Are you able to keep track of every amount that goes in and out of your account? Do you find yourself living from paycheck to paycheck and unable to save money?
The truth is, most of us are unaware of how much we need to live comfortably each month and this could lead to stress when paying bills. To manage your money effectively, creating and sticking to a budget is essential, and a zero-based budget will help you account for every single kobo you earn or spend.
In simple terms, a zero-based budget is your income minus expenses equal to zero (i.e. I - E =0). With zero-based budgeting, you will understand how your hard-earned Naira is being spent (expenses, debt, and investments).
Creating a zero-based budget might seem tasking, however, using the right digital saving and banking tools will make the process easy to start.
How to make a zero-based budget
List all your income sources
When making your zero-based budget, start by adding your possible sources of income. This can include your salary, income from your side hustle, cash gifts, residual income from investments, etc. You can do this with a sheet of paper, excel spreadsheet, or online savings platforms.
Write down your monthly expenses
Before the month begins, write down every planned or recurring expense starting with food, utilities, shelter, and transportation. Also, include a category for miscellaneous (unplanned expenses). Don’t forget to add your periodic savings to your budget too; saving money should be a priority.
Compare your cash inflow and outflow
Remember the goal of a zero-based budget is to have a balance of zero at the end. If your income and expenses do not equal zero that means you will need to increase your income or reduce your expenses, or both.
The desired outcome of the zero-based budget is to have every Kobo accounted for. This does not mean you will have zero Naira in your bank account, it means that you will have zero Naira left in your budget.
If you have a ₦20,000 excess in your budget, you will need to assign it to something profitable. For example, an investment platform like www.overwood.ng will help you earn compound interest on idle funds.
The biggest advantage of adopting a zero-based budget is that it gives you control over what is happening with your money. A zero-based budget will direct you on how to spend your money the right way.
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