With so many types of budgeting methods, it can be tricky to find a way that works for you. Your friends tell you that the 50/30/20 rule works, and others are focused on the 70/20/10 rule.
What about the zero-based budgeting method, though? This one could be the one that you need!
What Is the Zero-Based Budgeting Method?
Zero-based budgeting is exactly as it sounds. Your money gets to “zero.” However, it’s not quite in the way of spending it all and having nothing left over.
Every dollar that you have coming in is assigned a particular “job.” It could be spending on the necessities, or it could be going into debt.
With this, you can use a budgeting rule like the 50/30/20 rule. Or you can follow a “pay yourself first” method.
You just need to make sure that you end up with a zero balance in your checking account, with the money going to particular needs.
You Set the ‘Job’ Before You Start
You’ll determine the exact job that each dollar has, and for this, you need to have a good budget. It’s important to know just how much you have going out each month.
Work out the total of your expenses. From there, you can then work out the debt you need to clear, the savings you have in mind, and any luxuries that you want to spend on.
The first job is to make sure you have the money for the expenses. It can be hard to work out exact amounts for some — I know my electricity bills fluctuate each month — so you’ll need to work with an average. I tend to budget with the maximum amount that it’s been in a month, especially when following the zero-based budgeting method.
With the money that’s left over after that, you’ll need to work through debts, savings, investments, and other needs. Always pay off more of the debt than your minimum payments, otherwise you’ll be stuck in a constant debt cycle.
If you like an app to help with this, I highly recommend the You Need a Budget (YNAB) app. No affiliate link! It’s just an app that I love. There is one called EveryDollar, but I haven’t tried it, so I can’t vouch for it.
Does the Zero-Based Budgeting Method Work?
Personally, this method doesn’t quite work for me. I hate seeing my checking account get to zero. It messes with my brain, even though I know everything has been accounted for. I prefer to have at least $100 left in that account just in case.
Do I need it? No, but our brains all work differently.
If you can settle with a zero amount (knowing that everything has been worked out well) then it could work well for you.
You can combine this with other budgeting methods, as the idea of the 50/30/20 rule and others similar work with the idea that you will end up with a zero balance in your checking by the end of the month.
I recommend trying different types of budgeting methods to find the one that works best for you.
Which type of budgeting method do you prefer? Share your thoughts in the comments!
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