Zero Based Budgeting – How to use a Zero Based Budget

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What is zero based budgeting? Zero based budgeting is a simple budgeting method in which you allocate every dollar you earn to expenses, debt, and savings. This is my favorite budgeting method. Zero based budgets are used by budgeting gurus like Dave Ramsey!

Why Should I use a Zero Based Budget?

Using a zero-based budget creates financial awareness! According to surveys conducted in financial literacy classes, people who do a zero-based budget (versus those who don’t) pay off more debt and save more money!

The sooner you make a zero based budget part of your financial strategy, the sooner you’ll start to see your debt go down and your savings go up. 

With a zero-based budget you will put your budgeted income and expenses into your budget. After you have placed your budget information into your budgeting document, you will allocate any remaining funds to debt or savings.

A zero-based budget gives every dollar a place in your budget so that each dollar is working for you.

It also creates financial awareness. At the end of each period put your actual budget information into your budgeting document. Compare where you over and under spent. You can then change your budget allocations going forward.

Using a zero-based budget will put you on the path to financial freedom!

Need help planning your budget? Click the image above for this freebie!

Step Zero

To begin your budgeting journey, you need to:

  • Print off the last three months of bank statements, calculate your income in each month, and categorize your cash out by expense category. Use an expense tracker to understand how you spend your money.
  • Create a list of all of your debts, investments, and savings account balances.
  • Make the decision to change the way you use money!

Spreadsheets or Editable PDF’s?

Spreadsheets are not just for accountants. Anyone can use them! Years ago I was intimidated by spreadsheets. I didn’t know how to use the formulas or any of the features, and in the beginning I gave up before I even began.

Then I started my degree in accounting and learned that spreadsheets are tools that everyone should try! Currently, I use spreadsheets to budget.

monthly budget dave ramsey spreadsheet

But, let’s say, you are thinking, “there is no way I could use a spreadsheet! I wouldn’t even know where to begin!” My answer to that is, not a problem. The spreadsheets I have created have everything done for you!

All you have to do is take the plunge and give it a shot!

You are still hesitant. I understand! That is why I have also created editable PDF’s with the calculations done for you! This gives you the power of spreadsheets in a format that is not intimidating and easy to use.

An editable PDF is simply a form you fill out on a document viewer such as Adobe.

Let’s Start a Zero Based Budget!

Now that we have gathered all of our financial data, and chosen to use a spreadsheet or an editable PDF, it is time to get down to business!

It is the beginning of the period. You have seen that for the last few months you have different trends with spending. For example, on average, you are spending $400 a month on groceries and $200 on eating out.

You will take this information and forecast, or budget, your future months. Remember that you will budget to zero!

Use the extra money left after you budget to pay down debt, save, or invest!

After the month ends, you will actualize your budget. This is the most important step! If you don’t take where you started across the finish line and compare it to where you began, you have no way to improve your financial decision making!

Put your actual expenses next to your budgeted ones and see the difference.

Lastly, use this information to change your spending habits and boost your money habits! It is that simple!

Get Your Zero Based Budgeting Journey Started Today

Are you ready to start your zero based budget? You can find the zero based budget I have used for years in my Etsy Shop. It has been an invaluable tool on my financial journey!

Do you feel like you need to stay accountable to your budget by only using cash in the beginning?

Cash envelopes are a great way to stick to a budget. Allocate the amount of money you want to spend on a budget category. Once you have spent all the cash in the envelope you can no longer spend money for that category. This system got me through the lean times when I first started my career. It creates great discipline and helps you to rethink how you are spending money!

These cash envelopes are a great tool to use with your zero based budget to stay on track!

Need Additional Guidance?

I have created a YouTube channel with video tutorials on how to use my budgeting and habit tracking tools. These quick videos will get you started today! Let’s budget to financial independence together!

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