How to use the Zero-based budgeting method

When you think of the words zero-based what is most noticeable mention is the word “zero”. Thinking of something being zero in the mind of a saver can create that big question mark above your head. “Is this the best way to manage my money?” First, you would need to understand what is zero-based budgeting to figure it out.


Zero-based budgeting ( also known as zero-sum budgeting) is where income minus expenses should equals zero. This technique is basically taking your paycheck and assigning every cent to a category, in the end, this should equal zero. Giving a purpose to every dollar gets rid of the anxiety of living paycheck to paycheck. So how do we do use this strategy? keep reading

How to get started

There are a few things you should do before you get started. What we don’t want to do is guess how much money to divide up. We need to budget our average monthly income. Since every cent will have a purpose we don’t want to allocate too much to overspend. Under projecting our monthly income will only help create less stress since we are limiting ourselves.

Good ways to figure out an amount is to keep track of your expenses for a couple of months. You can always go back to your last few bank statements and separate your expenses in sections.

Write down and calculate all of your spendings.

Come up with an average amount to budget for on a monthly bases. When you receive your paycheck make necessary adjustments to find a place for every cent.

Track your expenses


The difficulty in a zero-based budgeting strategy is tracking expenses. I would think of it more as a discipline. As you place a particular amount in category for your budget, you have to try your best to not overspend. Keeping track of your daily expenses could be your best way to make sure you are within the limits.

You want to make sure you are consistent with this and make it a habit. Tracking your spending can reveal to you how responsible you are with money. Opening up insights into which categories you should budget more money for versus others you can cut.

Materials to get you started

Create your sections


After a whole month of tracking, I’m sure you got this part down. What are the categories? The regular expenses like utilities occur every month. If you find yourself needing spending cash, you might want to create a “Personal Spending” section. Other odds and ends may pop up as a surprise. I like to call this my “Miscellaneous section” for that buffer of a random expense. A good amount of money to set aside for “Miscellaneous” is between $50-$100.

List of Common Sections

  • Rent/ Mortgage
  • Utilities
  • Groceries
  • Personal Spending
  • Insurance
  • Savings
  • Debt

So what do you do when the month is over?

When you have finished out your month now you can prep for the month ahead. If there are still funds left in a few sections there are also few things you can do with them. You can transfer it to the following month, that way you are contributing fewer funds to those sections. Another thing you can do is place all remains funds to your savings. Do you have debt to pay off still? Add the leftover funds to the debt you trying to get rid of.

Who can benefit from this strategy


I would say a zero-based budget is good for everyone. If you are really bad at saving and overspend often this will be the best method. It forces you to take into account every dollar you make and everyone you spend. As a beginner at budgeting, I’m recommending this as a good starter. You can adjust your sections according to you to goals and or needs. Even though this strategy could be the most time consuming, the efforts you’ll put into it pays off in the end.

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