Create a zero-based budget

Create a zero-based budget

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I love budgeting and my favourite type of budget is the zero-based budget.  This is the process of planning your money so that you have a balance sheet with a big zero on it.


This doesn’t mean that you are spending it all.  It means that you are making sure that the money is all accounted for and has a job.


Essentially, this means you know what you are spending, saving and investing every month before the month even starts.  Follow these steps to create yours:


Write down your income

You need to know how much money you have coming in.  This means money from all sources, so from your job, your side hustles, benefits, investments and more.


Write down how much you are expecting from each source and when you are expecting it.  Total this up as this will be all the money you have to allocate for the month or period you are budgeting for.

List monthly expenses

Now you need to look back through your bank statements and write down how much you spend each month on different categories.


This can be broken down into home (rent/mortgage/council tax), car/travel, utilities, childcare, entertainment and food.  Or you can create the categories to suit you.  But make sure that you have covered everything.


List annual expenses

You now need to look over the whole year.  Think about birthdays, Christmas, holidays, annual bills and anything else that you must pay for infrequently.


Decide if any of these are due to be paid in the month that you are currently working on.  Save the others on a calendar so that you won’t be caught out next time.


Allocate all the money

The next step is to take your income and distribute it across all of these categories to make sure that all your bills are covered.


You also want to include some categories that help you get closer to your goals, such as debt payments and savings pots.  Spread the money between these in the way that suits you personally.


Make sure that when you are done income-expenses = 0.  This is why it is called a zero-based budget.

Monitor your spending

With the budget sorted, you get to watch it play out over the month.  Keep track of your spending as you go so that you can see if you are on target to stay in budget.


You might find that you get random expenses that come up or that you need to spend more in one category than you planned.  That is OK and it is part of the learning experience of budgeting.


Adjust the budget for next month

Spend some time reflecting on how your budget went last month.  If there were areas where you overspent, adjust your budget for next month to incorporate that.


Don’t forget to check your calendar for any seasonal expenses and include these in your budget planning.


Do you have a zero-based budget?

How do you find it?  Do you have any tips for people creating their first one?  Share them with me below and I’ll include them in this post.

Disclaimer:  Remember the information you read here does not represent advice.  Any ideas or suggestions are just that and may not work for you.  Read the full disclaimer here.

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This Post Has 7 Comments

  1. Maria Black

    Awesome post! I also do a zero based budget-any money that comes in is immediately funneled to different savings accounts, investments, credit card payments, and necessities.

    It’s really satisfying to know where your money is going 😄 I’ve found automatic savings apps like Albert, Mint, and Acorns are really helpful to a zero based budget

  2. Belle

    Thank you for sharing this, i basically need this right now. i have just started monitoring my expenses and i have noticed that i have exceeded a lot in the past months. I think i need to do more steps on how to monitor my expenses and save more.

  3. Ina

    Thank you for sharing this with us! Super useful!

  4. Morgan

    I’ve been spending crazily since lockdown. Excited to get back on track in June. Going to try this zero-based budget to see how it goes.

  5. This is great information I need to pass it along to a few of my family members to review to get their houses in order. Your steps are so simple to follow.

  6. I love the idea of having a zero-based budget with all monies accounted for. I’m just not that disciplined yet. Maybe someday.

  7. Josephine

    Hello! I do have a zero based budget! I use the YNAB method && LOVE it! 🙂 Have you heard of it?

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