How to Create a Zero-based Budget

A zero-based budget is a budget where every dollar must be accounted for. The most efficient way to create a successful zero-based budget is to make a new budget every month that is designed especially for that particular month. A zero-based budget plans to spend every dollar until there is nothing left. It creates a plan for your discretionary income that forces you to account for every dollar you come into contact with. This is a very efficient way to handle money. With a zero-based budget there is no question as to where your money is going. Here are some easy steps for creating a zero-based budget.

Difficulty: Moderately Easy

Instructions

1. 
    

   A few days before the beginning of a new month, set aside time to create a spending plan tailored to the upcoming month. If you are married, you and your partner should take this time to come up with a spending plan together.

2. 
    

   Talk about what expenses lie ahead for the upcoming month and subtract that amount from your monthly income. This will include bills, clothes, gas, trips, gifts, savings, debt payments, entertainment, parking etc. There is no such thing as miscellaneous spending in your zero-based budget.

3. 
    

   Continue subtracting from your monthly income until you have zero dollars left. There is always something to apply your money too. After you have paid for necessities, then you should be paying off debt, building an emergency fund, saving for a house or paying off your house, saving for retirement or your children's college fund.

4. 
    

   Since things happen. If you need to make changes to your zero-based budget, do so on paper first with your spouse. For example, if you have an unexpected car repair, then you can take money for the repair out of your clothes,entertainment, or gifts money.

5. 
    

   Creating a zero-based budget will help you keep your priorities in perspective. It will also help you easily see what corrections need to made to your budget and manage every dollar that passes through your hands.

[PBreech]

on 11/16/2009 Creating a zero budget is an excellent approach to handling your money. 5*

[sonni57]

on 8/24/2009 We can all use help on budgeting thanks for the good advice.

[violet4me]

on 7/30/2009 Excellent article. Writing down where every dollar goes is quite an eye openener & a great tool for money management. 5*

[proresumewriter]

on 7/29/2009 Nice article. Organizing your monthly budget is a sure way to save money. It will also show you where your money goes, allowing to cut back unnecessary expenses. Thanks

[jenng]

on 7/27/2009 Great article on How to Create a Zero-based Budget 5*