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Tired of not having enough money at the end of the month? Do you need to save more money for your future?

Zero-based budgeting (ZBB) can help you create your financial plan and change your finances forever!

With zero-based budgeting, you can finally manage your finances and begin your path to financial freedom.

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3 Steps to Create a Zero-Based Budget

Husband and wife at the table budgeting to meet their new financial goals

We teach you about zero-based budgeting and how it can help you get your money under control.

By following our smart steps, you can make the budgeting process simple and easy and you can go from no budget to a sure budget in no time.

And once you’ve made your budget, you’ll be on your way to better money management!

1. Determine your monthly income

The first step in zero-based budgeting is knowing your monthly income.

You need to know how much money you are taking in each month to allocate it to your expenses.

Knowing how much you earn may seem like a good idea, but many people don’t know their exact income!

Write down all your income streams for the month, how much you expect to earn from them, and have some totals calculated.

You can use a money management app like Personal Capital or Mint to help you track your income, savings and more!

2. Be realistic about your expenses

The second step in this budgeting process is knowing your expenses.

You need your fixed costs (rent or mortgage) and variable costs (groceries or transport) as part of your expense categories.

Cost control is essential to implement in this step! It’s about the same as for a business. You want to make sure you create a spending limit and don’t exceed it so that you can keep as much of your money as possible.

One way to find out what your monthly expenses are is to keep track of how much you spend a month. Use your bank account statement and credit card statements to track how much you spend in each category.

Once you know how much you spent in a given month, you can estimate how much you will spend in your current month. Just write down the bill (company or what the charges are) and how much you spend.

Now you’ve added up your income minus expenses, but what do you do with the remaining money?

SAVY TIP: Using a budget template or budgeting software like Quicken can help you with the zero-based budgeting process to track your money automatically.

Also use programs like Trim to save on utilities, cancel unused monthly subscriptions and save on your monthly expenses.

3. Make sure every dollar has a home

Every dollar of your income should have a home — the “zero” on this budget plan means you have ZERO dollars left at the end of the month.

Now, this is not quite true! You still have money every month and your income is allocated to whatever else you want to do or save after the necessary things have been paid for.

With a zero-based budget, you put money aside for all that good stuff, plus some savings. This way you never skimp on money for the future, but you also don’t spend too much on things you don’t need.

You can pay yourself first by making sure you have money to buy clothes, nice things from Amazon, etc.

Once you’ve done your regular expenses, it’s time to put money out for other expenses, sticking to strict spending limits so that you never have to spend your savings that month.

BONUS: Use coupons to save more costs and get cash back from Capital One Shopping and Honey.

SAVY TIP: There are many other ways to cut costs and reduce your expenses. You could:

Cut back on eating out Spend less on groceries Use public transportation Negotiate your personal loans

The possibilities are endless to reduce cost factors (like in business) and work towards zero dollars in the budget!

Zero-based budgeting vs. Traditional Budgeting

Smart couple budget template

Zero-based and traditional budgeting are two different budgeting methods for managing your income.

Zero-based budgeting starts each month with a clean slate, meaning you allocate each dollar to a certain category.

The traditional budgeting method allows you to carry over the previous month’s expenses into your current month to use the leftover income, but people find that this leads to overspending.

Both methods use a structured approach to allow you to track your expenses, but money is not allocated to expenses in the same way.

The main difference is that zero-based budgeting starts with a clean slate every month. You allocate each dollar to specific categories, leading to deliberate spending.

On the other hand, regular budgeting allows you to carry over from the previous month to this month. This is easier to budget because the leftover income is there for whatever, but it’s up for grabs, which people spend quickly.

Why use regular budgets?

There are a few reasons why you might want to use regular budgeting instead of zero-based budgeting:

Easier to Manage: Regular budgeting can be easier because you start a new period with residual income from the previous month. Your new budget can follow the same settings every month instead of changing spending category. Saves time and energy: You don’t have to spend time budgeting all your money, just what you expect to spend in a normal month. Your past budget results will be the same for several months, so you can copy and paste your budget from month to month and just add the money from before.

Why use a zero-based budgeting system?

The main advantage of zero-based budgeting (ZBB) is that it forces you to pay attention when spending. It’s the same concept as using the envelope-based budgeting method.

When you spend $0 each month, you are less likely to make impulse purchases or overspend in a particular area. It gives you the chance to prioritize better savings!

Here are a few quick reasons why people are switching to a zero-based budget:

To get rid of debt: If you have a lot of debt, creating a zero-based budgeting method can help you get rid of it faster. You can put extra money into your debt each month in lieu of other purchases. To save money: A zero-based budget can also help you save by making it a top budget category and filling it every month, rather than skipping it. Living a simpler life: If you want to live a simpler life, a zero-based budget can help you. You can justify spending and cut out the things in your life that you don’t need so you don’t spend money. To be more organized: One of the best reasons to create a zero-based budget is that you can easily keep track of your expenses and your savings with a simple organization.

Example of Zero-Based Budgeting

Here’s an example to help you create your zero-based budget!

In January, Joe has a salary of $4,000 a month from a local company and his salary is poured like clockwork into Chime.

He uses his bank statements and credit card statements to list all his expenses:

Housing: $1,000 Food: $400 Car Payment: $300 Gas: $100 Amenities: $200 Phone: $100 Insurance: $150 Entertainment: $50 Total Cost: $2,300 Money Left for Other Expenses: $1,700

Joe can use budgeting percentages to allocate his leftover money among other expense categories. For example, he could spend 30% on saving, 20% on debt repayment and 10% on going out with friends or buying new clothes.

He researched some budgeting tips and decided to allocate the remaining $1700 this way:

Invest in an emergency fund at CIT Bank: $350 Pay extra in credit card debt: $100 Invest in a retirement fund Savings: $250 Pay off doctor’s services: $200 Pay extra on mortgage: $350 Put extra on student and personal loans: $200 Saving for special occasions: $150 Personal expenses (clothing, shoes, etc.): $100

Now all $4000 of his earnings has a home and his total cash at the end of the month is $0.

Creating this budget allows Joe to take into account his current expectations with planned expenses and ensure that he uses his money only for the essentials and cut costs if necessary.

He can also save more money than ever every month and make progress towards his financial goals of becoming debt free and taking early retirement!

Pros and Cons of Zero-Base Budgeting

save monthly to avoid living beyond your means


Help you stay on track with your spending Be more mindful before you buy or waste Avoid overspending in one area Help save money


Can be time consuming You may need to make some changes to your spending habits Can be challenging to sustain Requires a lot of discipline

Final Thoughts

saving money for an emergency fund money moves to be debt free

Zero-based budgeting can be an excellent tool to help you save money and stay on track with your expenses. However, it does require discipline to create a budget every month.

You may need time to change some of your habits to make zero-based budgeting work so you can make progress toward your financial goals.

And once you’ve created your zero-based budget, you’ll be well on your way to better money management!

Top Personal Finance Software

Personal capital

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