What is a Zero-Based Budget?
+ How I Found $10k
I’ve found success with a zero-based budget! It has made me confident about my finances for the future.
What is a Zero-Based Budget?
A zero-based budget is a budgeting method where a person takes their monthly household income minus every expense to make the difference equal to zero dollars.
How To Create a Zero-Based Budget?
Track All Expenses For a Month
This consolidation can be done via an online spreadsheet or performed by hand in a notebook.
Identify Bills and Variable Expenses
At the end of the month, identify each expense as a bill or a variable expense. Bills identify as anticipated costs.
Set a Budget For Each Bill/Variable Expense
The next step is to set a realistic budget for each bill and variable expense.
Compare the New Budget to the Monthly Income
Sum the new budget amounts and subtract that amount from the monthly income.
Fund Goals
If there is any amount left over after budgeting for bills, it’s now time to use the extra money to fund goals.
Review and Evaluate
At the end of the month, it’s time to review if a person could stay within their new budget.
Repeat
At the end of every month, a person should review all their expenses in the previous budget.
A budget is not a “set it and forget it” event. Instead, it is an ever-evolving practice.