Second in our budgeting series, we will be going over the Zero-Based Budget.
Many people believe that a Zero-Based Budget means you have to spend all your money towards current necessities and have nothing left for savings, but that is not the case. This budgeting method gives every dollar a job, including putting money into savings. Here’s how it works:
First, take your monthly income—whether it's your salary, part-time wages, rental income, or any other source—and plan out your monthly expenses accordingly. Your expenses might include rent, food, utilities, insurance, savings, transportation, and entertainment.
Next, subtract your total monthly expenses from your monthly income. If you end up with a negative number, you’ll need to either increase your income or cut down on expenses. On the flip side, if you have money left over, you can allocate the remainder to boost any of your expense categories. Alternatively, you could use the extra money to pay off debt, like student loans (check out our blog on student loans!).
The goal is to ensure that by the end of this process, when you subtract your expenses from your income, the result is zero. This means every dollar has been assigned a purpose.
Stay tuned for our next blog where we’ll dive into the Envelope Budget!
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