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The Art Of Zero-Base Budgeting

It's time to master this saving technique.

Posted on: May 04, 2017

It's time to master this saving technique.

It’s really quite the brilliant concept. For anyone who endeavours to become a “saver” in due time, this is the one to master. It’s simple: once you receive your wage, you break it up into savings and expenses. Your savings will be transferred into another account (if possible high-interest earning) and once the pay cycle finishes, you send any surplus funds straight to your savings. Super simple stuff.

Every expense must be justified for a new period (preferably within your pay cycle). Costs will be grouped and then measured against previous periods. You can also break them down as a means of deciding which expenses are justifiable, and which can be cut down on, ultimately increasing your savings.

Avoid lifestyle inflation

Although difficult in the beginning, zero-base budgeting is sure to become easier as time goes on as long as you continue to be disciplined and smart with your spending. There is, however, one catch. As time goes on in your job, you may receive pay rises, making the money flowing into your account each pay cycle higher. You therefore feel the need to spend more money solely because you have more money to spend! It’s a dangerous game you can play and avoid spending more because you’re making more – you lived within your means before, so surely you can continue at the pace you were going.

Additional savings

In addition to the zero-base budget, you can also add a little extra to your savings fund each day by rounding your account down and sending a little extra your saving’s way. For example, you may end the day with an account of $238.45. You transfer $8.45 to your savings and keep your account at a nice round number. You’re also adding a little extra to your account every day without really making a dent in your budget. Just be wary of potential account keeping fees if you transfer too often – they can be hefty and make this brilliant idea quite redundant.

Get your magnifying glass out

It’s time to put on your Sherlock Holmes get-up and start investigating your expenses. It can be hard work, but you need to do an initial review to figure out where your money is going and how you can ensure it isn’t wasted. Cutting out or down on extra expenses like your entertainment allotment or electricity usage could be the catalyst in a bigger chunk of savings headed straight for your high-interest earning account. Making a spreadsheet of your current expenses and narrowing down your needs and wants could be especially helpful. You may not be able to cut down on your vehicle loan repayments, but you sure can renegotiate your phone plan!

Dont' forget to give your savings meaning

Now that you’ve got a handle on this whole zero-base budgeting thing, you should give your savings a purpose. A holiday, maybe? Deposit on a house? An inkling to move overseas and start fresh? The possibilities are endless, but what’s the point in drastically saving without a purpose? Treating yourself is a way of life, but just make sure you don’t leave yourself high and dry with nothing left over for an emergency.

So, get a handle on your budget and test out zero-base budgeting. It could result in savings galore if you’re determined to make it work and do the hard yards for a better result. ALSO, never leave a surplus at the end of each period – that little extra in your account could go towards car payments to pay off your loan quicker than expected!

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