Quick & Easy Guide to Using a Zero Based Budgeting Template

Here’s how to fill out your zero based budgeting template in just 15 minutes, so you can spend less, save more, and actually enjoy budgeting.

Do you want to do better with your money? Most of us do. The problem is that we don’t always have the most appropriate tools to help us accurately and efficiently plan our finances. This blog post will discuss how a zero based budgeting template can be used to better organize your money, and keep you on top of your spending.

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What is the zero based budgeting method?

It’s also known as the zero-sum budget method, and it is a favorite among people, it’s Dave Ramsey’s go-to budgeting method. This is where you give every single dollar a purpose in your money plan! You start with your take-home pay, and then you budget down each individual category until you have $0 left. That’s the quick & simple answer. How it works out in real life is a bit more involved, let’s dive right in!

Income – Expenses = $0

What are the advantages of a zero based budget?

There are many advantages of using a zero-based budgeting template. Some of the key advantages include

  1. You can see where every penny is going, and where you can make changes in your spending. This allows you to be proactive about your finances, and stay on top of your budget.
  2. It can help you stick to your financial goals, by giving you a clear plan of action for each month.
  3. It’s easy to follow; all you have to do is execute the plan.

What are the disadvantages of the zero based budget method?

There are a few disadvantages to using the zero based budgeting template. Some of these include:

  1. It can be time-consuming, especially in the beginning when you’re setting everything up.
  2. You need to be disciplined and stick to the plan, or you could end up spending more money than you intended.
  3. It’s not for everyone; some people find it hard to follow a detailed budgeting plan. They want more room for spontaneity, so they find on constricting.

I personally feel that the advantages far outway the cons; but that’s because I am Type A, I like to plan. I personally use this budgeting method (in combo with other methodologies in my signature Better Budget Method.

What does a zero based budget template look like?

A zero based budget template looks similar for most people; just the dollar amounts and some of the discretionary spending categories are different. It flows from the top to the bottom, with the most important things being at the top, and the least important at the bottom; these are your discretionary budget categories.

Here’s what the zero-based budgeting template should look like… Let’s start at the top of the page and work down the 4 steps.

1 . Income:

You set your household budget up at the beginning of the month. You most likely know your income if it’s salary. But if your hourly, it’s best to be cautious and work off your average paycheck. If you work more hours then great, that’s a bonus to your monthly spending. But to be safe go average. Then add in your extras like side hustle money.

This section includes all of your sources of income, including…

  • Wages
  • Side hustle income
  • Tips, etc.

Total it all up, that’s your monthly income.

2 . Must spend expenses:

Next, it’s time to tackle your must-spend items. You can come pretty close to what your utilities should be (more don’t his below in the tips section), and how much your debt minimum payments should be depending on what you paid for & bought last month. Add these must spends all up and then total it.

These are the thing you have to pay for no matter what. It’s your…

  • Rent/mortagage
  • Home/renters insurance
  • Utilities – water, power, natural gas, garbage, phone
  • Health insurance (if not covered by a job)
  • Basic transportation
  • Basic groceries/food

3 . Debt payments:

Then, grab all your credit card statements and loan papers and fill in your minimum debt payments. (don’t worry, we’ll get to paying extra on your debts later).

  • Credit card debt
  • Student loan payments
  • Car payments
  • Personal loans

The above 2 categories are your “must spend” line items (unless you stop paying your creditors, which is possible but it’s not recommended). The next zero based budgeting category is where you get to spend money on your “wants.”

Take your income – must spend items – debt repayments = leftover to spend on discretionary items.

4 . Discretionary spending categories:

Discretionary categories are your optional ones (i.e wants). These are usually your variable expenses (amounts that change month to month). List out each spending category that your family wants to do. This includes any cash envelopes that you’re using for your sinking funds too. For example…

  • Grocery splurges – chips, candy, etc.
  • Dining out – fast food, restaurants, delivery, etc.
  • Memberships & clubs – gym, Amazon Prime, etc – (These are usually fixed expenses)
  • Consumer goods extras – clothing, beauty, etc
  • Entertainment – movies, adventures, hobbies, etc.

When deciding on dollar amounts; it’s either a fixed amount (I.e. a monthly membership fee), or you’re giving it a budget amount. Make a good educated guess based on your recent trends in this category (and budget constraints).

Take the total amount from step three, and minus the total from step four and you should end at zero. Now, in a real & regular world, you’ll end up with a negative number. That’s normal, you just need to go back and do some trimming to come in at $0.

Zero based budget examples

I know that things are a lot easier to understand when you can see it on paper, so here are some examples of a zero based budget templates all filled out. Yes, you can use the method on a many different template forms. It doesn’t have to be one way or no way at all, budgeting can look many different ways.

When you take your first run through be sure to use pencil, and print a couple of copies. I always scratch up my first attempt at my monthly budget so don’t feel that you have to get it perfect right from the start.

Zero based budget using The Better Budget method –

Here is an example of the exact form that I use every month, it’s called The Better Budget. It combines a few different budgeting principles all on one form.

When you fill out your personal budget, be sure that you put your savings goal at the top. I know it feels weird, especially when you feel you’re running short on funds. But your big financial goal is important, so make those savings goals a priority (even if it’s only $10 at first). You can always increase saving when you get some extra money. Or set up sinking funds to help pre-save for an unexpected expense.

I have sinking funds for our emergency fund, house repair, car repair, and a vacation fund. At first, I started small contributions, some at $10 a month, but slowly increased amounts as time went on.

Zero based budget using cash envelope method –

Using cash envelopes is a great way to help ensure that you don’t overspend your discretionary categories. You can of course put your utilities and fixed bills on a debit card or a credit card, which is easier.

zero based budgeting template

Zero based budgeting using the budget by paycheck method –

You can still use the zero based method doing the budget by paycheck method. You just need to do a little more pre-work in looking at bill due dates, dividing up spending, and sinking funds (this is optional, you don’t always have to have sinking funds, but they are so helpful).

zero based budgeting template

How to use your zero based budget during the month

When your monthly bills come in, you need to log them on your zero based budgeting template in the “actual” right column. Remember, your estimated guesses go in the “budgeted” left column.

If your bills are over what you expected them to be, then you need to go down to your discretionary spending to decide where you’re going to cut. This stinks I know, but this is the way it goes.

You’ll also need to be diligent about tracking what happens throughout the course of each day as well as weekly, so you can identify where things go off track before it becomes too much work, or too late. Use a spending log to keep track of your discretionary category totals.

What if I’ve overspent my monthly budget?

During the month, if you’ve overspent and you can’t find anything else to cut, then it’s time to revisit your income category and see if you can increase it. Either work overtime at your regular job, do more with your side hustle, or it’s time to start selling things that you don’t need anymore.

I hate to say it, but the #1 underlying principle of budgeting is to spend less than you make. If you can’t nail this one thing then you will never have control of your finances.

Now, this isn’t to say you need to get 100% right now. You should make easy cuts at the beginning of your budgeting process. Then make small cuts during the month, and see how it goes. It may not be as painful as you expect to only get lunch out two times a week instead of four times.

No one is 100% successful with budgeting from day one. Everyone needs to tweak and adjust their budget. It usually takes three months for people to smooth out the wrinkles. If, after that time you’re still struggling then you may want to consider changing to a different budgeting method.

Tips for success with a zero based budget

  1. When you are filling in your discretionary spending line items, fill in the most important ones at the top and work your way down according to priority. Then when you add things up, if you’re overspent, then you know which ones need to go – the ones at the bottom.

  2. The goal of the zero based budget is to get to $0 at the bottom os the sheet. Yet some people feel a lot better if they have a slight cushion. Say, less than $50. This way if their utilities are higher than expected (because they fluctuate monthly) then you’re still okay.

  3. When planning on monthly utility usage figure out your average spending for the season. So every three-four months you should be recalculating your average bill. This is because your usage most likely varies with the weather.

    You water your lawn a lot in the summer, but never in winter. Or you use electricity a lot in the summer to run your a/c unit. But not in the winter, when you use more natural gas to heat your home.

  4. When you make your budget every month, you should be looking ahead at any important dates/events where you may need to spend more money. Such as birthday parties, sports fees, etc. You either need to budget these into your monthly spending or use sinking funds.

    Remember sinking funds can be a great way to plan for one-off events or big-ticket items that you normally wouldn’t be able to afford out of your regular budget.

Who is a zero based budget good for?

There are lots of different ways to budget, which is great as we all operate differently. The variety of budgets help accommodate styles and preferences. So this budgeting method is good for…

  • Those that really want to know where each and every dollar is going.
  • People that want to be very strategic with their spending.
  • Those that lose focus with too much wiggle room, or quickly forget what money is for what purpose.

The zero based budgeting method may not be the best fit for

  • Those that don’t have a lot of time
  • People that can get easily overwhelmed by lots of details
  • Those with highly variable incomes, if your monthly income changes, it may be hard to nail down exact numbers.
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Zero Based Budgeting FAQ’s

I don’t want to use a printable zero based budget template – is there an app for that?

Everydollar – Yes! There’s absolutely a zero based budgeting app – it’s Dave Ramsey’s EveryDollar app. It’s a great way to do zero based budgeting digitally and is super easy to use. I wrote a full review right here. It’s so easy, you can have your budget up and running within 5 minutes!

The #1 thing I really like about it is that it gives you recommendations on what percent of your pay should go to each budget category which is helpful.

YNAB – One of the other popular budgeting apps is YNAB (You Need A Budget). This app really helps you set and achieve your financial goals, which in a way makes it great for zero based budgeting. The goal is to get all your budgeted money to $0, which means you’ve spent it on the purpose that you planned.

YNAB really helps with overspending in certain categories by giving warnings when approaching (or going past) a category’s limit. There is a free trial so be sure to check it out before signing up for the full program.

Google Sheets – I love a good google sheet, you can do so many different things with it! You can absolutely build your own zero based budget. Sometimes making something from scratch helps you wrap your brain around it better. You can add in as many monthly expenses as you like (while traditional budgeting templates only have so many lines).

I don’t want to spend down to $0 – that feels risky. Do I have to?

I know how you feel, you’d feel “safer” if you left a little cushion in your budget. Because it’s laid out perfectly on your zero based budget template, but in reality, we know things don’t go perfectly.

An easy area for you to overspend is in utilities, if it’s super hot outside all month your electric bill may be a lot higher than you expect. You don’t want to blow your budget plan. So you could add in an “overspend” category down at the bottom of your budget template, and that can be your cushion.

Can I use the zero based budget method if I have an irregular income?

Absolutely! Your budget is something that you should be doing every month, it’s not a one and done with the numbers being set forever.

If you’re unsure of your income, then figure out what is the lowest amount you’d likely take home that month, and then build your budget from there. (Look back over your paystubs from the last 12 months and see what your rock bottom number was, and use that).

When you set up your zero based budgeting template, put the lowest priority items at the bottom – as these are the ones most easily cut and added back in. Then during the month, if you find you’re getting more hours at work, and thus more income, then you can add those items don’t he bottom back into your spending plan.

I’m ready to try the zero based budgeting method!

Great! I’m so glad you’re on board as I really think this is one of the best ways to budget your money (I use this method). You can grab the free budgeting templates up above, which has a form you can customize to this budgeting method.

Or you can grab the Zero Based Budget Planner right now. It’s already all set up for this method and all you need to do is to fill in the numbers.

At the end of the day

Zero-based budgeting is a great budgeting tool to managing your money strategically. It helps you plan ahead and stay on top of the details for every dollar that comes in or goes out.

What are your thoughts about zero based budgeting? Do you use it, or do something similar that works better for you? I’d love to hear from you in our comments section below!

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2 Comments

  1. Okay well I LOVED this!
    I actually will be using your templates with my husband VERY soon.

    This was extremely helpful and very well written. Thank you so much for this awesome info!