Ever found yourself sitting on your bank account on payday wondering where the heck all your money went? Yeah, me too. Too many times to count. We get a paycheck, we’re briefly rich for 2.7 seconds, and then poof? Money’s gone faster than free donuts in an office break room.
But what if I told you that there’s a budgeting method that can potentially shatter this frustrating cycle? Welcome to zero-based budgeting – the finances equivalent of Marie Kondo-ing your purse.
What Even Is Zero-Based Budgeting?
Zero-based budgeting isn’t some gobbledygook financial wizardry that requires an economics degree. Nope. It’s actually quite straightforward.
This is how it goes: you put your money up and give every single dollar something to do until you get down to zero. That’s all. Easy peasy.
Now don’t mess up “zero” with zero dollars. They’re not one and the same. It only means every penny has a use. You’re basically giving directions to your money rather than standing around wondering where it went. Mind. Blown.
Imagine it in those terms – your money is like a group of kindergartners on a school outing. Set them loose, and they’ll run amok in seventeen different directions at once. But with guidance and boundaries? They’ll stay on course. Most of the time.
Why Traditional Budgeting Sucks Kinda
Let’s be honest here. Traditional budgeting is about as exciting as sitting to watch paint dry. And about as helpful as a chocolate teapot.
Most of us do it like this:
- Guesstimate how much we spend in various categories
- Impose some arbitrary boundaries
- Ignore it completely until we feel guilty about spending too much
- Do it again next month
Ring a bell? Yeah. I’ve been there too.
The issue with old-school budgeting is that it doesn’t factor in real life. Life is full of curveballs. Such as your car just deciding it needs a $600 repair. Or your best friend having a destination wedding in Bali. Thanks a lot, Sarah.
How to Actually Do This Zero-Based Budgeting Thing
Let me walk you through this stuff step by step. And I promise not to use the kind of phrases such as “fiscal responsibility” or “monetary allocation” since we’re all friends here.
Step 1: Figure Out What You Actually Earn
Sounds easy. But is it? Do you have any idea exactly how much shows up in your account each month after taxes, health insurance, and that gym membership you never remembered to cancel?
Write down that figure. That’s where you begin.
Step 2: Write Down ALL Your Expenses
And by all of them, I mean all of them. Rent/mortgage. Utilities. Food. That box of Japanese snacks you can’t live without. Your twice-monthly therapy sessions (which, come on, are likely if you’re obsessing over cash this much).
Don’t overlook the occasional ones either – vehicle insurance that crops up every 6 months, annual Amazon Prime renewal, birthday gift for your nephew.
Step 3: Give Each Dollar a Job Until You Reach Zero
This is where the trickery happens. You assign each dollar of your income to every expense category until you reach zero.
Here’s the trick: If you’re making $4,000 a month, you should have $4,000 assigned to various categories. Not $3,900. Not $4,100. Exactly $4,000.
Got remaining cash (rockstar, financially speaking!), consider a “savings” or “investments” or a personal favorite of mine, a “future me fund,” bucket.
You broke? Time to cut back and sacrifice somewhere. Maybe skip that daily latte. Or not. Maybe cancel that stream subscription you don’t ever actually use instead. Your budget, your choices.
Real Talk: Why This Actually Works Better
Zero-based budgeting works for a number of reasons traditional budgeting doesn’t:
- You need to be intentional. No more money slipping through the cracks on autopilot! Every last dollar has a purpose behind it.
- You’re working with real, actual money. You’re doing this with money that actually exists, not money that you hope will appear.
- It’s incredibly flexible. Something life is hurling at you? No problem. Just reallocate your categories. Money is just changing jobs.
I’d like to relate a short anecdote. My friend Jake (not his real name because he’d kill me for sharing about his money calamity) was never able to appear to manage any money although he earned good earnings. He tried zero-based budgeting as a last resort prior to contemplating a second job delivering pizzas.
Two months in, he figured out he was spending over $400 a month on takeout. FOUR HUNDRED DOLLARS. That’s like. a car payment! Or half a designer handbag! Or 80 coffees!
Jake wasn’t a money disaster – he just didn’t know where his money was going. Zero-based budgeting opened his eyes, and he got back on track. He still gets takeout, but now it’s intentional, not his default when he’s too lazy to cook.
Common Mistakes That Will Catch You Off Guard
Everyone is guilty of mistakes, especially if we are introducing something new. These are a few to watch out for:
Forgetting Miscellaneous Expenses
That Amazon Prime yearly subscription can ruin your monthly budget if you recall it too late. Save some cash every month for these strange expenses.
Being Too Frugal
You’re gonna mess up sometimes. We all do. I once spent my entire restaurant budget in one weekend when friends came in from out of town. Worth it.
Instead of beating yourself up, just make an adjustment. Maybe eat ramen for the rest of the month (kidding. sort of). Or dip into another category that’s less important to you.
Not Adjusting as Life Changes
Got a raise? Update your budget. New place, increased rent? Update your budget. Baby on the way? Definitely update your budget (and maybe start a coffee IV drip savings plan).
Tools to Make This Easier
I’m not going to lie to you – with paper and pencil or a basic spreadsheet, you can do it, but it gets super boring. Luckily, we’re in the future now, and there are apps for this:
- YNAB (You Need A Budget) – the gold standard for zero-based budgeting
- EveryDollar – Dave Ramsey’s version of zero-based budgeting
- Goodbudget – employs a digital envelope system
- Excel/Google Sheets – for the spreadsheet ninjas among us
Pro tip: Most have free trials. Use them. Discover what works for your brain.
The Psychological Game-Changer
Here’s something no one talks about nearly enough: zero-based budgeting isn’t so much about changing your money – it changes how you think about money.
When you have a clear picture of where your money is going, financial anxiety goes down. Even if things aren’t ideal, there’s something empowering about being in control.
It’s like the distinction between flying and driving. Both will take you where you need to go, but one allows you to be in charge of how you arrive.
Is This Worth All the Fuss?
Hear me out, I’m not gonna sugarcoat it. Zero-based budgeting takes more effort than normal budgeting, at least initially. You’ll probably end up investing a couple of hours to set it up and a couple of minutes each day operating it.
But is it worth it? Absolutely freaking yes.
Think about it: do you want to spend 30 minutes a week managing your money or hours and hours of worrying about it?
In the wise words of someone who was likely wise, “If you fail to plan, you plan to fail.” And when it comes to finances, failing isn’t really an option unless you have a trust fund or the winning lottery ticket.
So try zero-based budgeting. Your future self will appreciate it. And hey, worst case scenario, you can always fall back on the “swipe and hope” method that’s going so great for you right now.
Spoiler alert: chances are, it’s not going great.