Why You Need a Zero-Based Budget in Your Life

MartinRaymondo

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MartinRaymondo 〰️ 〰️

“Budget” feels like a dirty word until you realize you can’t live without one. 

I still remember when the money would run out before the month. 

Sometimes, the month would start, and I’d already be behind before the money came in. 

After years of struggling with my finances, someone introduced me to zero-based budgeting. 

They told me that at the start of each month, I should list all my income and expenses and then assign a specific purpose to every dollar I earn.

Give Yourself a Raise

When constructing a zero-based budget, you feel like you got a raise. 

As you start to assign every dollar its place, you notice areas where you can cut back. 

When you don’t track every single expense throughout the month, it’s easy to overlook small recurring costs like Netflix, Disney+, HBO, and other subscription services. 

You won’t get it right the first month you do it, but usually, three months later, you have it dialled in. 

Communicating together is a good idea if you live with someone like a partner. 

Once you’ve crafted the budget, both parties must approve any changes. 

Now, you don’t have to spend every dollar. 

However, you have to give every dollar a spot in your budget. 

If you have $300 left over and all your bills are paid, you can actively decide what to do with the extra money. 

In that case, you can transfer the remaining funds to a savings account or set it aside for upcoming expenses, like buying new tires.

Financial Discipline

A zero-based budget scrutinizes every expense, creating a heightened awareness of spending habits. 

It makes you focus on your needs over your wants and helps cut unnecessary costs. 

It also helps assign money to specific financial goals and keeps track of how you’re doing in reaching those goals. 

Zero-based budgeting is flexible and allows you to adapt, as not all months are equal. 

February tends to be more expensive for me with car insurance payments and many birthdays, making it quite different from other months. 

There are also plenty of great apps out there that cater to the zero-based budget. 

Do a search and see which one you like the best. 

I also use an expense tracker app to record my daily expenses to stay caught up. 

This way, you can isolate certain days and even by categories. 

If I want to know how much I spent on transportation in February, I can separate that and see what I’ve spent on gas, car washes or repairs.

Final Thoughts

Incorporating a zero-based budget into your life is excellent because it frees you from living paycheck to paycheck. 

You will have complete control over your finances and know where all your money went. 

I also recommend that you write down the yearly total for each category. 

This changes how you look at what you spend your money on. 

If you budget $50 for gas weekly, you will spend approximately $200 monthly. 

When you write down the total for the year, it comes out to $2600. 

The yearly total shocks you, making you realize how much money you spend in different categories. 

Some categories that trip people up are groceries, restaurants and gifts. 

Try the zero-based budget for one month and see how you feel. 

You won’t have to wonder where your money went anymore as you’ll be telling it where to go.