Managing and improving the health of your personal finances can be daunting. Even people who are good with money on a professional level often have problems with personal budgeting. When it comes to personal budgets, managing debt, and good spending habits, people often have trouble cutting the fat. We often overspend on food, entertainment, and non-essential goods, and fail to properly account for them. Zero-sum budgeting is a great technique for curbing wasteful spending and ensuring that you don’t spend more than you earn.
It is easier to have a firm grasp on monthly bills, mortgages, car payments, and other expenses that are more or less the same from month to month. In fact, you might have all of these bills set up for automatic payment so your payments are never late and you can easily quantify a large percentage of your monthly expenses. However, the extra money that you spend on entertainment and food can be harder to budget for, especially since it fluctuates throughout the year. This is where zero-sum budgeting really comes in handy.
With zero-sum budgeting, you can plan out and accurately predict how much money you have left over to spend on non-essential goods and services. By categorizing your main expenses and prioritizing bills that are essential, you can earmark your money for certain uses. When it comes to zero-sum budgeting, the goal is to never spend more than you have earned in the previous month.
This simple quiz will test your zero-sum budgeting knowledge. Use the knowledge you gain to optimize control of your finances.
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.