Definition and examples of zero-based budgeting
How zero-based budgeting works
Advantages and disadvantages of zero-based budgeting
How to create your own zero-based budget
Alternatives to zero-based budgeting
Definition and examples of zero-based budgeting
Zero-based budgeting is a budgeting strategy that involves allocating every dollar of your income. By the end of the month, after considering all your expenses, savings, and spending, you should have no money left over.
How zero-based budgeting works
First, you need to know how much you earn from your net monthly income. Then you need to know what your total monthly expenses are. Next, you need to allocate every dollar and cent to cover those expenses, including any amount you want to save and any amount you want to spend on activities such as shopping or dining out.
Advantages and disadvantages of zero-based budgeting
Zero-based budgeting has many advantages and disadvantages. Among the advantages: it provides a clear view of your finances, prevents overspending, and helps clarify your financial goals. Among the disadvantages: it takes time to set up, may be difficult in the case of unexpected income, and may not always accommodate variable expenses.
How to create your own zero-based budget
If you want to create your own zero-based budget, follow these steps:
- Determine your net income
- Track your spending
- Categorize your expenses
Alternatives to zero-based budgeting
If you are not sure whether zero-based budgeting is right for you, you might have some other alternatives: cash-only payment, the envelope method, the 50/30/20 budget, or the 80/20 budget.
Source: https://www.thebalancemoney.com/zero-based-budgeting-5186319
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