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It is hardly news that the economic system of most countries is spiraling downwards. But, as you’d expect, it is the average person that bears the brunt of the economic downturns. Thus, it is not out of place to search for ways to make and save money. One solid financial advice in this regard is to use budgets.
Budgets give you the means to track your income vis-a-vis your expenses. Instead of leaving your money lying fallow in your bank accounts, you stay proactive, deciding where your money goes to and when. Several budgeting tips and patterns are available. First, there is the cash envelope system where you put cash into different envelopes for different needs. There is also activity-based budgeting, value proposition budgeting, and zero-based budgeting. This review looks at the latter.
A zero-based budget arms you with the tool to identify and be in charge of all your expenses. This works the best for people who struggle with paying off their expenses or have irregular income streams. You could either decide to use a zero-based budget template or a zero-based budget app to make things easier.
This guide will provide you with an in-depth overview of zero-based budgeting. That’s not all, though! We’ll also give you our picks for the best zero-based budget apps so you can find the right choice for your needs.
Let’s get started!
What is Zero-Based Budgeting?
Zero-based budgeting is a budgeting method that finds a purpose for every dollar you make. Thus, your monthly budget will incorporate monthly expenses and savings, and in the end, you will have no surplus left. With a zero-based budget approach, you will not have money left at the end of the month without any idea where it is to be channeled towards.
Say you make $3000 in a month. You categorize expenses, dividing them into fixed expenses and then variable expenses. If your former takes up $2 000, you have $1000 left. Using the zero-based budgeting method, you will ensure that the extra money goes into the monthly bills that may not be part of the fixed expenses. Thus, in the end, there will be no spare money to spend anywhere.
This budgeting system is fantastic because it makes sure that every penny is accounted for in the budget. In addition, it acts as a pre-emptive measure and so tells you what to do with spare money before unexpected expenses arise. If you do not have a clear vision of where you want to channel spare funds to, needs will always come up that you have to take care of.
Furthermore, it makes you better at tracking expenses. Since your expenses equal your earnings in a given period, you will at no time be at a loss regarding where your money goes to. You will not need to ask your bank for your financial accounts to be abreast of your financial information.
More so, it equips you better to cover your monthly needs. With a zero-based budgeting plan, you will be using last month’s income to settle this month’s bills. This is especially helpful for people who do not have a fixed income. This budget method ensures that you can effectively cover irregular expenses without breaking a sweat.
There are some drawbacks to the zero-based budgeting method. The first is that it can be quite rigorous. If you find it difficult managing finances or keeping up with your budget, then this budgeting pattern might not work for you. You will have to be eagle-eyed about how you spend money.
Additionally, you will be forced to learn how to be flexible. This is because you may have to create a new budget each month. This budgeting tool takes into account your projected expenses for each month. Your past spending pattern may not be what you’ll expect for the future. Hence, you would need to innovate.
Notwithstanding, zero-sum budgeting is worth all of the hassles. Besides, most of the drudgery will be eliminated if you use a budgeting or money management app.
Best Zero-Based Budgeting Apps
Regardless of your personal finance philosophy, you will enjoy some benefits when using a zero-based budgeting app. Below are our top recommendations for revamping your financial life.
You Need A Budget (YNAB)
You Need A Budget is one of the best budgeting apps you can find. It is a fan favorite and has some of the best features you could find on any budgeting app in the market. But, more so, it can help you implement zero budgeting.
YNAB gives you a zero-budget template. You can then create spending categories. It also tracks your income minus expenses by comparing your budget with the money you have in your bank accounts.
Another great feature you get with YNAB is the automatic imports option. The app automatically imports every transaction you make, helping you keep an eye on your spending habits this way.
Finally, you can also set and track goals using the app. You can download and install the app both on your mobile device and your computer.
Unfortunately, You Need A Budget does not have a free version. However, the paid version comes with a 34-day free trial period. You will not need to input your credit card details at this point. You can focus solely on checking out the service’s features without worrying about the cost.
Every Dollar
Every Dollar’s driving philosophy is flexibility. It believes in “telling every dollar where it should go.” This sounds a lot like what zero-based budgeting also tries to achieve.
It has a free version and a premium one. The free budget app has limited features. However, that will be enough for regular budgeting activities such as keeping track of your spending and saving for your retirement accounts. In addition, you can schedule payments such as a debt payoff using the app.
The premium app has customizable budget templates. For example, you can use it to create a zero-sum budget.
Tiller Money
Tiller Money is a good budgeting app. Saving money is straightforward and seamless. Beyond that, it also has capabilities that make it an ideal choice for anyone interested in zero-based budgeting.
Firstly, it provides various zero-based budget templates you can use. It also connects with your bank account so that you can easily view your account balance in real-time, note your everyday spending, and direct funds to where they will be most needed.
It also fares well when it comes to security. It ensures that customers do not lose their monies to crooks and bad elements. Unfortunately, it isn’t a free budgeting app. Thankfully, it has a 30-day money-back guarantee window. Within this period, users can set up accounts on multiple devices, try out the service and request a refund if they are unsatisfied with the quality of services they get.
Personal Capital
Personal Capital is another zero-based budgeting app that we recommend for keeping track of your personal finances. The budget app has exciting features and a robust security framework.
It is one of the free apps you can use to track spending and expenses. This gives you a quick overview of how much you make in a given month and what you spend. Syncing the app with your bank account gives the best result.
Personal Capital also has a premium version. This is a Robo advisor platform and only caters to those who have made up to $100,000 in investment savings and would like to take things up a notch.
Personal Capital is a highly recommended free app that can get you well on your way to financial freedom. Sticking with it will make sure you pay off personal loans and save money you can even channel into investments.
How to Create a Zero-Based Budget
Having looked at the different zero-based budgeting apps available, the next step is to itemize how to use this investment tool. So, how do you make a zero-based budget?
Record your Monthly Income
First, write down your month’s income. Calculate all you make, both from your regular job and any side hustles you engage in. One budgeting piece of advice you can glean from this article is honesty. Please do not leave any income stream off, regardless of how inconsequential you think it is.
Set Expenses
The next step in the process is to list your expenses. Ideally, you ought to begin with fixed expenses. That is, those you have to offset every month. Thus, here you could have rent, insurance premiums, car payments, internet, etc. Next, you can go through your bank account transactions to make sure you aren’t missing any.
After that, move over to variable expenses. Here, you could have everyday spending like groceries, entertainment, etc.
Plan for Irregular Expenses
The thing with a zero-based budgeting system is that it allocates every penny you receive. For that to happen, you have to track spending and personal finances. However, what about expenses that are unexpected and hence cannot be planned for? You also have to factor them in.
You will have to set aside some money for these unexpected expenses. Unlike the others, you will not be certain about how much to designate exactly. Hence, setting aside an estimated sum that you believe will cover these unexpected expenses is often ideal.
Fund Your Goals
The beauty of zero-based budgeting is that you do not fund your long-term goals with money leftover from your expenses. Instead, you include the goal as part of your expenses. That way, some money goes to it at the end of each month.
Some of the long-term goals that could make their way into your list include your children’s college tuition fees, retirement plans, buying a home, etc. Of course, you may not have the means to pay for all of this upfront. However, it is easier when you automate the process with a budgeting app. The best budgeting apps find ways for you to save and channel funds to your long-term plans.
Conclusion: Zero-Based Budgeting
There are two takeaways you should have after reading this article. The first is that budgeting is a necessity, not a luxury. Planning one month ahead about how you spend your money can make all the difference in your finances. Budgeting also helps you save, and by extension, it makes sure you have more money whenever you need it. Another incidental benefit is an improved credit score. Budgeting apps allow you to save, making sure you pay off debts and that your creditworthiness improves as well.
Secondly, zero-based budgeting is one of the best budgeting techniques to apply. It takes account of your past few months to determine how your future income and expenses should look like. Then, every money that comes into your bank accounts gets assigned a purpose. That way, you do not have money that you aren’t using for anything.
Thus, first consider getting a budget if you don’t have one already. While at it, also consider using a zero-based budgeting technique.
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Apps Budgeting
