Using zero based budgeting at home

zero based budgeting is the tightest, most complex form of budgeting out there. Before this statement makes you quit reading this article, though, you should know that this type of budgeting is what will really get you in control of your money so that you can save and prepare for emergencies.

It is budgeting like this that will allow you to eventually take your dream holidays, buy a new car or redecorate your house, even if you're on a limited budget right now. Once you're in control of your money, just about anything's possible with a little patience and work.

How to use this type of budget

A typical budget takes into account your income and basic expenses, and whatever is left over just gets spent indiscriminately. You may or may not already be budgeting for variable expenses like petrol, food and entertainment, but zero based budgeting will take all of this into account. To get started with a zero based budget, write down your income - or expected, average income, if it varies a bit - for the next month

Then, fill in all of your must-pay expenses like rent or mortgage, insurance payments, car payments, utilities, etc. After that, go ahead and see how much you have left to work with. Start budgeting out the rest of the money, starting with the most important things that you can't get by without such as petrol to get to work, food or nappies for the baby. Also, budget out the long-term expenses that you absolutely must pay - such as car insurance - by splitting each yearly payment over twelve months and budgeting it into each month.

Once you've done this, you should have accounted for most of the things that you must pay, but you don't get to spend the rest of that money, yet! First, you'll need an emergency fund, which you can put a little money into each month until you save up a few thousand pounds; this fund can keep you from blowing your budget when you have to fix your oven or replace your boiler. Don't forget to budget some money for savings each month, and if you're paying off high-interest debt, budget as much extra as you can to pay for your debt.

Now you may have a bit of money left over. But with zero based budgeting you need to re-allocate this within your budget. Put in what you'll spend on shopping, gifts, entertainment, dining out and anything else you spend on until you end up with a big, fat zero at the end of the month.

Why zero based budgeting works

This type of budgeting may seem really over-the-top, but it actually does a lot to put you in control of your funds. After all, if you look at your finances over the past few months, you'll probably find that you've spent a lot more than you expected on random things like meals out and that you haven't saved enough or paid off as much debt as you would like. zero based budgeting is super-detailed, but this detail allows you to be in control of every penny you spend so that you can meet your financial goals for the future.