This post may contain affiliate links. Read my full disclosure here

There are many different ways to budget your money, and I talk about a lot of them here on this website. But one of the most popular ways to budget is zero based budgeting. Unfortunately, many people do this wrong. For that reason, I have compiled this article and a FREE zero based budgeting template to help!

Contrary to popular belief, zero based budgeting doesn’t mean to actually take your budgets and accounts down to zero. In fact, you should NEVER bring your bank account down to zero dollars, if at all possible!

There should always be a small amount of money in your checking account, called a buffer. This checking account buffer will save you from overdraft fees and can be considered a bit of a slush fund if you will.

So if you’re interested in learning more about zero based budgeting and getting that free template, keep reading. I’ll help to answer your questions, teach you all about the do’s and don’ts of zero based budgeting AND I’ll get you that free template you’re wanting.

Sign up for my emails now for FREE access to the Resource Library full of Financial Templates for budgeting and taking control of your money!

* indicates required

What is Zero Based Budgeting?

Zero based budgeting is a term used to describe the fact that every dollar is accounted for. Zero dollars get left behind and zero dollars are unaccounted for.

The objectives of zero based budgeting is simple. You budget every dollar of your income into a specific category so it’s accounted for. Every month, week, or payday, it’s reset and you start from square 1 all over again. 

The advantages of zero based budgeting this way is that you can catch all the irregularities in your income and expenses. This is great for when you’re trying to pay off debt or save money for a specific purpose because you’re more likely to find “extra” money in the budget and tell it where to go.

The Goal of Zero Based Budgeting

The goal of budgeting this way it to have the income minus the bills and expenses only to come out to zero. But, people often take that far too literally. As previously stated, you should never allow your accounts to go to $0 dollars.

Even Dave Ramsey, writer of Total Money Makeover recommends leaving some money in your account for the unaccountable expenses.

How many times have you been surprised by a payment getting taken your of your account?

Unexpected expenses happen a lot in any adult’s life. And if you don’t have the money readily available for these things, you get charged with a convenient overdraft fee or bounced payment fee, which is always quite pleasant. 

Studies have shown that those that do zero based budgeting as opposed to other budgeting methods are more likely to save money and pay off debt. So if you’re interested in doing either of those two things- this could be a great budgeting system for you!

Pretty brunette writing on a paper while calculating sitting on the floor at home

How to Make a Zero Based Budget

Figure out how much you have to work with

If you’re living above your means, you may find that you’re spending more money than you make. With a zero based budget, you’ll easily spot those cuttable expenses.

Some examples of things you can remove, cut or trim. 

  • Eating out
  • Car payments
  • Groceries
  • Utilities

Eating out

There are several different ways that you can get by without eating out (or by eating out much less). Meal planning, eating and reusing leftovers for new dishes, organizing your pantry and reducing food waste, it all add’s up. If you do still eat out, set a strict budget and look for ways to save money on eating out.

Car payments

A lot of people are upside down on a car loan, and those things usually take a good chunk of money per month to make payments. Reducing your monthly expenses by selling the car and buying one that’s used, can help to reduce your payments without losing your set of wheels.

Groceries

Grocery shopping and grocery budgets are one of the places where people can cut the easiest and with the least amount of pain. With couponing and store sales cycles it’s pretty easy to trim costs and save money on your grocery lists. 

Utilities

If you pay more attention to your utility usage you can cut costs on electricity and save money on water bills just by making a few simple changes to your life. Turning the light off when you leave the room or taking a shorter shower can add up to big savings.

Once you figure out how much money you have coming in, and look at the areas you can trim, you can begin to make a realistic zero based budget.

Young couple calculating their domestic bills at home

Steps to make a zero based budget

You can make a budget plan in just 4 simple steps:

  1. Writing down your income
  2. Writing down your expenses
  3. Subtracting the expenses from the income
  4. Tracking your spending

Write down your income

Include all areas of income. Everything from disability to work, child support and more.

Only write down how much money you know is coming, never include things like personal loans from friends or family who are supposed to pay back with a payment plan.

That money should be considered a pleasant surprise and never be included in the important income needed to keep your 4 walls paid.

Write down your monthly expenses

Expenses vary per person but write them ALL down. If you need help getting numbers or ideas of what you spend money on, look at your past 3 bank statements and get ideas and numbers from there.

Remember to include everything from the rent/mortgage to the life insurance and Netflix subscription.

Look at seasonal expenses

Christmas budgeting takes place months in advance and you should already know when to expect Thanksgiving and Easter. These things might move around slightly, but they happen every year just like a birthday.

Set up sinking funds for these events so that you don’t fall short on money when they get here.

Add the sinking funds to your list of expenses.

Brunette looking worried over bills in kitchen

Subtract income from expenses and equal to zero

If you’re lucky then your expenses will be less than your income. This should give you money left over to do what you want. Including everything from saving money to paying off debt or investing.

Important reminder: Your account buffer should be included in the list of monthly expenses so that your account still comes to zero, without actually being zero.

Your account buffer can be however much you feel comfortable with. Honestly, $100 is plenty, and anything more than that, you risk overspending and using it as a slush fund. Which is setting yourself up for poor financial habits.

Track your spending

Track your spending throughout the month to make sure that you are sticking through with your budget. If you aren’t make a note on why, and then come ack to it next month when you make your new ZBB plan.

Was the expense just a fluke or are you just not giving yourself enough money in one area or too much in another?

It can take several months to get your budgets perfected and to find all of the leaks. Don’t beat yourself up if it’s not perfect from the start.

How to zero base budget with irregular income

If your income varies per month, you can still budget with the ZBB plan!

Look at the past 6 months to 1 year of income, and find the one where you earned the least.

Make your ZBB based off of the least earning month. If you can handle your bills at your poorest moments, you’re doing great! If you can’t think about setting up savings funds or increasing your income with a side hustle.

Make sure you also prioritize your bills. The most important things are shelter, food, and water. After that, everything else can fall in line based on their order of importance.

If your income is short and you can’t pay all of the bills on time, you’re going to want to make sure that your food and shelter are taken care of first and foremost.

If you have to have some bills go unpaid, contact the to let them know. They may even be willing to work with you so that it doesn’t negatively impact your credit.

So to recap,

A Zero based budget gives you control over every dollar in your account. You tell everything where to go, and what to do. And this plan helps you to be more likely to pay off debt and save money. So what are you waiting for? Get started on your own ZBB today!

Click the link below to download your very own copy of a zero based budgeting template so that you can get started making a huge financial change for the better! Make sure to click File Save so that you don’t lose it once you close out of the page!

Click to Download Zero Based Budgeting Templates

Sign up for my emails now for FREE access to the Resource Library full of Financial Templates for budgeting and taking control of your money!

* indicates required

If you liked this post, pin it to save it for later!

Zero based budgeting. What is a zero based budget? How to make a ZBB and how to do a ZBB successfully. Dave Ramsey swears by this type of budget but not many people follow it correctly. Are you? Check out this article full of tips and financial advice as well as a free printable template to get you started!
Zero based budgeting. What is a zero based budget? How to make a ZBB and how to do a ZBB successfully. Dave Ramsey swears by this type of budget but not many people follow it correctly. Are you? Check out this article full of tips and financial advice as well as a free printable template to get you started!
Zero based budgeting. What is a zero based budget? How to make a ZBB and how to do a ZBB successfully. Dave Ramsey swears by this type of budget but not many people follow it correctly. Are you? Check out this article full of tips and financial advice as well as a free printable template to get you started!
Spread the love