19 October 2020 | 4 min read

Make A Zero-Based Budget By Following These Simple Steps


The Covid-19 pandemic has had a lot of us rethinking our money management and made us extremely cautious of undue expenditures. Saving and investing your money wisely is absolutely essential. One of the most efficient ways to do that is by creating and sticking to a budget. If you want to make a thorough budget that will put all your income to work for your financial goals, try zero-based budgeting.

In the simplest terms, zero-based budgeting is a way of budgeting where your income minus your ex-penses equal zero. In this method of budgeting, each rupee of your monthly income is assigned for a specific purpose. Once you have allocated money towards monthly expenses, savings, and loans/debt repayment, you should have zero money left over.



1) Accuracy

The biggest advantage of zero-based budgeting is that it gives you absolute control over your personal finance. During a pandemic and the financial uncertainty, it brings with it, having accurate knowledge about the exact allocation of your funds can be reassuring.

2) Flexibility

If your income is inconsistent or you have variable monthly expenses, zero budgeting gives you the flexi-bility to re-allocate funds monthly depending on your income. As your budget starts fresh every month, you can tweak the categories as per priority and assign your money to the categories accordingly.

3) Reduction of wasteful expenses

The accuracy of zero budgeting enables you to identify the various unnecessary monthly expenses you didn’t realize you were making. It leads to the identification of opportunities and a more cost-effective way of doing things by eliminating redundant costs.


1) Add up your monthly income


The first step towards making your zero-based budget is adding all the fixed sources of income you can count on every month. If you have a salaried job with a fixed income, you can just put that figure down. In case you have other sources of income from a side hustle, include that as well. If you are a freelancer and have various sources of income varying each month, be sure to put down all your sources of revenue for each month.

2) Add up your monthly expenses


At the start of every month, jot down every expense you have for that month. Start with the basic costs of living expenses like housing, utilities, food, transport, and insurance. Once your fixed costs are cov-ered, list down the rest of your monthly expenses. Some of your monthly expenditures might vary as per your needs, hence it is important to make a new budget every month. The easiest way to track these var-iable costs is by adding a miscellaneous category to your budget. In the months you don’t end up using the money allocated in that category, you can consider it as savings or reallocate that money towards loan repayment, an emergency fund, or investments. Also, it is important to track monthly savings, if you have any, so that you can allocate every rupee for a specific purpose.

3) Calculate


Once you have logged in all your income and expenses, you need to subtract your income from expenses to equal zero. It is important to note that you may not be able to balance these out in your first attempt. This means that you may need to rework a few categories until you get the desired zero. In case your ex-penditure is more than your income, then trim your budget and consider more cost-effective options for your day-to-day supplies. In case you have a surplus saved at the end of every month, put that money to use for loan repayments or towards investments so that you can balance it out and arrive at the figure zero. After a little trial-and-error, you will surely get there.

4) Track your budget


The final step towards zero-based budgeting is tracking the monthly budget you have set for yourself. This is the only way you will be able to accurately find out if your income and spending line up with your monthly plan. Tracking your budget will help you stick to your budget, see your progress, and get you a step closer to reaching your financial goals.

All of the above may seem like a Herculean task but remember that you are the ultimate boss of your budget and you are responsible for making every rupee of your hard-earned money work for you. Whether you are in debt or you have surplus savings, you need a budget regardless. Start budgeting and head to Digibank to explore investment, savings and loan opportunities.



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