A Beginner’s Guide to Zero-Based Budgeting

Zero-based budgeting is an effective financial tool that can help you gain control of your finances and achieve your financial goals. It is a budgeting system that requires you to start from zero, meaning that you start with no money allocated for expenses and you budget for each expense individually. This type of budgeting helps you track your income and expenses, create a spending plan, and save money for the future. It is an especially useful tool for those just starting out in the world of budgeting, as it provides the structure and guidance needed to form successful financial habits. With this beginner’s guide to zero-based budgeting, you’ll learn the basics of this budgeting system, how to get started, and how to use it to reach your financial goals.

What is zero-based budgeting?
Zero-based budgeting is a budgeting system that requires you to start from zero, meaning that you start with no money allocated for expenses and you budget for each expense individually. Unlike other budgeting systems, like the 50/30/20 budget, which start with a base amount budgeted for certain categories (like groceries or gas), ZBB requires you to add each expense as you incur it. This budgeting system forces you to track your income and expenses, create a spending plan, and save money for the future. It is an especially useful tool for those just starting out in the world of budgeting, as it provides the structure and guidance needed to form successful financial habits. With this beginner’s guide to zero-based budgeting, you’ll learn the basics of this budgeting system, how to get started, and how to use it to reach your financial goals.

Benefits of zero-based budgeting
When you start with a budget, you may be tempted to just plug in the same numbers from your previous budgeting system. But why would you do that? Why not start fresh with a system that has been specifically designed to work for you? A zero-based budgeting system provides many benefits that other budgeting systems may not, including:
A Focus on Future You - At the beginning of the month, when you’re at your most motivated, you can imagine Future You sitting at a table with a notebook, pen in hand, and a glass of water beside her. She’s not worried about paying for groceries this week or next month’s utility bill. She’s thinking about 10 months from now when she starts a side hustle and needs to buy a computer. Or 20 months from now when she wants to travel but knows she needs an emergency fund saved up. With ZBB, you can start with a clean slate each month. You can think about Future You, who will be grateful for the time you saved up for those trips, computers, and emergencies.
A Focus on the Present - As the month progresses, you’ll write down all of your expenses as they occur and think about and plan for the money you need to spend now. You’ll be focused on the money you need to spend right now. You won’t be able to let your current expenses creep up to last month’s budgeted amount. You’ll stay in the present and think about what you need to spend right now.
A Focus on Your Spending Habits - A zero-based budgeting system is designed to help you track your spending habits. You’ll be able to see where your money is going each month and make adjustments if necessary.
A Focus on Your Values - A budgeting system should help you live in accordance with your values. It should help you save money for the future and provide for your loved ones. A budgeting system should help you live according to your values.

Steps to create a zero-based budget
If you’ve decided that zero-based budgeting is right for you, the first thing you’ll need to do is determine your monthly income. Next, add up your monthly expenses and see what you have left to allocate to savings. Once you know what you have coming in and going out, you can start creating your budget. A zero-based budgeting worksheet will help you get started with this process.
You have two budgeting systems available to you: the 50/30/20 budget and the zero based budget. The 50/30/20 budget has been used for decades and is a simple way to control your spending. With this budgeting system, you’ll decide how much you want to spend on each category of your budget (e.g., groceries, gas, etc.), and then you’ll divide that amount by three to get a monthly budget. A zero based budgeting system, on the other hand, requires you to start from scratch with each new month. You’ll make a new budget each month using a zero-based budgeting worksheet.
The first step to creating a budget is to decide on a budgeting system. Once you’ve decided on a system, you can begin to create your budget. Divide your monthly income between the different areas of your budget. Place the rest of your income into your savings.

Create a spending plan
Once you’ve been tracking your spending for a few weeks, it’ll be much easier to create a spending plan. A spending plan is a tool that will help you stick to your budget. It’ll help you see what your financial goals are and how to achieve them. It’ll also help you better manage your money and prevent overspending. Once you've been tracking your spending for a few weeks, it’ll be much easier to create a spending plan. A spending plan is a tool that will help you stick to your budget. It’ll help you see what your financial goals are and how to achieve them. It’ll also help you better manage your money and prevent overspending.

Save money for the future
Once you’ve created a budget and spending plan, it’s time to start saving money. Building up an emergency fund and saving for your future is an important part of budgeting and essential to achieving financial security. Once you’ve created a budget and spending plan, it’s time to start saving money. Building up an emergency fund and saving for your future is an important part of budgeting and essential to achieving financial security. Building up an emergency fund and saving for your future is an important part of budgeting and essential to achieving financial security. With zero based budgeting each incoming dollar has a destination, therefore pair your savings goals within these. For example if you want to save $30,000 for a home over the next 36 months, than you build that monthly or bi-weekly number into your zero based budget.

Tips for sticking to a zero-based budget

Don’t forget to account for taxes
When you’re creating your budget, remember to account for taxes. Taxes are applied to all your income and expenses, meaning you’ll have less money than you thought when the government is done taking deductions from your paycheck.

Make adjustments as necessary
Once you start tracking your spending, it’ll be easier to make adjustments if something isn’t working. Perhaps you’re spending too much on entertainment or groceries. If so, you’ll need to make adjustments to stay on track. Make adjustments to your budget as necessary.

Start small
If you’ve never budgeted before, you don’t need to start with an extremely strict budget. Start small and work your way up. Once you’ve got the hang of budgeting, you can make it as strict as you need it to be.