Budgeting isn’t one-size-fits-all. There are many different budgeting styles, but you’re going to want to use the one that makes the most sense for you and your finances. This blog post will discuss zero-based budgeting: what it entails, who it’s designed for, and how to get started.

What is it?

Zero-based budgeting (also known as zero-dollar budgeting) makes the most of every dollar—every part of your monthly income is assigned and used deliberately. The goal is that your income minus your expenditures (ex: rent, bills, savings, retirement, etc.) equals zero by the end of the month.

Start by breaking up your expenses into categories. Each month, you’ll assign a certain amount of your monthly income to a specific category. You can repeat categories each month or shake them up, and if you come in under budget in a particular category, move it to another, such as your emergency savings. See the example below of how to categorize your expenses below.

Who would benefit?

Zero-based budgets are specifically compatible with over-spenders and meticulous planners alike. It’s beneficial because it makes monitoring your spending clear, and it’s customizable, which can be especially useful if you’re new to budgeting or managing your money. It’s important to note that this budgeting type may pose challenges for those with an unpredictable or irregular income because you won’t have a set amount to allocate month-to-month.

How to get started.

Before you begin, do the following steps to ensure you’re budgeting realistically:

• Know your income. Use your paycheck, benefits, and other income sources to find out how much money you have to work with.
• Track your expenses. Take a few months to track what you spend money on—this will help create a framework you can use going forward.
• Categorize your expenses. Identify all your priorities and expenses, including your needs and wants, debt, emergency fund, and other savings goals. Are you planning a vacation or want to buy a new car? Make sure those are separate categories within your budget.

Budgeting is one of the best ways to curb overspending and create good financial habits. As Yolo County’s #1 Best Credit Union, we’re here to help you grow your future. Click here to download a fillable zero-based budgeting spreadsheet or download a zero-dollar budgeting app to track your spending right from your phone. For a more visual way of tracking your debt payoff over time, download our Game of Debt-Free Life.

For another convenient way of monitoring your money, check out our Money Track tool, available through Online Banking. The Money Track tool allows you to link all of your external accounts to one location so you can track your spending habits, create and achieve goals, budget across multiple accounts, and more! Click here to learn more.

If you would like to learn how to budget for life, head over to this Achieve playlist or schedule an appointment with a local expert.