Zero-based budgeting is a method where you allocate every dollar of your income to specific expenses, savings, or investments, leaving you with zero dollars unaccounted for at the end of the month. This article will guide you through the steps to create a zero-based budget.
Step 1: List All Income Sources
Start by listing all your income sources, including your salary, freelance work, and any other streams of income.
Step 2: List All Expenses
List all your fixed and variable expenses, such as rent, utilities, groceries, and entertainment.
Step 3: Prioritize Expenses
Prioritize your expenses in order of importance. Essentials like rent and utilities should come first.
Step 4: Allocate Income to Expenses
Allocate every dollar of your income to your listed expenses, starting with the highest-priority ones.
Step 5: Adjust as Needed
Throughout the month, adjust your budget as necessary. If you find you’ve overestimated or underestimated certain expenses, make the necessary changes.
Step 6: Review and Reset
At the end of the month, review your budget and start the process over for the next month, making adjustments based on your review.