The zero-based budget is a budgeting method that makes you give value to every dollar you have in your account. The idea is that the money you use as your monthly income and expenses close in 0. This means that your cash covers all you spend without having to recur to credit sources.

This monthly budget strategy forces you to have a budget category for each variable or fixed expense, including debt payments, and use the actual income after taxes. You can control and relocate your money somewhere else.

And if you don't have debts or spending, you can overspend a little – This is why many people like this budgeting method.

The zero budget helps you plan savings, spending, and variable expenses. You can’t guess or change your budget in the middle of the month. Instead, you must consider how much you have in your bank account.

A zero-based budget will help you to:

• Create an emergency fund.
• Control your expenses based on a regular and not irregular income.
• Have enough money for costs like child support.
• Measure if you have any money left at the end of the month.
• Save money for car repairs and other bills.
• Boost your confidence to start side hustles.
• Track the amount of money spent on groceries.
• Investing the extra money – if you have some left.

If you align your financial life to this paper – or document – you can improve your money management skills in just a few months.

It’s clear that a budget is necessary to keep your expenses on track. But why should you use a zero-based budget instead of all other personal financial strategies?

The budget takes into consideration:

• Your gross income or net income in the checking account – you can do it in cash as well.
• Investments such as rental properties.
• Monthly food payments.
• Gas.
• Tax deductions.
• Potential purchases.

You need to have prepared upfront your income and expenses. After all, your budget should equal zero.

As with any budget, values could change monthly – especially if you don’t have fixed expenses or a steady income. So, if you decide to use this budgeting strategy, you should estimate each purchase to make your paycheck last enough.

Developing a zero-based budget is easy. It can take you up to three steps to do it.

Here’s how you can craft and adjust your budget until it reaches zero:

This is the first step you take to determine your budget. To do that, you must gather all your sources of income.

Make sure the money you’ll use for your budget is net income – after subtracting taxes and retirement contributions.

You can use bank statements to understand your financial situation better.

Now for the hard part, recording your expenses.

To determine your expenses, you must have an adequate line of thought. We recommend you be sincere about your costs of living before you start. You could divide them into two categories:

• Needs: Include all that’s necessary to survive—for example, rent, utilities, insurance, emergency fund, and child support. Don’t include anything related to “fun money.” Instead, you want to keep this section free of unwanted information.
• Wants: You can allocate here all your desires. This is tricky because, unlike “Needs,” there are services and products you don’t need to live, but you still spend a few dollars on them—for example, subscriptions, optional insurance, or property taxes.

With all this stuff, you can assign money to pay all these debts.

Once you have gathered all your income and expenses, you must allocate them to your budget spreadsheet.

Create the document based on your financial goals. We recommend you prioritize savings or debt repayment before anything else.

You can use Google Sheets or Microsoft Excel to develop a helpful budget. Create a format and separate the budgeted debts into sections such as:

• Housing costs.
• Utilities.
• Subscriptions.
• Date nights.

You can also use something old-fashioned such as “earnings” and “debts.”

The point is you add enough expenses, so your declared income reaches zero. There’s no room for errors here. If you have free money left, then you need to relocate it. 

For example, if you have a budget of $1,000 a month and have $100 left after adding expenses, you need to find a way to cover this money.

You could use it for shopping or add it to your savings account. Either way, you need a concept for it.

If you don’t want to spend a lot of time on your zero-based budget, you need two tools:

1. A productivity tool.

2. Zero-based budget templates.

Microsoft Excel works excellently as a productivity tool. This online-offline software can help you develop an automated budget for your whole life. You can use formulas to:

• Determine how much to invest in emergency funds.
• How many expenses you have already paid.
• The amount of money you’re putting to pay debts.

It doesn’t matter what formulas you need; Excel can do it for you.

The thing about Microsoft and its whole software suite, is that you need to get a license to use it. If you were to enter the official website and get a CD key, you would have to pay over $250. Fortunately, you can get third-party serial numbers for barely $20.

This will give you access to the software that Microsoft Office 2021 has for you, from Word to PowerPoint.

Templates help you spend less time creating or editing the budget. They also have formulas included to automate processes.

Here are some of the best zero-based budget templates you can find for Excel:

Template #1

The zero-based budget is one of the saving methods you can use to meet your money goals. Whether they are short-term savings or long-term financial goals, you can control your spending when you measure your spending.

You can create your savings categories, summarize your total income and select a “job” for each cent you have available after taxes. This is the best way to control every dollar you earn.

It can be time-consuming initially, but this is the main difference between planning for your future and living day after day without knowing if you’ll have enough money to live when you’re older.