A Job for Every Dollar: Why I Love Zero-Based Budgeting

I once opened an app that gives you an end-of-the-year spending rundown to find out that I had spent $99,000 the previous year. I was surprised because I definitely didn’t have $99,000 worth of anything to show for it, but sure enough, it was gone. As I looked further into the breakdown, I’d realized a sheer 13k had gone to eating out, over 15k to travel, and over 10k to shopping. After the initial shock wore off, I decided that every single dollar that touched my fingers would now have a job. This is called zero-based budgeting.

Essentially, zero-based budgeting means that every dollar in your budget is categorized and that you start over each month from scratch instead of modifying the previous month’s budget.

This type of budgeting is great for spenders like me, and here’s why:

1. Every Dollar is an Opportunity to Make More

The good thing about keeping track of all your dollars is that you don’t lose too many to things like morning coffees and afternoon smoothies. You choose every single month how much money you are willing to spend on those things, and stick to it. This helps free up a lot more “waste dollars” that can go to things like investing so that you can use your money to make more money. Imagine if I had simply eaten at home that year. I’d have had 13k extra to invest. Now do the math on that at a 10% return over twenty years. Suddenly, it hurts a lot more.

2. At the End of Each Month You Know EXACTLY Where Each Dollar Went

Have you ever been excited for payday, only to need money again the following week, having no idea where your money has gone? Zero-based budgeting kills this issue by accounting for every single dollar. What was once “How did I spend $300 on coffee this month?” becomes “I spent exactly $150 on coffee this month because that’s what I allotted for it.” Zero-based budgeting gets rid of the question marks and for that, it will always be my budget of choice.

3. It Forces You to Look Over Your Budget Monthly

Every single month, you have to start over from scratch with your budget on zero-based budgeting. This requires you to take an in-depth look at what worked and didn’t work the previous month. It may seem labor-intensive, but it’s far better than making it all the way to the end of the year to find out you’ve been spending like El Chapo on things you didn’t need.

4. It Cuts Down on Lifestyle Creep

This is especially important for people like me with wildly fluctuating incomes. I can make anywhere between 65k-190k a year with no guarantees of either. For most people, when the money is high, the spending soon follows it. You don’t mind catching an Uber instead of walking a few blocks because “you got it” and other small little things that contribute to your monthly expenses creeping upwards as you make more money. Unlike many other budgets, zero-based budgeting keeps that behavior in check.