How to use the zero-based budget method...
This is a good strategy for people who focus on the details and like to track where all their dollars are being spent.
To achieve our financial goals, we need to know where our money is going. This is why having a budget is so important.
What’s even more important is to find a budget that matches your personality.
The zero-based budgeting method is great for those who love details and like to see where every dollar is going.
Here’s how it works:
Every month you start your budget from zero dollars.
For every dollar that you spend, you have to justify the expenditure to yourself.
As you give each dollar a job, whether it’s for housing costs, general living expenses, transport, entertainment and dining out, the focus is to reduce or even eliminate things that don’t align with your overall goals.
Once you find an unnecessary expense, cut it from your budget, and then you can save more as a result.
At the end of the month, you sit down and review all your expenses to understand what happened during this month, so you can better prepare for the following month.
The beauty of this method is that it doesn’t matter what happened in the past. When the next month begins, you start from zero expenses all over again.
People who love spreadsheets will love this method, because with a spreadsheet you can see your pattern of expenses and you can question every one of them.
The bottom line
A zero-based budget works great for those who love the nitty gritty details of every expense.
While this method requires a lot of time and effort, at the same time it gives you a very clear view of where your money is going. Then you can decide where to cut back if you choose to, so you can save more.