Zero based budgeting can often sound like a daunting term. I mean budgeting is hard enough, now we want to add extra’s. It does seem overwhelming, but stick with us along this journey as us at Once A Week explain Zero Based Budgeting, and how it can help you!
Zero based budgeting takes a newer look at the old budget by questioning all expenses each period. The philosophy says that all expenses must be justified. So how does this work?
Step one: Write Down your expenses
The first step is to write down or record all your expenses. This can be in a journel or an excel spreadsheet. This is entirely up to you. Get a copy of your bank statement and credit card statements and write down or record all of these.
Another option is using an app like 22Seven by Old Mutual. This app allows you to link your bank accounts and automatically record your spending into specific categories.
Step two: Analyse and Justify Your Expenses
Now that you have written down your expenses, it is time to look and analyse them. You want to look through all your variable spending. This is everything except debit orders and fixed payments.
Look through them and justify why you spent that money. Be it on necessary groceries, a friend’s birthday or a splurge on yourself. Record how much money you splurged or spent on non-necessities in a month.
Step three: Why do Zero Based Budgeting?
I implemented Zero Based Budgeting in late 2018 and it made a huge change in my life. It got me into the mindset of “Do I really need that?”. This helped me when budgets are tight and the bank balance is low. As you know you will need to answer to yourself later.
Can I still Splurge?
Yes! Of course! Spending money on yourself is essential, but in moderation. And that is why when you see where you are spending your money on non-necessities, you can cut down on what is not necessary and what is.
Zero Based Budgeting is a great way to manage your money in 2021. It has worked for us and could work for you. Do your research and make your own decision if Zero Based Budgeting is for you!