Planning and sticking to a budget is a technique that smart entrepreneurs use to help grow their business. However, budgeting isn’t just limited to the business-world. In fact, entrepreneurs would be wise to use budgeting in their personal lives to help them operate more efficiently. By optimizing your personal budget, you can find extra money that can be used for long-term savings, debt repayment, or to help grow your business.
Zero-sum budgeting is a popular budgeting strategy that can help anyone become more fiscally responsible. To perform a zero-sum budget, you simply take your previous month’s income and allocate every dollar towards a categorical expense for the current month.
In other words, take your best estimate of earnings for the current month and spend every penny on some category. The typical categories could include food, entertainment, other expenses, debt repayment, savings, or any other relevant outflow of money that you can estimate. The purpose of a zero-sum budget is to make sure that every penny counts.
The process helps you critically think about whether you want to spend 30$ this month on coffee or put that same 30$ to repaying a high-interest loan. The more you practice using a zero-sum budget, the better you’ll understand the importance of every dollar you earn.
Many entrepreneurs self-fund their startup or business idea. If you’re trying to build a business from the ground up, any extra money you can put into the company means a better likelihood that you’ll succeed. If you want to test your understanding of how to execute zero-sum budgeting, take this quiz below from Health IQ.