What Is Zero-Sum Budgeting And How Can It Help? (QUIZ)

Budgeting means estimating the influx and outflux of money over a set period of time. This practice is critical for entrepreneurs trying to run a successful business, but it’s also important for individuals trying to run an efficient life.

Zero-sum budgeting is a budgeting technique that forces you to spend every dollar that you earn. The concept of “spending” simply means allocating every penny you make into some category. The concept is based on the idea that if you allocate every dollar you have coming in, you can avoid waste and maximize your overall earnings. The end goal of zero-sum budgeting is to reach a net zero at the end of each month.

How To Keep A Zero Sum Budget

To execute a zero-sum budget, you need to use your previous month’s real income to pay the current month’s expenses. This means you can only execute a zero-sum budget once you have at least one month of your steady income stream.

Once you start zero-sum budgeting, you’ll need to allocate every dollar that you bring in to some outcome such as paying off bills, repaying debt, or saving. Many experts believe that if you don’t plan your money’s job, you will end up spending it on something irrelevant. Keep your expense categories clearly defined and give every dollar a job.

Zero Sum Budget In Business

Of course, the ability to allocate your resource efficiently improves your business cash flow. By getting one month ahead in your business expenses, you will be prepared to meet your future financial requirements. To help your business succeed, be sure to over estimate your variable business expense categories. This will create an additional “cushion” in case of anything unexpected. If your business is very volatile, you might want to consider having an emergency fund as one category. In both cases, you business budgeting will be prepared for unexpected costs or opportunities too.

Think you have got the hang of zero-sum budgeting? Try this quiz below:

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Image from http://www.patheos.com/blogs/missionwork/2015/10/rising-tide-or-zero-sum-game/

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