Zero Based Budgeting Explained

Zero Based Budgeting Explained

I love zero-based budgeting. Giving every single one of my dollars a specific place to go gives me the freedom to choose what I want to do with my money, and meet my goals.

What is Zero Based Budgeting?

Zero-based budgeting is basically a budgeting method which follows the formula:

income – expenses = zero.

Income-expenses = zero does not mean that you rack up extra expenses so that you can use all of your money just to pay bills. Expenses in this case just means that you treat every dollar as an expense, whether that expense is paid to someone else or to you. The formula basically just makes sure that each and every dollar has a place to go. Having extra money in your account at the end of the month is wasteful, and means that there isn’t a purpose for your money, and it will likely just get spent frivolously.

So, with your zero based budget, after you pay your bills, anything left over will be distributed to an ‘expense’ category that you choose. These categories can be whatever you want them to be – groceries, entertainment, clothing, savings etc… No matter where you decide to put your money, the point is that you are intentional with it.

The Benefits of Zero Based Budgeting

By doing this, you are getting out of the mindset that your money decides what you get to do, and getting into the mindset that YOU are the one who tells your money what you are going to do with it.

Each month, rather than wondering where in the world your money went, or worrying that you might not have enough, you can think about other things in life because you will already know where each dollar went and that you had enough.

Once you have used this budget for a little while, you will have funds set aside for accidents or surprises that you would have had to worry about before. You will also have savings to be able to do the things you want to do with. You will have financial freedom.

You can get a FREE zero based budgeting worksheet here. There is one for computer users utilizing excel, and there is a printable version for those who like doing things by hand. Choose the one that’s right for you and start your journey towards financial freedom!

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