So you’re looking for a budgeting strategy. If you log in online today, you’ll be inundated with a plethora of budgeting strategies each purporting to be useful than the next one. It’s easier to fall for any or all of them. But there’s one that takes the Oscar home: Zero-sum budget strategy. It’s a favourite for many, and for good reasons. It is simple to implement and requires no third-party support of fancy budgeting software. All you need is a pen and paper or spreadsheet, and you’ll be on your way to transforming personal finances like never before.
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Wondering how a zero-sum budget works? Here’s how:
- The zero-sum budget comes up with your current month’s expenses by using your last month’s income – so instead of basing your budget on mere projections, you instead base it on your income.
- A zero-sum budget helps account every dollar you used in each month – It helps to come up with a plan that gives each of your earned dollars a job. This helps maximize your money usage, do away with waste, and also allows you to pay yourself first.
- The sole objective of a zero-sum budget is to ensure each month ends with a zero, literally – Your month should end with nothing because you’re planning for each dollar spent based on last month’s income.
So how do you use this budgeting strategy to pay off debt?
One thing you should realize is, zero-sum budgeting strategy is powerful yet eye-opening. Many families do not realize how messy their spending on miscellaneous items is until they start tracking their spending and create a zero-sum budget. It makes everything clear, even the most complex of issues. In fact, it accounts for every dollar and shows you how you exactly spent it.
But having this budgeting strategy will not suppress or keep your bad spending habits at bay. Following through a zero-sum budget requires a healthy amount of patience, consistency, and utmost discipline. If you want this budgeting strategy to work for you and your family, you have to write down your spending goals individually or as a family and follow through those goals to the letter.
If you’re serious about paying off an accrued debt, you have to be equally serious in your planning on how to repay your creditors. It might take time but with the right strategy in place, it is possible. If you want to get out of a vicious debt cycle, follow through these tips to help you come up with a powerful zero-sum budget that works for you.
1. Pay your debts (and yourself) first
It’s an open secret that if you want to get out of debt make sure to save for the future and repay your debt. You have to make these two things a top priority. And soon you’ll be debt-free. So at every beginning of the month, take painful but consistent steps in your zero-sum budget by paying off the heftiest of debts or bad credit loans with high rates with the help of some quality lenders. out of the way first. There is no better route to success than this.
2. Don’t sit and wait to see how things to work out. Be proactive!
One of the grave mistakes that people are guilty of when making a zero-sum budget is to sit and wait to see how things work out eventually. This is a recipe for creating bad financial goals. For instance, if you owe $2,000 in credit card debt, don’t wait to see “how things work out” at the end of the month pay off the debt.
By doing this you not only allow $2,000 to sit idle in your checking account for a whole 30 days but also allow indecision to take control. This will soon or later work against you because old habits die hard.
Another thing, by sitting and waiting to see “how things work out” you are silently saying to yourself you don’t think they will, after all. To put it another way, you’ve set yourself up for failure before you even commence employing the use of a zero-sum budget. To avoid making a mistake that will set you up for failure before you even start, make sure to do away with the heftiest of debts on your list at every beginning of the month.
3. You must track your spending. Do this regularly!
Once a week sit down and start tracking how you spend money. This is not an easy task or action to do but if you make it a habit, you’ll be on your way to a life free of debt. For example, if you’ve been used to spending large amounts of money on eating out and entertainment, it will be a challenge to spend say $300 on entertainment. It won’t be easy.
So the best thing to do is to track your spending regularly, at least once a week. By doing this you will have a clear view of your projected spending and fluctuating expenses say on food and entertainment. Decide on the best financial goals to come up with after this. And to best effectively stay on track of your spending, print out your bank statements and monitor each expense.
By having a bank statement or a statement of your online check account, you will have a clear view of where you are in terms of your spending. This will make easy tracking of every dollar you spend. These statements provide you information on whether you are overspending or toeing the budget line.
Conclusion
You have nothing to lose by creating a zero-sum budget especially if your financial goal is to get out of debt. Also, you don’t need to invest in third-party software or to buy anything to help you stay on track of your spending. Just need a paper and pen, and your credit card or bank statements. So, it’s a cheaper yet effective way budgeting without spending money on anything.
Anything worth doing including budgeting or getting out of debt requires time and patience. The same applies when you come up with the zero-sum budget. The first few months may pose a challenge but with the time you’ll get used to how a zero-sum budgeting strategy works.
Remember, the easiest way to pay down debt is to first pay off your (hefty) debts and yourself. Then don’t wait and see how things will work out. Be proactive. Lastly, track your expenses and generally your spending at least once a week. If you do these three things and dedicate yourself to meeting your financial goals, your budget will work for you. And you’ll be glad you kept a budget.
Also read: How Can Early Age Investors Benefit from Stock Markets
