Zero-Based Budgeting: 5 Tips for Success
Did you know that only 30% of US households have a long-term financial plan? And, just 24% of millennials show signs of basic financial literacy. Now, more than ever, it’s important to stay on top of your finances and learn how not only to invest your savings but to budget them as well.
That’s why we’re here! At Cheese, we’re dedicated to providing you with the tools and tips you need to succeed. Whether you’re figuring out which budgeting apps work best for you or are navigating the ins and outs of credit scores, we’ve got you covered.
And, that’s why we want to talk a bit about zero-based budgeting. For those that struggle with budgeting and saving, this system makes it easy to account for every dollar that you’re spending. When you’re forced to justify every dollar that you spend, you really make it count. Here’s what you need to know.
What is Zero-Based Budgeting: Tips to Succeed
1. Focus on $0
This might sound counterintuitive when your goal is to budget and save your money, but that’s actually the idea with zero-based budgeting. Essentially, you’re accounting for and allocating every dollar that you earn, whether that’s towards utilities, insurance, gas, rent, or even savings. The point is to be mindful of where you put every single cent. So, if you net $2,500 a month, you should focus on getting that down to $0 by the end of the month. Anything leftover should go straight towards savings or investments.
2. Find a Good Zero-Based Budgeting App
There are numerous great financial apps out there for you to use. However, the best budget app for zero-based budgeting is You Need a Budget or YNAB. The software is great for those who are also looking for a desktop-based tool to use to control and track their finances. But, the only drawback is that it isn’t free. It requires a financial investment of either $84 a year or $11.99 a month, after a 34-day free trial. But, it’s well worth it if you’re going to really take advantage of all the tools it provides you with to succeed with this system of budgeting.
3. Constantly Tweak Your Budget
Whenever your income changes you should think about modifying your zero-based budget. And, even if your income stays the same, it’s still a good idea to revisit the budget every few months. Find ways that you can cut back on certain expenses. If you find that you’re overspending on subscription services, for example, do away with a few and allocate that money elsewhere. Moving your cash around like this is a good way to ensure you’re conscious of your savings goals and are able to stay on top of them.
4. Use Cash Only
Part of the appeal and effectiveness of a zero-based budget is that, at the beginning of the month, you know exactly how much you’re going to spend in a certain category. If you’ve allocated $500 for groceries, then you know you can’t go over that limit. So, withdraw the cash from your account, place it in an envelope labeled “groceries” and only take that cash to the store when you shop. This will help you avoid overspending. You can also do this virtually via a budgeting app such as YNAB. But, if you’re prone to overspending on cards, the cash method is pretty effective.
5. Focus on Repaying Debt
We’ve mentioned savings and investments, both of which are extremely important in building your financial health. However, you’ll see a lot more success with any system of budgeting if you’re focused on paying off debt first. We suggest focusing on paying off high-interest debt first, which means that when you create your budget, you’ll want to put those at the top of the priority list. If you’re making the minimum payments, that’s great. However, if you’re spending hundreds of dollars on entertainment a month, chances are that you can shift that money over to pay off your debt a little faster.
Saving More to Allocate to Your Zero-Based Budget
Zero-based budgeting is a great way to regain control of your finances. It forces you to take a hard look at your income, expenses, and spending habits. Each month, sit down and make a new budget to ensure that you’re constantly optimizing your efforts and are able to meet your financial goals faster and easier.
One way to make it easier is to save more money to allocate to various categories in your budget. How? The Cheese Debit Card makes it easy. Our FDIC-insured Cheese Debit Card comes with $0 in fees and lots of chances to earn cashback for everyday spending.
Sign up today to begin optimizing your finances.