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How to Build a Zero-based Budget
Posted By Jim On 02/01/2010 @ 7:02 am In Personal Finance | 20 Comments
A zero based budget is a budget where every dollar you earn is assigned to a category in your budget. Your income minus your expenses equals zero – zero based budget. The idea sounds very simple, and it is, but the real value in creating and following a zero-based budget is that it requires you to plan very deliberately ahead of time and track it very closely as you go through your month.
The main benefit of creating a zero based budget is in the creation process. By forcing you to assign a dollar of income to each expense, you are taking a look at the entirety of your finances. You are forced to remember and allocate dollars to otherwise automatic expenses – such as rent, car insurance, and cable television. As you go through the budgeting process, you might consider shopping those services around to see if you can get them for less so you can spend that money on another expense.
Another big benefit is that by assigning each dollar of income to a category in your budget, you move away from a mindset of casual spending to one of deliberate spending. Unlike envelope budgeting , where you have some wiggle room, you take that wiggle room away when you zero base your budget because there’s no miscellaneous envelope.
As you can see, zero based budgeting is very deliberate but not unlike many other budgeting methods . It’s also a budgeting methodology that requires very little in the way of tools. While you could turn to a budgeting tool  to help you out, the hard work is in the planning and adjustment of your zero based budget. All that can be done, fairly easily, using Microsoft Excel or some other spreadsheet application.
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 envelope budgeting: http://www.bargaineering.com/articles/bvc-16-introduction-to-envelope-budgeting.html
 budgeting methods: http://www.bargaineering.com/articles/brief-look-at-five-budgeting-systems.html
 budgeting tool: http://www.bargaineering.com/articles/free-online-budgeting-planning-software-tools.html
 thetruthabout: http://www.flickr.com/photos/thetruthabout/2665403018/sizes/m/
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