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Your budget is going to be your secret weapon when it comes to taking control of your finances.

It goes without saying that getting a good budgeting system in place is going to be pivotal to your financial success.

There are many different ways to budget, some of which I have covered before like the 50/30/20 budget, the basic budget for beginners and the cash envelope system.

Each of these systems has its own advantages and disadvantages but today we’re going to discuss the zero based budget and what it can offer you.


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What is zero based budgeting?


A zero based budget is a very simple concept with very powerful outcomes.

Having a zero based budget means making sure that your income and outgoings end up at $0 each month.

Before you freak out, let me just explain that zero based budgeting does not mean that your bank account will also be equal to zero, phew!

Oh no, that’s the opposite effect from what we are trying to achieve here.

Put very simply if your income is $2500 per month then at the end of the month you should end up with a big fat ZERO in your budget. Not because you have frivolously spent it all but because every single dollar has been accounted for in some way.

It would be wise to put any extra money that you have left at the end of your budget into a debt snowball if you have debts that still need to be paid off or into savings of some type.

You just need to make sure that each dollar is accounted for.

Pretty simple right?


Zero based budgeting for beginners

Zero based budgeting helps you keep track of every single penny


How do you start putting together a zero based budget?


1. Add up your income

You need to start at the very beginning and make a list of your income.

Don’t make the mistake of thinking that your income is just what you get paid from your job. There are other things that can also contribute to being a part of your income too.

If you get a one-off bonus from work or receive some type of windfall that is also a part of your income for that month too.

Even if you were to win on scratch cards that should also be accounted for as part of your income too. I don’t recommend that you play with scratch cards or participate in any other form of gambling especially if you are in debt.

These things are likely to cost you more than you will ever win in the long run. People that are lucky enough to gain from a considerable windfall are very few and far between.

Selling anything on eBay or Etsy is also another form of income that should be noted down for the month.

Interest that you receive from savings or investments is also earned income and should not be overlooked.

A lot of people overlook these items and end up spending the money on things that they can’t even remember. Don’t fall into that same trap.


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2. Add up your expenses

Totaling up your expenses can be a little tricky to do.

The best way to make sure that your expenses are correct is to make sure that you have gone over your bank statements from the last few months to make sure you haven’t missed anything.

Your expenses will include things like debts, savings, bills, loans, groceries, gift giving and subscription services, etc.

If you have a sinking funds schedule then you should make sure that those items are listed here too.

Anything that causes you to take out your wallet to pay for is an expense that needs to be accounted for.

If you have a private pension fund, that also needs to be included in this.

Take a few days to go over your expenses because it can be a tough one to nail down.

Once you are confident that you have listed out you can then move onto the next step.


Zero based budget


3. Take your income from your expenses

This is where everything comes to light.

If you are doing well hopefully your income will surpass your outgoings but if it doesn’t don’t worry there are always ways that you make a few little tweaks and make cutbacks where necessary.

If after making some cutbacks you still can’t get your budget to equal zero then you may need to think about some type side hustle (which is not uncommon these days) such as proofreading or transcribing which will allow you to make some much needed extra income without having to go out and get a second job.

The goal here is that our income and expenses should end up at zero.

Doing this is the only way to make sure that your money is working effectively for you.

I’ve lost count of the number of times where I have a little excess left in my budget and then poof! just like that, it’s gone.

That’s not a very good money move.

If you have excess in your budget then you need to find a home for those extra dollars.

You can put the extra towards Christmas, gifts for your children, or a mortgage payment, basically, anything that you want.

I can almost guarantee you that if you don’t assign those dollars a job they will disappear on you like Houdini.


Adding up expenses


The advantages of zero based budgeting


It makes sure that every dollar is accounted for.

You can see exactly where your money is going each month.

You can easily allocate free money to where it is needed most of all.


Disadvantages of zero based budgeting


Can be time-consuming to implement and stick to.


Final thoughts on zero based budgeting


There really are not many disadvantages to the zero based budget that I can see.

It may be a little time consuming to begin with but as experience takes over you will get faster at it.

Personally speaking, I find this to be the most helpful way to budget especially when you have debts or need to save towards something specific.

Don’t let the time to takes to perfect this method put you off. Just go for it!


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Zero based budgeting