,000
Rent/mortgage  -400
Utilities  -100
Insurance  -25
Groceries  -300
Gas  -50
Personal Spending -100
Misc.  -200
Savings 625
Total left 0

In the second example, every single dollar has a place to live and a job to do. Even if it’s just to build your savings, tuck each dollar into a job. 

Let’s put it a different way; Imagine you’re in charge of 10 children. If you only keep track of 7 of them, you’ll lose 3 children. You won’t know what happened to them, they’ll just be on their own with no direction. 

It’s the same concept with money. How many times have you bought something even though it wasn’t worked into your budget? If you’re working a zero-based budget you don’t think to yourself oh I have some extra, you know that you can’t buy that now because you don’t have the money set aside for it. 

Zero-based budgets help you prioritize your needs and wants. 

Zero-based budgeting ensures that all of your money has a job. 

A zero-based budget will absolutely change the way you spend and save your money. 

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