Anyone struggling to save a few bucks for the future should consider using a zero-sum budget. What’s a zero-sum budget? Also called zero-based budgeting, it’s a spending plan with a place for every dollar of income that comes in the door. The point of zero-sum budgeting is to make income minus expenses always equal zero. It’s the perfect tool for people who want to make saving for the future a priority.
Sample zero-sum budget:
Monthly net income: $4,119
$ 1,074 House payments w/taxes or monthly rent
$ 800 Groceries, household cleaners and supplies
$ 220 Furniture, appliances, electronics, upkeep, repairs
$ 544 Car payment w/insurance, repairs, fuel and upkeep
$ 426 Health Insurance, medical and dental co-pays
$ 283 Uilities, phone, internet, etc.
$ 160 Clothing, personal care and grooming
$ 200 Entertainment, education, books, hobbies
$ 120 Donations, charitable causes, gifts, misc.
$ 3,827 Monthly Expenses
$ 292 Leftover $$$ each month:
Try 0-sum budgeting. After budgeting for essentials (needs) and a few nonessentials (wants), leftover income each month adds up to $292 in this budget. Any money remaining after all monthly payments should be earmarked to save. That’s where families can make sensible choices. Rather than squandering the remaining cash, those who want to get ahead add two types of savings to their 0-sum budgets:
$200 Long-term savings
$ 92 Emergency fund savings
If monthly expenses, either essential or nonessential, add up to more than net earnings each month, it’s time for 0-sum budgeters to reduce their spending. Shop around for better monthly rates for must-have goods and services, such as phone, internet . . . even food. Revisit home loan interest rates or find ways to reduce costs for transportation, clothing, entertainment or incidentals.
0-SUM RESULTS: Small cuts in monthly budget items can put you in a much better place financially.
Learn more about 0-sum budgeting: Watch for more tips for cutting costs, spending less and saving more on both essentials and nonessentials. See the mid-August edition of AAM’s ‘Manage Your Money’ blog.
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