In this series, we will go over a few different types of budgets and problem they are trying to solve. Actually going to start with one that takes the most work and that is the Zero-Line Budget or Zero-Based Budget.
This budgets main purpose to get all expenses down and get the result down to zero so you know where all of your money has gone. This is to alleviate a scenario where money is spent carelessly. By itemizing all the expenses down. It creates a scenario where money is planned out with more discretion.
Say budget is $500.
|Rent||$200||$500 – $200 = $300|
|Food||$100||$300 – $100 = $200|
|Utilities||$50||$200 – $50 = $150|
|Transportation||$50||$150 – $50 = $100|
|Savings||$100||$100 – $100 = $0|
In our basic example we have our basic Rent / Food / Transportation / Savings / Utilities all laid out and gotten our total left down to Zero. It’s really good because it forces you to look at every area that money is being spent in and allows for prioritization of what is important.
Aspects of a Zero-Line or Zero-Based Budget that often go neglected.
- Credit Card Payments
- One-Time annual expenses
- Seasonal expenses
- Accounting for pulling from savings
Why are these important to mention?
Mentioning these is important because of consideration of whether having to dip into savings and potentially creating an “un-even” cycle is of imporatance.
These are topics that can be missed out on if not taken into consideration. Again, some thought has to go to into this budget in order to get the most accurate information in there to make a decision.
Do note this budget can get fairly large and complicated. Take note and double check it for errors so there are no surprises come “Pay – Day”