When it comes to the topic of managing your money, are you taking the best approach? While many people may believe they have a sound budgeting system and process, only a few manage to set aside money for their future.
The basis of zero-based budgeting, also referred to as zero-sum budgeting, is a simple elementary school math equation. Your budget is considered "zero-based" or "zero-sum" when your total income minus total expenses equals zero.
The "zero" in zero-based budgeting tends to worry people. However, it does not mean that your bank account balance equals zero. Instead, it simply means you must consider the money you save and invest as "expenses" and subtract them from your income.
The beauty of zero-based budgeting is that you account for every dollar you receive. Using traditional budgeting methods, you typically list all necessary expenses, such as rent or mortgage, car, and debt payments.