the Zero-Sum Budget

What’s the Zero-Sum Budget and how to get it to work for you?

This week I’m going to be talking about the zero-sum budget, also sometimes known as the zero-based budget and I’ll explain how to get it to work for you.

Today I’m going to be following up on my last budgeting post and bringing you yet another budgeting method.

Now, I want to reiterate that this isn’t me saying that this budget is better than any of the other budgets that I’ve already covered or the ones I will be covering later on this blog.

Again my goal is just to show you what options are out there and let you make a better and more informed decision when it comes time for you to choose the method that you’re going to be using with your budget.

So look at this as an educational post more than anything else and with that out of the way let’s get started.

What is the Zero-Sum budget?

The zero-Sum budget is a budgeting system that tries to make your income minus expenses equal to zero.


Recently it’s been popularized by Dave Ramsey through his every dollar app and here’s how to set it up:

1. Write down your monthly income

Start off by writing down your monthly income. This should include your paychecks, any small business income, other side hustles, any residual or passive income that you may have, child support, and basically any other cash that you bring in during the month.

Think of it like this: the money that is going into your bank account is income.

2. Write down your monthly expenses

Next, write down your monthly expenses, list everything from rent and food to phone and cable bills, be sure to keep it simple and just write down 1 months’ worth of expenses we don’t need to get in over our heads here.

3. Write down seasonal/ irregular expenses

Next, try to think of any seasonal expenses that you might have. For example, Christmas is every single December so be sure to plan for that in your budget if you plan on exchanging gifts.

Also, try to think of irregular expenses that pop up from time to time, I’m talking about car tag renewals and other expenses like that which could blindside you if you don’t think about them beforehand.

4. Subtract your monthly income from all of your expenses

Now, subtract your monthly income from the expenses that you’ve written down, they probably won’t equal 0 the first time but that’s okay now is when you want to make some adjustments.

If your income is higher than your expenses:

If your income is higher than your monthly expenses then first of all congratulations for having some extra cash left over at the end of the month but you’re not quite done yet.

You should increase either your savings, you’re giving, the amount you put towards your debt every month if you have any, or your spending.

The reason for this is that you want to give every dollar a name before the month begins because if you don’t it’s very likely that the remainder of your money at the end of the month will go toward some impulse buy and you won’t remember how it got away.

This is the reason, of course, why budgets are needed in the first place.

We need to know where our money is going and why it’s going there because if your money is leaving the house every month to parts Unknown then there’s one thing that we can say for sure and that is that your money is not working for you and we want your money to work as hard for you as you do for it if not harder.

If your income is less than your expenses:

Now, if your income is less than your monthly expenses then you need to find some ways to cut your expenses or increase your income.

Some common ways of cutting expenses are eating out less, getting rid of your car payments possibly even by selling your current car and buying a decent used car for a couple thousand dollars at least until you’ve got your finances under control, or just using coupons and waiting for sales when shopping.

And remember you’re not done adjusting until your income minus your expenses equal 0.

What if you have an irregular income?

One question that I do think I should answer is can you use this budget with an irregular income and the answer to this is Absolute YES.

A good rule of thumb while doing this is the Zero-Sum budget is going to be based on what a low earning month for you would look like and when you get your expenses you’re going to want to make sure that you cover the four walls first which includes your food, housing cost including utilities, the clothing, and transportation costs basically the things that you cannot live without.

So, when your income arrives, make sure you cover those expenses first and then list the other expenses in order of importance to you and pay them off in that order.

And if you should find yourself with money left over at the end of the month, after all of your expenses have been paid, that’s when you start to look into, again, saving more, spending more, or giving more.

Now you’re ready to start the month, track your expenses and build your own fortune.

Who should use this budgeting method?

In my opinion, in an Ideal World anyway, everyone will at least attempt to use this budget once. Not necessarily because it’s objectively the best budget ever, that’s not my opinion.

I’m saying that because it does force you to, at least, look at where all of your money is going, at least at one point in time, and the knowledge of where your money has been without you even maybe realizing it can be life-changing for some people.

And even if they don’t continue to use this budget afterward, that discovery can help make whatever budgeting method they are using work that much better because they’re more aware of their spending habits.

They know where the problem areas are for them financially and in my book that’s always a good thing but I think the people who this budget method works best for are those who never want to feel like they’re wasting money as well as those who want to feel in the most control of their financial destiny as possible, as opposed to the money being in control of them.

Because, again, every single dollar you have has a job, every single month, and when every dollar has a purpose it’ really hard to waste them and that feeling of being in total control of your money instead of it being in control of you can be very empowering.

How the Zero-Sum budget can fail?

On the flip side, this may not work as well for people who want to create a quick budget without too much more hassle because if you don’t budget for everything there is a possibility that this budget can fail.

How to get the Zero-Sum budget to work?

On the bright side, you can counteract this to a degree anyway by doing things like overestimating your variable expenses like your utility bills that are a little bit different every month and adding in contingency expenses.

Since you do try to budget for everything with this method there shouldn’t, realistically, be a miscellaneous expense lying on your budget but that doesn’t mean you can’t put one in.

Something along the lines of miscellaneous unexpected expense might help you cover anything that comes up that would otherwise have been budget-breaking.

Now, the idea is not “oh I need this pack of gum as I’m standing in line at the grocery store so I’ll put that under the unexpected expenses line” No!

This is something more along the lines of “I was driving in an unfamiliar area and missed a stop sign and got pulled over and ticketed as a result”

That’s not an irregular expense like car tab that does come up every now and then but these expenses still may be enough to disrupt your budget for that month and this contingency plan can help you stay on track.

Now, if you go through the month and don’t have anything unexpected like that come up you can always transfer the amount that you put into the miscellaneous unexpected expenses into your savings.

Now, you might ask “what if something happens that’s bigger than a ticket?” well that’s what your emergency fund is for and hopefully, you got that established.

However, I should note if you don’t have an emergency fund then you should have something in your budget that forces you to build up your emergency fund to at least three to six months’ worth of expenses.

Thanks for your time

This was my approach to the Zero-Sum budget. I hope you liked it and if you did then I recommend you to join my newsletter I post about money management and how to make money online.

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