Personal budgeting can be overwhelming and it’s probably no surprise that many of us including seasoned business professionals, still struggle to spend only what is in the paycheck or pay packet each month. Thankfully there are many different budgeting theories employed by multinational corporations and personal entities. Zero-sum budgeting is one of the most simple and effective budgeting techniques. The great thing about zero-sum budgeting is that you can get started with just a pen and paper.
The guiding rule of zero-sum budgeting is to never spend more than you actually earn. That is, base your spending off of last month’s earnings. Don’t factor in potential earnings, next week’s paycheck, credit card availability, and things like that. It is very easy to spend money when you know you will be getting paid soon. When you do this, however, you end up with debt to make up.
Imagine you receive a $4,000 paycheck at the first of every month. The goal with zero-sum budgeting is to only spend that $4,000 during the next 30 days. If the end of the month is approaching and you’re tempted to make a purchase that will put you over $4,000 for that month, you need to hold off. If you do overspend within that month just because you know that in a few days you will be receiving your full paycheck for $4,000, you will basically be putting yourself in trouble for the next month. Essentially, you’re reducing your next month’s paycheck and will have to live on a smaller budget because you overspent the previous month.
The trick to zero-sum budgeting is making sure you properly track and plan the cost of food and entertainment. Take this quick and informative quiz by Health IQ to test your zero-sum budgeting knowledge!
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Budgeting can be fun especially with an expenses App. on your mobile that let’s you track what you spend and also what you save each month.