Zero-Based Budgeting: Does it Work?
Made famous by Dave Ramsey, this budgeting method assigns every single dollar a job. Is it too restrictive or the key to freedom?
S
By sarah-jenkins
Financial Analyst
The concept is simple: Income minus Expenses equals Zero.
If you earn $4,000 a month, you must allocate exactly $4,000 to various categories including bills, savings, investments, and fun money. Nothing is left floating in your checking account.
The Pros
- Intentionality: You are forced to be aware of every dollar.
- Guilt-Free Spending: If you budgeted $100 for dining out, you can spend it without worry.
- Faster Goals: It usually finds “leaks” in your spending that can be redirected to debt payoff.
The Cons
- Time Consuming: It requires constant tracking and monthly adjustment.
- Variable Income: It can be difficult for freelancers or commission-based workers whose income fluctuates.
Conclusion
Zero-based budgeting is excellent for those in debt or saving for a major goal. Once you are financially stable, a looser “pay yourself first” model may be more sustainable.