How to Create a Zero Based Budget

How to Create a Zero Based Budget

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A zero based budget may sound complicated but it’s not at all. A zero based budget is just your income minus your expenses which equals zero. It is easier than you might think to create a zero based budget! With a zero based budget it is important to make certain your expenses match what is coming in each month, this is the only way to stay on the zero based budget.

How to Create a Zero Based Budget cover

Another great thing about a zero budget is that you can still keep one if you have an irregular income. When making a zero based budget for an irregular income it is to budget on a low earning month would be. You’ll then use steps one through four as you would to create a regular zero budget.

By employing these simple steps you can create a zero based budget:

1. Write down monthly income​

This can be done on a sheet of paper or in a customized spreadsheet. Make note of all income including paychecks, child support payments, side hustles, small business income, and any residual income.

2. Write down monthly expenses​

At the beginning of the month write down all your expenses. You should make a list or category for everything your money is spent on during the month. Your monthly expenses will change month to month so it’s important to make a new zero based budget every month.

3. Write down seasonal expenses​

When starting to create a zero based budget, this is where a lot of people mess up! There are just some things that we don’t spend money on every month, but these items do add up over the year.

Here is where you’ll want to jot down all those birthdays throughout the year, any holiday spending, and anniversaries. If you’ve got a wedding you’ve been invited too don’t forget to add it in too.

How to Create a Zero Based Budget

4. Subtract your income from your expenses to equal zero​

To get your budget to zero completely may take a little time of practice and planning. Once you’ve given each category a name and placed your funds in that category being at a zero budget doesn’t mean there not any money in your account it just means there isn’t any money left over in your budget. If you have money left over after you’ve finished budgeting; put it somewhere in the budget. This way all of your money is accounted for and where it needs to be.

5. Once you create a zero based budget, keep track and keep going!

Once you’ve done one zero based budget you’ll see how important it is to keep going and you’ll get exciting when seeing the progress you’re making.

When creating your budget don’t forget to add in your savings as well as any money you may give; this money can be for fundraisers or as charitable giving. If any money left over is not named within your budget then it will be spent in miscellaneous places. Making a budget is the easiest way to see where your money is coming and going each month. Don’t get discouraged if it takes you a month or so to get used to this new method. No matter which zero based budget you are creating remember you are the boss of your budget!

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