You may have heard of a zero dollar budget, but are not sure what that means. A zero dollar budget means that you spend every dollar on paper before the month begins. This way you have assigned an amount to each of your expenses. Once you have reached the limit you stop spending in that category. This budget works well with the envelope system.
It is important to realize that you can adjust the amounts that you spend during the month. For example if your entire family ends up with strep throat you may overspend in the medical category. You can pull money out of the entertainment category or grocery category to cover the added expenses. The amount at the bottom of the page should always equal zero. It should never go into the negative.
For a zero dollar budget to work well for you, you need to sit down with your spouse each month and plan out the expenses for the next month. It is also important to have quick checks during the month to make sure that you are not overspending in a certain category. You may want to rollover extra money from month to month as well. This can help you to build up your medical expenses or car repair expenses categories.
It is also important to include savings in a zero dollar budget. You should pay yourself at the beginning of the month. You should transfer your savings into a separate account, this will to stop any extra spending that may be taking away from the amount you want to be saving each month.
If you receive extra money it is important to take the time to reassign it as well. You may decide that any extra money should be applied directly to your debt or to savings. You may also decide that you use part of that money for a special treat for you or the family. You still need to decide where the money is going or you and your spouse may spend it in different areas, and you end up overspending.
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