Want to get rid of stress? You could meditate, count to 10 or simply start a zero-based budgeting system.
In fact, 76% of people who use such a system report either no increase in financial stress or a decrease in the level of their financial stress last year, according to a recent survey by YNAB (short for "You Need A Budget"), an app that helps people rein in spending and reach financial goals.
In a zero-based budgeting system, you earmark every dollar of your income to different spending categories.
For example, someone with a $100 budget might allocate:
- $50 to food
- $25 to clothing
- $15 to toiletries
- $10 to entertainment
Once you have made your allocations, you have “zero dollars” left to spend — hence, the name “zero-based budgeting system.” Someone who wants to spend more in a certain category — say, $30 on clothing — has to reduce spending in one of the other categories. This keeps you out of debt.
YNAB notes that the results from the study of 6,000 people are especially remarkable because they indicate the power of budgeting to calm nerves at a time when the COVID-19 pandemic and massive job losses have put people on edge.
In fact, 29% of respondents experienced a job or income loss in 2020. Yet, 98% of all survey respondents say they felt more in control of their money and financial future since starting a budget.
Despite the pandemic — and related job losses — 66% of respondents say they saved more money in 2020 than in 2019. Part of that might be because they spent less on:
- Travel (74.9% of respondents)
- Gas (67.8%)
- Dining out (51.2%)
Groceries are the one category where people tended to spend more in 2020 than the prior year, with 66% of respondents reporting an uptick.
How to build a better budget
The survey clearly shows the power of building a budget. If you don’t make a conscious effort to control expenses, they can quickly overwhelm you. For more on such mistakes, check out “9 Overlooked Expenses That Ruin Your Budget.”
YNAB itself is a great tool for budgeting. The Money Talks News partner is an app that makes it easy to track day-to-day expenses, prepare for unexpected costs and build savings.
You can even connect the program directly to your bank and credit card accounts, which allows you to download transactions to YNAB automatically so you don’t have to manually enter them one by one. That makes it much easier to track expenses.
For more, check out “An Easy Way to Track Your Spending and Build Your Savings.”