International Baccalaureate (IB) Practice Exam

Does writing and following a zero-based budget help in avoiding overspending?

1. True

2. False

3. Only for some individuals

4. Only if combined with other strategies

The correct answer is: True

Writing and following a zero-based budget is an effective method for helping individuals avoid overspending because it requires that every dollar of income is allocated to specific expenses, savings, or debt repayment at the beginning of each budgeting period. This approach forces individuals to clearly define their financial priorities and make conscious choices about their spending. By assigning a purpose to every dollar, people become more aware of their financial habits and can actively track their spending against the budget. This level of awareness can help mitigate impulse purchases and unnecessary expenses, thereby reducing the risk of overspending. The zero-based budgeting method also encourages regular review and adjustments of the budget, reinforcing financial discipline over time. While some may argue that a zero-based budget might not work for everyone, the fundamental principle of aligning income with expenses remains beneficial in promoting mindful spending and helping individuals maintain control over their finances. Other strategies can complement this approach, but the core strength of a zero-based budget lies in its structured allocation of funds.