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    What is Zero Based Budgeting

    Disclaimer: Penny Calling Penny is an affiliate website. This means that we get a small commission when you click some of the links in this article. Don’t worry – we’ll never recommend anything we wouldn’t use ourselves.

    Zero-based budgeting is an accounting and budgeting technique. It was developed in the 1960s by a guy named Pete Pyhrr, account manager at Texas Instruments. (Yep, the calculator people!) Zero-based budgeting helps you assign your money to savings, debt, and expenses. You can leave the categories the same, change them every month, or change them up based on upcoming events.

    How to Start

    You need to know how much money you’re bringing in, first of all. Then, you need to know what your expenses are. You can track them for a few months or you can look back at your bank and credit card statements. Print them out and use different colored highlighters to track your spending.

    Okay, So Give Me An Example!

        Monthly Income: $4,000.00
    Rent/Mortgage $1,575  
    Gas Utility $88  
    Water $25  
    Electric $120  
    Gas for Vehicle $80  
    Car Payment $450  
    Student Loan Payment $250  
    Groceries $300  
    Insurance $275  
    Credit Card Payments $500  
    Entertainment $100  
    Amazon Gift Card Balance $100  
    Savings $137  
        Amount Left: $0.00

    Is There an Easier Way?

    This way is actually super easy! There are actually computer software programs that can help, as well as apps for your phone or tablet! Some of the apps let you change stuff around…say your water bill doubled due to a leaky toilet…. I like to always put money onto an amazon gift card balance for those last-minute moments when you forget a birthday or break your favorite shoes.

    What Are the Benefits of Zero-Based Budgeting?

    • You know what money is coming in
    • You know how much is going out and where it is going out to
    • You can customize it according to your needs

    What Are the Cons or Downfalls of Zero-Based Budgeting?

    • Buying something unexpected can throw off your whole budget
    • Set-up and adjustments can be time-consuming
    • Zero-based budgeting with income that varies month-to-month can be tricky

    How Can I Incorporate Zero Based Budgeting Into My Business?

    You can actually incorporate zero-based budgeting in stages. You need to identify and come up with descriptions for each category, often called decision packages. Next, you would evaluate the decision packages to make sure they align with the overall goal of the company. Next, you need to prioritize the packages or groups from most important to least important. Finally, you would allocate resources/amount of money to each section.

    Zero-based Budgeting for Beginners

    Zero-based budgeting can be a great strategy for people who are new to budgeting. Apps like Pocket Smith, Quicken can walk you through the process from start to finish, and even help you set goals!

    For more budgeting help, as well as tips for saving and managing your money, subscribe to Penny Calling Penny’s newsletter! We have weekly tips and tricks to help you on the path to financial freedom.

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    "Do not save what is left after spending, but spend what is left after saving."

    Warren Buffett

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