Welcome to Money Monday! In this week’s segment, we’re covering my favorite all-time budgeting strategy – a Zero Sum Budget! I personally believe this is the easiest and most effective money management system there is!
Why automating your savings isn’t enough
Automating your savings is a great place to start when you’re trying to save money. However, I find that this still leaves people with too much money in their checking accounts. Before they know it, the money they could have saved or invested is gone.
This is where a Zero Sum Budget comes in…
How a Zero Sum Budget Works
A Zero Sum Budget is pretty simple and it’s pretty self explanatory. Each month, you would take your money down to “zero.” In other words, you find a purpose for every dollar and then start over again the next month.
For example, let’s say you bring home $5,000 per month in a paycheck and your expenses are $2,000. That leaves you with an extra $3,000.
With a Zero Sum Budget, each dollar would find it’s way into some sort of savings bucket. In my case it may looks like the following:
- $1000 goes to retirement savings
- $1000 goes into a travel fund
- $1000 goes into a real estate fund
(Note: I already have a fully funded emergency account.)
As you can see, my sum goes down to “$0”
Why I love this budget
There’s one main reason I love a Zero Sum Budget – it’s easy. No need to deal with complicated budgeting systems and spreadsheets.
It’s also very effective. This method has allowed me to save thousands of dollars in very short periods of time because every dollar had a job.
Resources Mentioned In This Segment
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Videos mentioned in this episode:
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Disclaimer: This is meant for education purposes. Please consult professionals before doing anything with your money.