Zero-based budget: A quick guide

The zero-based budget I believe is the most productive budgeting method.

How does Zero-Based Budget Works?

Dave Ramsey is arguably the most famous champion of the zero-based budget. Simply the most simple, straightforward and actually makes every dollar you earned accountably.

The first step, like in most budgeting method, is to track exactly what you earn each month and start saving until you have one month’s worth of income saved for an emergency.

Example.

Your Income : $ 5, 000

Your Bills: (Example)

Rent$ 1,000
Utilities$ 200
Phones$ 200
Internet$ 150
TV / Netflix$ 50
Insurance$ 250
Car Loan$ 950
Groceries $ 250
Personal Loans$ 500
Credit Cards$1,000
Total$ 4,550

So, basically you only have $450 ( $5,000 – $4,550).

What to do with the extra $450?

Now, you can put that money up for saving up your initial $1,000 emergency funds.

After that, the $450 can go into paying off your debts. Pick one with the lowest balance and pay it off first.

This will give you the sweet taste of small victories.

Continue on this route until you paid off all (if not all, the majority of your debts).

Recommendation

Try to cut some of your expenses, making the extra money which can go into your step of paying off debts.

I personally prefer this zero-based budget. But as my personal finance improves, I switch to the 50/20/30Β Rule.

But still doing budgeting.

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Author: Muhamad Aarif

A notorious book addict by night and an oil and gas executive by day. As Mark Twain said, "The man who doesn't read good books has no advantage over the man who can't read them." So, read, read, and read some more.

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