There are many different budget systems out there. A zero-based budget is when your income minus your expenses equal zero. Simply put, it means that every cent of your money is budgeted and accounted for. 

How to plan a Zero-Based Budget

When planning a zero-based budget, there are a few things to consider. First, knowing your income is the most important, as this is your spending money. Next, you should track your expenses before you start budgeting. A few months is best, but one month will also do, as you need to see and track how you are spending your money currently. And last, you will need to list your expenses, and decide whether their are financial goals you will need to make in the near (and far) future.

How a Zero-Based Budget will Help Your from Overspending

The trick, though, is to not treat this budget as if it is an excuse for a spending spree but rather a way to allocate funds towards savings, expenses, and debt payments. Many find this budgeting approach helpful. If every dollar is accounted for, you won’t be able to blow your budget or overspend. It is also a beneficial way to track where your money is being spent. And it is highly customizable, as you decide how much to allocate towards which expenses.

It is possible to struggle with a zero-based budget. This is especially true if you are not disciplined or organized. It can feel stressful to monitor whether or not you have money to grab a coffee in the morning, or contribute to a friend’s birthday present at the last minute. Another problem lies within variable expenses. Infrequent or emergency expenses can be difficult to budget for with this method. But setting aside a little money for emergencies or extras each month is always a good idea, no matter what budgeting style you prefer.

Ultimately, using a budget that works best for you is most important. And it is always important to put money towards savings and to plan ahead. If you are struggling with finding the best budget for you, schedule a meeting with your financial advisor.