Ask Away Blog: Why a Zero-Based Budget Works

Why a Zero-Based Budget Works

Wednesday, November 3, 2021

 


Zero-based budgets are a great thing but many people don’t seem to understand it. Some people think that it means you were just spending your money until there’s nothing left. But that’s really not how it works. When you create a zero-based budget, you are taking control of your money.


Creating a zero-based budget gives every dollar that comes your way a job. And that helps you control behavior like impulsively spending money on things when really the money that you’re spending should be set aside for something else. When you use a zero-based budget and you stick to that budget every month, you can help eliminate  the possibility that you’ll overspend and have to do something like turn to credit cards. 

It also helps you rethink things like what to do with any leftover money in your budget each month. Rather than looking at it as money that you can use to buy something fun, that you don’t actually need, you can instead put it towards your savings goals or paying off debt. 

Using a zero-based budget can also help you see that you have enough extra money left over every month to really tackle long-term goals that you may not even be thinking of right now. Perhaps you realize that you could set money aside towards purchasing your first home in the future, or even contributing more to investing. 

For me, I realize that I actually could rethink the categories of my budget to make sure that I don’t leave anything out that eventually comes up as a surprise throughout the year. This can be something like a drivers license renewal fee,  birthday party supplies for your family, or even magazine subscriptions. 

To learn more on how to create a budget like this, see my budget post here! I even offer you a free budget spreadsheet template!



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