Zero based budgeting is a form of budgeting where every single dollar is accounted for. In zero based budgeting, every single dollar you make is budgeted for in some way. Let’s learn more about zero based budgeting so you can see if it’s a tool that can help you be more organized with your personal finances!
Let’s be honest. Taking care of your personal finances can be very difficult. There are so many different types of expenses that you always need to be worried about, and it can be very hard to be organized. Remembering every cost you have from things like rent, utilities, food, and entertainment can be a huge headache that you need to deal with every single month. If you aren’t on top of your finances, you can become extremely overwhelmed and stressed and it can put a damper on your life.
Further, if money is tight for you it can be extremely difficult to keep track of each cost and to make sure you have enough money to pay your necessary expense. If you don’t, you might find yourself having to pay even more money in the form of late payment fees.
Thankfully, budgeting is a practice that exists just to help you with these things! Traditional budgeting helps you make sure you have enough money for each expense throughout the month. Budgeting gives you direction for your personal finances and allows you to organize your spending in a way that makes the most sense. Without budgeting, you might find yourself simply trying to remember what expense you need to pay and how much you need to pay for them.
There are tons of different ways to budget, but all of them help you to be more organized and efficient with your finances. Let’s take a look at some of the benefits of traditional budgeting:
Zero based budgeting (ZBB) is just one of the many different ways you can budget. Many people swear by zero based budgeting because it is arguably the budget type that is most efficient with your money. With zero based budgeting, you are never wasting a single cent. Every single dollar you make is put towards something with a purpose, and each baby step you take will get you closer to reaching your financial goals.
ZBB implementation follows similar principles as envelope budgeting. With this, you are putting your money for things like rent and utilities in an envelope at the beginning of the month. When it comes time to pay your rent, you open the “rent envelope” and make your payment. Similarly, zero based budgeting makes sure you have extra money to make sch payments like rent at the end of the month.
The ZBB approach is also one of the best ways to be organized with your money. Zero based budgeting sets aside money for every single one of your costs. This is important because it helps you make sure you have enough money to make these purchases but it also makes sure you do not overspend. For example, if you have a total of $250 set aside for entertainment purposes and $250 set aside for utilities, you theoretically can’t spend more than $250 for entertainment with zero based budgeting. If you do, you won’t have money for utilities and you will find yourself in some trouble.
Still unsure what a zero base budget looks like? Let’s make a quick sample zero based budget so you can see what it looks like. For this example budget, let’s say your monthly income is $4,000. Your sample zero based budget might look like this.
See how you made $4,000 and your budget adds up to $4,000? That’s no accident. Every single dollar is used towards something. If you did not have a zero based budget and you had $200 unaccounted for, you might just be letting it sit there instead of putting it to good use. Even if you know that $200 is going to be put towards your savings account, keeping it organized and accounted for is beneficial for your long term money goals.
Overall, zero based budgets are one of the best ways to keep track of your money and make your earnings as efficient as they possibly can be. Still not convinced? Let’s take you through why zero based budgeting works and why it can be a positive thing to implement in your personal finance routine.
According to Forbes, zero based budgeting is a practice that many companies are beginning to use. This budgeting process is making their finances more transparent, efficient, flexible, and helps to make better spending decisions. But you’re not a company. Does this budgeting method still work for you?
To put it shortly, zero based budgeting works. However, like everything else, it does come with its drawbacks (which we will discuss in more detail later).
Zero based budgeting is a strict budgeting process. This makes it both very effective yet sometimes difficult to put into practice and maintain. Zero based budgeting is a very tried and true method that people swear by.
With zero based budgeting, you will find that you are always much more aware of your spending, which can never be a bad thing. You will also likely find that you are successfully making your payments on a more consistent basis. Overall, doing this budget method can make you more organized and can remove some of the heavy stress that comes with your personal finances.
Zero based budgeting works, but it is not perfect. Here are some of the advantages and disadvantages we found with zero based budgeting:
Making your own zero based budget is extremely important, but it can also be slightly difficult. You will likely need a few months worth of expenses to go off of, so you might not be able to make a budget in one day. There are plenty of budget apps and budget websites that could help you make a zero based budget if you need some help. Regardless of how you make your budget, these are things you will need to create your budget effectively:
Overall, while zero based budgets are somewhat difficult to make and have their drawbacks, there are a fantastic tool to get control of your personal finances. Using this budget method can help you pay back your loans faster, meet your savings goals, and take a great deal of stress off of your shoulders. Get started on making a zero based budget today and be on your way to successful cost management!