How To Do Zero-Based Budgeting

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The first step in gaining control of my finances involved getting on a zero-based budget. Essentially it means assigning every dollar to a category. If we don’t know where our money is going, how can we learn to save more?

As I’ve evolved through the years financially so has my budget. However, I still track my expenses and assign every dollar to a category. This post is designed to help you know how to use a zero-based budget.

Before I get into my article, I’d love to put out a request to you…what topics do you want me to write on? What would you like for me to research and report back on? I’m open to your suggestions and you can reply in the comments or send me a private message.

Now onto budgeting…

How To Set Up a Budget

Here are the things you’ll need to think about and gather before you begin:

  1. How often you are paid
  2. Your net take-home pay
  3. Your savings goals
  4. How much you typically spend on monthly expenses such as:
    1. Groceries
    2. Eating out
    3. Personal care
    4. Entertainment
    5. Gasoline
    6. Rent/mortgage
    7. Utilities
    8. Healthcare
  5. How much you spend on expenses that are expensed less frequently like annually, semi-annually or quarterly:
    1. Homeowner or renter’s insurance
    2. Automotive insurance
    3. Water/sewer
  6. Your total debt
    1. Each of your accounts and their total pay off and minimum balance

Once you’ve got that gathered you can come back here to build your budget.

Choosing Your Format

So this really comes down to preference but there are a ton of tools out there. Here are two I’ve heard good things about:

  1. Every Dollar
  2. You Need a Budget

However, I prefer good old fashioned Microsoft Excel or Google Sheets.  Since I love you all so much I’ve created several sample budgets on Google Sheets. You’ll need to open and save a copy if you want to actually use them for your own budgeting purposes. You can do that by going to file > make a copy.

  1. Monthly
  2. Bi-monthly
  3. Bi-weekly
  4. Weekly

On the bi-weekly sample, I added a column for a 3rd week. When you come to a month that has 3 pay periods, you can add numbers in that column. Likewise, in the weekly sample, I added a column for a 5th week.

Once you start using one of these you’ll want to create a like one for each month of the year.

What’s in the Budget?

Everything. Seriously, if you spend it and you are trying to get a handle on your finances, everything you spend should be in your budget.

These are fairly extensive examples that I’m sharing but you may still have expenses that I didn’t account for so be sure to make this personal. The numbers are made up and may seem too low or high in some instances.

Be honest about your actual numbers when first inputting them into a budget. It will help you see where you might be bleeding money. Moreover, you’ll find out if you don’t have enough money at the end of the month.

In the budgets, there are 9 sections:

  1. Charitable gifts
  2. Savings
  3. Housing
  4. Utilities
  5. Food
  6. Transportation
  7. Personal
  8. Recreation
  9. Debt payoff

You can tweak these however you’d like but I’ve found everything can fit into one of these categories.


So if you are contributing to pre-tax accounts like a 401k or an HSA and they are taken directly out of your paycheck you won’t list them here. These are already factored in the fact that we are starting with your takehome pay.

The items listed in the saving section are extra things like an emergency fund, a car fund, and other things that come up annually (i.e Christmas, vacation). On my actual budget, these things get pulled from my checking account and put in my savings account each pay period.


This one is kind of obvious – rent, mortgage, property taxes. That’s about it.


Another obvious one!


The nice thing about compartmentalizing these items is that you’ll be able to a.) stay to a budget and/or b) track how much you spend on each category. This is groceries and eating out.


This includes some obvious things and some not so obvious things like car maintenance. Everyone should be putting aside money each month for automotive repairs. That way when you have an unexpected expense, like a flat tire, it’s not really unexpected!


The things that you buy for yourself care. Some people lump these items in with groceries. Whatever works for you is fine. The key is sticking to a plan that makes sense to you.


This is where I track my skiing and other hobbies. Also, why not just budget some money for random entertainment. That way if something fun comes up, you’ll be able to say yes. 🙂

Debt Snowball or Avalanche

Lastly, if you have any debt you are working on you’ll list it here. Choose a method for paying off your debt – the snowball, avalanche or a hybrid of the two. The most important thing is to start and don’t get caught up in analyzing the most optimal method. The best method is the one that will allow you to pay off your debt.

Once you decide which debts you’ll pay off first, list them in that order on your budget. Additionally, list the minimum payment for each and add any extra money at the end of each pay period to the debt you are attacking first so that each column zeros out.

Of course, if you don’t have any debt, you won’t have this section.

Other Talking Points

These sample budgets work well with cash. Cash is simple and when you run out, you’ll realize you are at the end of your budget. When I was paying off my debt, I budgeted with cash and kept my expenses in different envelopes.

It works beautifully.

I’d stack all the expenses that were being withdrawn from my account in one pay period so I only had to go to the bank once a month.  Then I’d stack the other things that were getting paid out of my account (or being saved) on the other pay period.

You’ll have to play around with things until you get your expenses in the pay period that works for you. Some things are due on certain dates so my suggestion is to plug those in first to the pay periods in which they must be paid. Then you can play around with the other expenses until you get the final row to zero out.

Budgeting with Credit Cards

Now that I’m disciplined with credit card use and pay off my balances on time and in full every month, I often use credit cards to pay for my monthly expenses.

I’ve been playing around with different methods for budgeting with credit cards and here is one method I came up with last year.

This year, I’m trying something else so if at the end of the year, my overall assessment is good, I’ll share my new budget with y’all.

Closing Thoughts

I find freedom in budgeting and telling my money where to go. It also teaches me delayed gratification. If there is something I want, I add it to the budget and save up for it.

Sometimes when I do this, I realize I don’t want it after all and save the money instead.

If you are more of a tracker than a budgeter, that works too. I know many people in the personal finance space who set their savings goals and live off the rest. However, you’ll always want to track your spending.

I personally think if you are trying to get out of debt, budgeting is the way to go.

Once you are disciplined at staying out of debt, you may find you still like to budget or perhaps you’ll prefer tracking. Either way, it’s important to know where your money is going.

Happy budgeting!!


8 thoughts on “How To Do Zero-Based Budgeting”

  1. Love this post! My fiancé and I love our budget and we don’t ever see ourselves not having one! Instead of feeling restricted by a budget, we feel it opened us up to a world of opportunity. After college, when I looked at my debt, I felt lost. When you have debt and you are paying hundreds of dollars to lenders every month, it is easy to feel like you don’t have any control. Through being intentional with our spending and tracking it, we found peace in our financial situation because we were able to take that control back! P.s. I listened to your ChooseFI episode on the way to work today! Such a great, motivating story about overcoming obstacles. I really enjoyed it!

    1. Hey there! Budgets are great and I really owe a lot of my success today to the zero-based budget. What a testament your comment is to budgeting! I remember that lost feeling but, as you said, what you are intentional on your spending and have a plan you gain financial peace. That’s what it’s all about!!

      Thank you on the ChooseFI episode compliment. Those guys are such great interviewers. It was a real pleasure to be on their show!

  2. Wm. G. Broaddus

    Deanna, another means of paying one’s bills and reducing cost is to use electronic fund transfers from one’s checking account. I currently have fifteen line items that are paid electronically, of which twelve are paid monthly.. This results in dramatic savings by not needing to write checks, or use postage stamps for mailing..

    1. Excellent comment, Dad. I actually pay all of my bills electronically and most of them are set up to pay automatically. You are exactly correct that it not only saves on time but money in postage stamps. You just gave me a great idea for a future article! Thank you!

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