This is a guest post from Daniel Packer over at Sweating The Big Stuff. Daniel writes about negotiating, saving, and conscious spending while attempting to maintain a high quality of life. To read more, subscribe to his feed or follow him on twitter.
As you must know by now, Fiscal Geek is a HUGE fan of the zero-based budget. His Zero Based Budget System posts outline what it is and goes into detail about how to create one and tools you can use to make sure you stay on track.
Some people like a zero-based budget because it forces them to realize what they are spending their money on and what they need to cut back on.
But I don’t use it. Why?
In my traditional budget, I have a place for savings, for paying down my debt, and for most of my other expenses. I even have a miscellaneous spending category because it’s hard to account for every expense. But I don’t account for every dollar. In fact, I account for about 80% of my income. At the end of the month, anything I don’t spend goes into my savings account. So what happens to the other 20%?
Having a zero-based budget stresses me out. It means I have to think about whether I should treat myself to a candy bar. It means I have to question whether or not having a beer with friends is a good idea. I don’t like worrying anymore than necessary and I enjoy the flexibility to go with the flow and relax about my decision making. With a zero based budget, I am tied down to do something specific with my money rather than having plenty of options.
I definitely track my expenses and I have a pretty good idea of how much I spend on each category, but I am not vigilant. Since I am hitting my savings goals and I do not overspend, there is no reason to track every dollar. After making all my required expenditures and tucking away money into my savings accounts, so what if I don’t know what’s happening with that extra money at the end of the month?
Maybe it will go towards a nice meal or a night at the improv club. Maybe I’ll decide to take a trip with friends or maybe it will be swept into my savings account. And if that extra money is different month to month? I’m ok with it. I like to keep my options open.
The stress of zero-based budget can scare people into not budgeting at all because they may find that small purchases cause them to worry more than before their budgeting days. If you are new to budgeting, choose something simple, sign up for your favorite budget program. You’ll learn that budgeting can be fun if it doesn’t control your life!
Everyone has their own way of budgeting. Some choose a simple budget, some choose a zero-based budget, and some don’t budget at all. Of course, it comes down to what works for you.
How do you track your spending?
Photo courtesy Tambako the Jaguar