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Zero-Based Budgeting 101:

Best Practices To Following the Money

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.

Your budget is considered “zero-based” or “zero-sum” when your total income minus total expenses equals zero.

What is Zero-Based Budgeting?

For example, if your net income is $3,000 a month and you use a zero-based budget, your expenses would need to equal exactly $3,000 a month. However, when totaling your expenses, you need also to include any money you save and invest, as that money will still be leaving your bank account.

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?

However, in many cases, you may neglect to consider miscellaneous spending or expense categories that don't occur regularly, such as quarterly bills.

Frequently irregular income, unexpected expenses, or even misunderstanding the basic steps of balancing your budget can easily throw your budget off track.

With zero-based budgeting, every cent has a specific purpose. This structured approach allows you to be more intentional with your spending and, in turn, makes you more likely to stick to your budget.

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