personal finance

Did You Overspend This Summer? Zero-Sum Budgeting Could Help You Save More


This story is part of CNBC Make It's One-Minute Money Hacks series, which provides easy, straightforward tips and tricks to help you understand your finances and take control of your money.

If you're having difficulty controlling your spending, you might want to try zero-sum, or zero-based, budgeting.

Popularized by You Need A Budget and financial experts like Dave Ramsey, this strategy allocates every single dollar you earn to a specific expense. So, at the end of the month, you should have zero dollars left over, since everything has either been spent or saved.

Since every dollar is given a job, zero-sum budgeting can help identify areas where you overspend, therefore helping prevent you from doing so. If you're spending more than you make, this strategy can help you prioritize where your money goes.

How it works

First, calculate your monthly income.

Second, make a list of all the categories you spend money on, like food, fun and transportation, and assign spending limits to each one. The goal is to have every dollar you bring in accounted for. 

If you earn $3,000 per month, then you want all of the line items in your budget to add up to $3,000, leaving you with $0 at the end of the month.

For example, you may allocate $1,000 for rent, $150 for utilities, $150 for food, $500 for savings, and so on, until your entire monthly income is used up.

You can plan for irregular expenses as well by adding a miscellaneous category to your budget. You can also adjust your budget categories ahead of time when something arises. This strategy is endlessly flexible; each month, you can tailor the categories of your budget to your specific needs at that time.

Make sure to include any savings goals or debt you want to pay off as well. That way, you can ensure a portion of your income is spent in these areas early on, instead of waiting to see what's left over at the end of the month.

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