What is Zero Based Budgeting?

 Zero Based Budgeting is defined as:

"Zero-based budgeting is a method that has you allocate all of your money to expenses, savings and debt payments. The goal is that your income minus your expenditures equals zero by the end of the month."

In essence, as you earn money, you take that money and allocate it to your expenses. When you spend money, you check that purchase's category, and make sure you have enough money allocated before you make the purchase. If you don't have enough money to fund the purchase, you wait until you do, then you spend it.

Another format people use is "Envelope Budgeting" - you take all the spending categories you have - Rent, food, clothing, power, etc - and give each category an envelope. You write the dollar amount needed for the month on the envelope, then you stuff them with cash until they are full with the dollar amounts necessary, and then you spend it on that particular envelope's category. YNAB is a software version of that. 

There are also some rules that go along with this particular method of budgeting, but we'll get in to the particulars later. First, you have to get a grip on your income, and your expenses.

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