Zero-Based Budgeting

Zero-Based Budgeting

How It Works

Zero-Based Budgeting (ZBB) ensures that every dollar of your income has a specific purpose. Instead of planning your budget around expected income, you base it on your actual account balances. The goal is to ensure that no money is left unassigned, giving you complete control over your finances.

Why Use It?

  • Enhanced Control: By allocating only the money you actually have, ZBB helps you manage your finances more precisely, especially when dealing with irregular incomes or unexpected expenses​​.

  • Proactive Financial Planning: ZBB encourages you to plan every dollar carefully, prioritizing expenses and savings as funds become available throughout the month​​.

Every Dollar Needs a Purpose – Even Your Savings! When using zero-based budgeting, every dollar you earn should be assigned to a specific category, including your savings. This method ensures that you are intentionally putting money towards your financial goals, like building an emergency fund or saving for a big purchase. Allocate funds directly to your savings category to make sure you’re not just setting money aside but actively directing it towards a purpose. Remember, even savings have a job in your budget!

Getting Started with Zero-Based Budgeting

  1. Add Your Accounts:

    • To start Zero-Based Budgeting, you first need to add your transactional accounts, such as checking accounts, savings accounts, or credit cards. These accounts will display your real balances, which form the basis for your budget​.

  2. Enter Your Current Balances:

    • Once your accounts are set up, enter the current balances for each account. The app will automatically calculate the total amount of money available for allocation, displayed as "Pending Allocation."

  3. Allocate Your Income:

    • Now, assign your available funds to various categories, such as rent, groceries, utilities, or savings. Every dollar should be allocated to a specific category, ensuring nothing is left unplanned​​.

  4. Monitor and Adjust:

    • Throughout the month, continue to monitor your budget and adjust allocations as needed. If additional income comes in, it will appear in the "Pending Allocation" section, ready to be assigned to categories​.

Zero-Based Budgeting offers great control, but it requires more hands-on effort. You’ll need to regularly monitor your accounts and make adjustments as income and expenses change throughout the month. For users willing to stay engaged, this method provides unmatched clarity over every dollar.

Quick Example: Allocating Funds in Zero-Based Budgeting

Scenario: You start the month with $3,500 in your checking account. You allocate this money across various categories as follows:

  • Rent: $1,200

  • Groceries: $400

  • Utilities: $300

  • Debt Repayment: $500

  • Entertainment: $300

  • Savings: $600

  • Miscellaneous: $200

Now, your total of $3,500 has been fully allocated, meaning every dollar is assigned to a purpose. As more income arrives throughout the month, it will be added to your "Pending Allocation," ready to be distributed.

Steps in the App:

  1. Enter Your Starting Balance:

    • Add your $3,500 checking account balance. This amount will appear as "Pending Allocation."

  2. Allocate Funds to Categories:

    • Assign $1,200 to rent, $400 to groceries, and so on, until your $3,500 has been fully distributed across your categories.

  3. Monitor Your Progress:

    • As the month progresses and additional income arrives, allocate new funds to the appropriate categories based on your financial needs.

You can change or customize your categories at any time by going to the side menu and selecting "Groups and Categories." This flexibility allows you to tailor your budget as your priorities change throughout the month.

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