Zero-based budgeting my be a term you've never heard of, but it's something that can truly change the way you spend your money. The goal of zero-based budgeting is to have a plan for every dollar you bring in each month. In other words, all of your income has a purpose.
According to the Dave Ramsey website, “If you cover all your expenses during the month and have $500 left over, you aren’t done with the budget yet. You must tell that 500 bucks where to go.” It's truly a budgeting method that can make a big difference. Let's take a closer look at the reasons why you should have a zero-based budget.
A Zero-Based Budget Can Help You Meet Your Goals
It doesn't matter if you're trying to get out of debt or want to go on vacation, when you use a zero-based budget you can meet your goals.
When you sit down to make your budget for the next month, look at how much money you have left over and think about what's most important at that moment. If it's paying off debt, put all your extra money towards paying your smallest debt. Soon, all your debts will be gone and you'll have even more money to each month to apply to other goals.
You'll Stop Wasting Money
It can be tempting to spend the money you have left over each month or frivolous purchases. You might decide to go shopping for clothes you don't need or just blow the money and not even know where it went. A zero-based budget ensures that all your money is being used wisely.
You Can Budget for Irregular Expenses
A zero-based budget also gives you the ability to budget for those expenses that pop up once or twice a year. For example, you could put the money towards back-to-school expenses or Christmas presents. These are expenses that you don't have each month.
It Helps You Save Money for the Future
If all your expenses are covered, you're out of debt, and have a healthy emergency account, why not save as much as possible towards your future? If you're left with $1000 each month, why not invest in an IRA or real estate? For example, you could save that money up until you have the money to purchase a small property that can be rented out to increase your income.
Zero-based budgeting can make such a difference in how you spend your money. If you're tired of not having anything to show for your hard work, consider this budgeting method. It's a great way to get out of debt, save for a vacation, or even save for the future. Best of all, you'll stop wasting money on things you don't really need.