Zero-Based Budget: Everything You Need To Know To Get Started

Jun 27, 2019 | Budgeting, Master Your Money | 0 comments

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Here’s a crazy stat:

Two-thirds of Americans don’t have a budget.

That means that 218 million people are spending their money will-nilly with no game plan.

Two hundred and eighteen million people who are not financially successful.

Because, let’s face it:

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Without a budget, you are highly unlikely to be able to afford your lifestyle, pay down debt, or save money.

Are you one of these people?

It’s ok if you are.  I was too.

And it gets better:

Creating a budget (or a plan) for your money is hella easy.

What isn’t always easy is sticking to your budget.

However, when you use a budgeting method, such as the zero based budget method, you can significantly increase your chances of sticking to a budget.

And, when you stick to a budget, you’ll be able to:

  • afford your lifestyle
  • pay down debt (and stay out of debt)
  • save more money
  • free up money for personal use

and more.

That sounds pretty sweet, right?

I know.  It totally does.

So, let’s get started.

> why you definitely need a budget

Learning how to budget is super crucial if you want to stop living paycheck to paycheck and reach your financial goals.

But, budgeting can be the worst, so people tend to avoid it.  (Two-thirds of Americans to be exact!)

Here’s the deal, though:

Not budgeting is a huge, huge mistake.

Because, if there is one thing that you should keep organized in your life, it is your money.

So, why do so many people avoid budgeting their hard-earned cash?

Two reasons:

  • budgeting is can be time-consuming
  • budgeting is can be stressful

See, money is often the cause of stress, tension, and arguments between partners.  And, money controls most aspects of our lives, leaving us feeling like we often do not have enough.

So, why even bother with it all, right?

Wrong, wrong, wrong.

You 100% need a budget, regardless of how ‘little’ or ‘big’ your income is.

Because, here’s the deal:

Without a proper budget (and understanding of your finances), you will never, and I mean never, feel satisfied with your income and standard of living.

A budget is necessary if you want to:

  • afford your lifestyle
  • stop fighting about money
  • pay off debt (and stay out of debt)
  • save money

So, let’s set up your zero based budget so you can prepare for a kickass financial future.

> how to use a zero-based budget

To set up a zero based budget follow these steps:

  1. Determine Your Why Factor
  2. Collect Your Financial Information
  3. Calculate Your Income & Expenses
  4. Cut Costs (if necessary)
  5. Create Your Zero Based Budget
  6. Track Your Budget

And don’t miss this:

Your free zero based budgeting starter bundle!

> who is a zero-based budget good for?

Everybody can benefit from a zero based budget, especially if you really, really like to plan (like me!).

Why’s that?

With a zero based budget, you will be assigning every dollar you earn to a category, such as expenses, savings, or debt repayment.

Simply put, a zero based budget will:

  • establish a plan for every dollar you earn
  • make sure you’re living within your means
  • help you pay off debt and save money

The pros of a zero based budget include:

  • being able to easily eliminate poor spending habits by not allocating money to that category of spending
  • always having enough money allocated for bills and other necessities
  • quickly paying off debt by allocating more money to debt repayment efforts
  • easily saving money by allocating spare money to a high-interest savings account

 The cons of a zero based budget are:  None.

But really:

A zero based budget is simple, straightforward, and doesn’t restrict your lifestyle in any way.

Let’s dive into the deets.

step 1: determine your why factor

We’ve already established this:

Every single person needs a budget if they want to be financially successful.

But why.

This will be different for everybody, and you can determine your why factor by asking yourself these questions:

  1. What will budgeting help me do?
  2. How will budgeting make my life simpler?

For example:

You might want to start budgeting to stop living paycheck to paycheck, to pay off debt, or to save more money.

Knowing your why is essential because it creates meaning for your purpose.  Without it, you’d have no motivation to continue budgeting.

Because let’s be honest:

If you do not have a plan for your money, how are you going to afford your dream life?

Here’s a hint:

You won’t be able to.

So, once you establish the reason you want to start budgeting, I urge you to write it down!


Because writing it down makes it real and it reminds you of why you started in the first place (if/when budgeting gets tough).

Recommended:  Need a spot to write down your motivation for budgeting?  I highly recommend investing in a budgeting planner, like the Budget Boss Binder.  Keeping all your financial information in one tidy spot makes budgeting a whooole lot easier!

step 2: collect your financial information

Want to know the best part about this step:

It’s hella simple and shouldn’t take you much time at all.

You’re simply going to gather up your financial information. (i.e., pay stubs and bills)

You’ll need:

  • a months worth of pay stubs (and your partners, if applicable)
  • all the bills you currently pay, their individual costs, and when they’re due
  • your personal spending habits

This is crazy, but:

Most people don’t actually know how much money they make or how much money they spend.

And, when you don’t know this information, it is impossible to budget.

So, to avoid playing guessing games, take the time to gather your financial information before you try to create a budget.

Helpful Hint:  If you are unsure of your exact income and expenses, track your finances in a budgeting planner to find out!

step 3: calculate your income + expenses

Before you can assign your income to categories (i.e., create a zero based budget), you need to establish your average monthly income and expenses.

Here’s why:

If you’ve never budgeted before, you probably don’t have a firm understanding of your finances.

Therefore, you’re probably spending more than you can afford (or not spending your money efficiently).

So, to determine if you need to cut back on expenses before you start budgeting (for better budgeting success) calculate your income and expenses now.

(Knowing your exact monthly income and expenses is also critical for planning out a zero based budget.)

Your Income:

Using the information you gathered during step two, calculate your total monthly income (after taxes) from all sources.

Once you know exactly how much money you earn each month, you can determine if you are living within or beyond your means.

For the purposes of this post, let’s pretend your total monthly income is $4,500.

(Monthly Income Organizer & Financial Evaluation available in the Budget Boss Planner)

Your Expenses:

Next, you’ll want to calculate your total monthly expenses.

For the purposes of most budgets, break your expenses down into two categories:

1. Fixed Expenses

2. Variable Expenses

Fixed expenses are bills that you are required to pay monthly, such as rent/mortgage, utilities, cell phone, credit cards, insurance, etc.

Variable expenses are those that vary in cost each month and could be decreased or eliminated if needed.  These expenses include things like groceries, transportation, entertainment, and more.

If you aren’t sure what your monthly variable expenses are, begin tracking your spending in a financial planner to calculate an average at the end of the month.

For the purposes of this post, let’s pretend our total fixed expenses equal $2970 and our total variable expenses equal $730.

(Monthly Income Organizer & Financial Evaluation available in the Budget Boss Planner)

step 4: cut costs

Once you’ve calculated your monthly income and expenses, you can quickly decipher if you’re living within or above your means.

To do this, simply subtract your total expenses from your total income.

If the number is a positive number:

You’re in the green and should be able to afford your lifestyle with ease each month and can easily move onto setting up your zero based budget.

If the number you calculated is a negative number:

You’re in the red and cannot afford your current lifestyle, meaning you will have to decrease your expenses if you want to successfully start budgeting.

If you are in the red and need to cut costs, these are the best resources:

1.  Use BillBargain

This is a fantastic resource that will help you lower your monthly expenses.  BillBargain has successfully negotiated over 85% of the bills they receive for cell phone bills, Wi-Fi, cable, and more.  The best part?  BillBargain is 100% risk-free.  If they don’t successfully negotiate a lower price for your bills, you don’t owe them a dime.

Get started with BillBargain for free here!

2.  Pay Off Your Debt

Credit card debt will suck you dry every month if you don’t work hard now to pay off what you owe.  I highly recommend consolidating your credit card debt into a low-interest personal loan to save tons of money and pay off your debt in half the time. (Doing this helped me pay off $15,000 in debt in only 12 months!)

3.  Sign Up For Trim

Referred to as a financial health service, Trim securely connects to your bank account(s) to analyze spending, subscriptions, and recurring bill pay.  Then, Trim will help you cancel unused subscriptions, negotiate lower bill prices, and more.  In the last month alone, they’ve helped their users save over $1,000,000!!

Sign-up for Trim for free here!

101 Ways To Save Money:  Read our ultimate guide to frugal living to discover 101 ways to save thousands of dollars a year!

step 5: create your zero-based budget

To get started:

Next, follow these steps:

1.  Add up your monthly income (after taxes): $4,500

2.  Total your monthly fixed expenses: $2,970

3.  Total your monthly variable expenses: $730

4.  Subtract your total monthly expenses from your total monthly income to see how much money you have left to budget:  $4500 – $3700 = $800

5.  Assign the rest of the money ($800) to debt repayment, savings, retirement, vacation fund, and more.

6.  Subtract steps 2-4 from step 1 to get ZERO.

The goal is to reach zero at the end of your budget planning and calculations, meaning that every dollar you earn has a job each month.

This is great because you’ll be able to easily budget for your lifestyle while also affording to pay off debt and save money.

And, the best part:

Your zero based budget can change every month to align with your current financial goals.

Remember:  If your budget doesn’t balance to zero and instead equals a negative number, you have to cut costs.

To get started with your zero based budget, download your free printable bundle here.

step 6: tracking your budget

Most people forget this crucial part of budgeting and end up wondering why their budget failed a month after implementing it.

If you have a budget, then you need to track it.

Because, here’s the deal:

If you do not track your budget, you cannot make sure that you are sticking to your budget.  And, if you aren’t making sure that you’re sticking to your budget, your budget will fail.

You might be wondering:

How do you track your budget?

Here are the best budget tracking resources:

1.  The Budget Boss Binder – $9 ($27 value)

A printable and digital budgeting planner designed to help you create & stick to a budget, pay off debt, save money, and more.  The Budget Boss Planner is un-dated so you only have to purchase once to use this planner forever.

To take a peek inside the Budget Boss Binder, click here.

2.  Honey Money ($50 value)

An online resource to track your budget.  Honey Money is the internet’s version of a printable financial planner.  Within your dashboard, you can create your budget, track your budget, create debt repayment and savings goals, and more.  If you aren’t a pen and paper kinda person, I highly recommend this budget tracking resource.  

Get started with Honey Money for free here.

Again, when you track your budget, you ensure that the system you put into place is working correctly.

Don’t let the time you spent creating a budget go to waste by avoiding this simple step!

>> wrapping up

A zero based budget is the ultimate way to take control of your money (and your life).

In fact:

A zero based budget is the exact budgeting method we used to pay off over $15,000 in debt in under a year.

I know.  These are high claims for a simple budgeting method.

But, it’s true.

And, I want the same things for you.

So, take action:

Gather your financial information, implement your zero based budget, and track your budget for success.

Don’t forget your free budget by paycheck bundle!

And, cheers to stressing less about money!

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Happy budgeting,

– michelle

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