Zero-Based Budgeting 101:  Best Practices To Following the Money

When it comes to the topic of managing your money, are you taking the best approach? While many people may believe they have a sound budgeting system and process, only a few manage to set aside money for their future.

A common issue is that many people use a traditional budgeting method or tool but don’t stick with it or fail to account for every expenditure. These breakdowns in their budgeting systems eventually lead to confusion and frustration. If this sounds familiar zero-based budgeting (ZBB) can improve your budgeting process.

What is Zero-Based Budgeting?

The basis of zero-based budgeting, also referred to as zero-sum budgeting, is a simple elementary school math equation. Your budget is considered “zero-based” or “zero-sum” when your total income minus total expenses equals zero.

The beauty of zero-based budgeting is that you account for every dollar you receive. Using traditional budgeting methods, you typically list all necessary expenses, such as rent or mortgage, car, and debt payments.

What Is the  Benefit?

How to Create a Zero-Based Budget

If this is your first introduction to budgeting, it will be helpful to grab your bank statements for the past 3-6 months. Combing through them is the best way to determine the amount of money you’ve spent monthly in each expense category.

Gather Your Income

Begin by listing all money that flows into your bank account throughout the month. This income will fund your entire budget and should include the money you earn and any money you deposit into your account throughout the month.

Gather Your Expenses

The next step is to list all of your mandatory expenses. These are payments that you need to make every month and usually include costs such as: – Rent – Insurance – Interest payments on debt (credit cards) – Food / Groceries

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