How to Create a Zero Based Budgeting Template

What if you had a simple budget template to track your money?

You’d know…

How much you spend on groceries
Can you afford to buy a house?
Are you actually saving money?
Why you’re not saving money
Will you be able to retire early?

All of this, and SO MUCH MORE can be tracked and answered with a zero based budgeting template.

We’ve all heard that budgeting is important, but creating a budget that works can be a lot harder than you thought.

Where do you even start?

Do you need to create a budget spreadsheet from scratch?

Is it better to find a budget template, even if it costs a few bucks?

The good news is, there’s a lot of ways to budget, and no “one size fits all” approach to creating a budget template that works for you.

I’m going to share my zero based budgeting template and a few examples of how a zero based budget can apply to your own finances.

Ready to learn about the advantages of zero based budgeting?

What is Zero Based Budgeting?

The basic idea with a zero based budget is to give every dollar you make a job or responsibility.

In other words, you track what you do with every dollar.

When you use a zero based budgeting template, the basic formula is:

Income – Expenses = $0

This formula should be true every single month that you use a zero based budget.

I want to break this down a little more and define income and expenses more clearly.

If you already know all about zero based budgeting and are just here for a sweet, easy to use zero based budgeting template, click here to get an annual budget spreadsheet or here for a monthly budget spreadsheet.

Both are only $5.

What Counts as Income?

In a zero based budget, income is any money you make or that comes into your bank accounts during a month.

A few examples include:

your main career/job
selling things
tax returns
stimulus checks
side jobs

I feel like income is pretty self explanatory, so I won’t keep kicking a dead horse.

But expenses can encompass a lot, so let’s dive in a little deeper.

What counts as an expense in zero based budgeting?

Of course there are the obvious expenses – bills, debt payments, car insurance, groceries, clothes, daycare, pet food, date nights, etc

BUT…

Expenses also include all of the following:

Investments
Roth IRA
Traditional IRA
Any money that goes to savings
Tithe and donations
Life and health insurance
College savings and 529 plans
Extra debt payments

In zero based budgeting, ALL of these things are treated as an expense.

If you’re unsure, think of it like this – if it’s not income, treat it like an expense.

So going back to the formula,

Income – Expenses = $0

This helps you intentionally track all of your money, set aside money for your goals and priorities, and know exactly how much money is spent on each of your budget categories.

Advantages of Zero Based Budgeting

3 of the most important benefits I see with a zero based budget are:

More awareness of your spending habits
Pinpoint and cut unnecessary spending
Focus your spending on your goals and priorities

Becoming More Aware of Your Spending Habits

After years of using a zero based budgeting template, I can tell you with pretty good accuracy how much money we spend EVERY, SINGLE, MONTH on almost all of our expenses.

Or at the very least, how much we set aside for every expense in our budget.

Sometimes we’re under budget, and other times we go over budget. It happens and is a real part of life.

I’m not going to pretend our budget is perfect and just because I write about budgeting all the time, it means we never go over budget. It’s just not true.

Just last month we went over by $50 on household stuff – TP, paper towels, dish soap, etc.

It happens.

Then you make adjustments for the next month and keep going.

When we started our first budget in 2013, it was eye opening (and slightly alarming) how we were spending our money.

And with a very small income, and very high debt, I realized really quickly that I needed to make changes in how I spent my money. It wasn’t just “a feeling” that I wasn’t using my money well, it was verifiable fact and data staring me in the face.

Was that hard to face and deal with? You freakin betcha!

BUT…

It was the best thing I could’ve done and has turned my life around. It’s led to more focused spending on things that matter, and less spending on things that don’t.

Cut Expenses that You Don’t Care About

Month to month you’ll spend money on a lot of things.

Some money goes to things that really matter – mortgage/rent, groceries, savings goals, childcare, transportation, and dates.

But…

Sometimes we spend money on stupid stuff that doesn’t bring any value, joy, or fulfillment to our lives.

And it turns into wasted money.

Take a minute and look at your expenses. What’s something that you hate spending money on or could do without?

I’ll bet you can find something that you spend money on that you don’t really care about.

For me, that was cable and clothes.

I like watching tv, but Netflix is plenty for me. Do I miss watching my Minnesota Twins? You betcha I do. But I can find other ways to keep up with them.

As for clothes, I’m pretty content with what I have and have never been someone to buy lots of clothes.

It was easy to cut those out of my budget and save that money instead. Actually I used it to pay off debt.

What about you?

What can you cut out of your monthly budget?

If you don’t know right now, your zero based budgeting template will help you. Get yours right here for just $5.

A Budget Helps You Focus on Your Goals and Priorities

When I know where all my money is going, I can set better, more specific goals with my money.

And when you go through the process of writing everything down and cutting out spending you don’t care about, there’s more left over to reach your money goals.

Growing up, my general goal with money was to have enough of it to do the things I wanted to do.

The problem with that is I never took the time to think about the important goals in my life.

And when I became an adult with a real job, I didn’t have a clue how I could use my money to reach my long term goals like getting married, starting a family, providing for my family, saving money for my kids to go to college, traveling.

I wanted to do those things, but money was an obstacle, because I never felt like I had enough.

Learning how to set up a zero based budget – and actually use it – helped me align my spending with my goals.

I finally understood my income and expenses and made intentional changes to optimize my finances to reach my goals.

Here are a few examples of how using a budget can help you reach your goals.

Save $50 a month to slowly save for your dream vacation.
Paying off debt is a bigger priority than you thought. Making extra payments can help you get out of debt faster.
Christmas shopping always sneaks up. Start saving $100 a month in January so you know you’ll have the money in December.
You’re pregnant and growing your family. Now you can plan for all those newborn expenses.

There are so many other goals that you can focus on when you build them into your budget.

Your budget is fully customizable to your goals and values. If you care about it, make sure you set aside money every month for it.

A Zero Based Budget puts YOU in Control of Your Money

When you know exactly how much money you make and choose how much money you want to spend, save, use to pay off debt, you truly become the master of your money.

A zero based budget helps you choose how to spend each dollar before it even hits your bank account.

It creates an intentional plan for your money with your biggest goals and priorities in mind.

A zero based budget template can help you reach your goals, and that’s important.

Zero Based Budgeting Examples

Okay, I’ve been talking about a lot of theory behind a zero based budgeting template. Now it’s time for solid examples. Both of these example budgets are from our own budget in 2014 and 2018.

Zero Based Budget Example #1

Back in 2014, this is a snapshot of our budget. Everything that isn’t income belongs in the “expenses” category.

2014 Zero Based Budget

So back to our zero based budgeting formula: Income – Expenses = $0

You might notice that we actually have $488 left over so our budget doesn’t equal zero…yet.

That just means we had $488 that we needed to assign a job to. Here are a few options we considered back in 2014.

Pay extra do debt
Add to our emergency fund
Add to our vacation sinking fund
Give more money away

And to help us make this decision, we went back to our goal of being debt free. Most of this extra money likely went to pay off debt.

Now our income – expenses = $0.

Zero Based Budget Example #2

2018 Zero Based Budget

One thing to note, your income and expenses can change A LOT in a couple years. This is our budget from 2018.

We were debt free, bought a house, adopted dogs, added savings, investing, and life insurance to our budget categories. And our income changed drastically.

But our zero based budgeting continued and we learned how to account for every single dollar of income, whether it was a bill, saving money, or investing.

Every dollar got a job and our budget became very efficient to help us reach our goals.

The real power in zero based budgeting is to align your spending to your goals so you reach your goals faster, like saving money and getting out of debt.

Are you ready to create your zero based budget? Let’s go!

How to Create a Zero Based Budget

These steps are going to be really practical, and it might help to grab a pen and paper so you can get a head start on creating your own zero based budgeting template. You can also grab a premade zero based budgeting template for just $5.

List all of your income sources and how much each one is
List every expense – bills, groceries, investments
Write down all of your savings goals

Now it’s time for a little math. Income – Expenses = _____

See what your current budget looks like with this simple exercise. This is the first step of budget awareness.

You can see a couple things right away.

1. Do you have money left over after covering all of your expenses?

2. Are you willing to cut any expenses that detract from your goals?

3. Are your savings goals getting the money and attention they deserve or that you WANT them to receive?

Once you have a clear picture of what your current zero based budget looks like, you can start making changes for your spending to reflect your goals and values.

Things like saving money, paying off debt, investing in retirement or your kid’s college fund, going on more dates might be areas where you choose to spend more money because it’s a big goal or higher priority than driving a fancy and expensive car.

Now that you have a basic idea of how to create a zero based budget, let’s look at a couple options to turn your numbers into a spreadsheet that collects data every month.

I love using my budget to create data because that data helps me keep making intentional decisions to move closer to our goals and align our spending with our values and priorities.

Options for a Zero Based Budgeting Template

The first step of creating a zero based budget or using a zero based budgeting template is creating a detailed list of your income, expenses, and savings goals.

If you haven’t made a list of your income, expenses, and savings goals yet, do it now!

Once you have that, you need a place to store and document your income, spending, and savings goals every single month.

That’s where a zero based budgeting template comes in.

I have 2 options for you.

1. Create your own zero based budgeting spreadsheet from scratch. Don’t worry, I made this step by step video to help you.

It might seem long – about 30 minutes – but it is everything you need to start a budget from scratch. No spreadsheet experience needed. Plus, you can stop, pause, rewind, and rewatch over and over again if you need to 🙂

2. Buy a zero based budgeting template for $5 and save yourself the time of creating one from scratch.

I made two budget spreadsheet options in Google sheets, and you can buy either one for just $5.

Zero based budget option 1 – a Monthly Budget Spreadsheet.

In this monthly budget spreadsheet there is a tab for each month of the year that is fully customizable for every month.

Monthly budget spreadsheet

Because each month has its own unique expenses, challenges, and events, a monthly budget helps you create a new budget at the start of each month to accurately reflect the expenses for a specific month.

Plus, resetting your budget every month helps you be very intentional in reaching your money goals and aligning your spending with your priorities and values.

Option 2 – an Annual Budget Spreadsheet

This is the zero based budget template that we’ve used since 2014. Each year, it allows us to reflect on our spending habits and make adjustments to focus on our goals.

It comes with all of the formulas to automatically calculate monthly expenses, income, and savings goals.

Annual Budget Spreadsheet

And just like the monthly budget spreadsheet, you can fully customize ALL budget categories to match your spending, goals, and priorities.

BONUS – both the monthly and annual budget spreadsheets come with mini tutorial videos to help you set up your zero based budget in google sheets. And if you like excel spreadsheets, all of the same instructions and principles apply to a zero based budget in excel.

Helpful Tips and Common Questions for Your Zero Based Budget

Alright, we’re almost at the end and you have PLENTY of information to start your zero based budget and have wild success.

I have 3 more things that I think will be helpful for you as you get started.

What if my zero based budget is negative?

I think this is a really common fear for a lot of people, and a BIG reason most people choose not to use a budget to track spending.

If that’s you, I want to tell you that it’s going to be okay.

It’s okay to struggle with money.

I see your fear.

I understand because money can be scary and stressful.

But struggling with money is nothing to be ashamed of or embarrassed about. Everyone you know has money struggles, stress, and fears.

We’re all figuring it out as we go and doing the best we can.

So if your zero based budget shows a negative balance, it’s okay, and we’ll work with it.

A negative monthly balance means you’re spending more than you make, and you need to make some changes.

Your options include:

Cut and reduce expenses
Make more money

Look at your expenses and choose what has to go. If you’re really struggling with cutting expenses, here is a really good article to help you cut expenses from your budget.

I know first hand that cutting expenses can be hard.

We stopped going out to eat for 5 years while we paid off debt.

You don’t have to be that extreme, but the good news is that anything you cut from your budget today can be added back in later when it’s a better fit.

And maybe you don’t have to cut things out completely, but just lower how much you spend on it monthly.

As for making more money, there are all kinds of things you can do to increase your income or find a small, part-time job for a short period of time.

Helpful Budgeting Categories to Make Budgeting More Flexible

Budgets get a bad reputation.

But when done well, a budget creates freedom and possibility to reach all of your goals and have fun doing it.

In my experience, adding specific budget categories can make your budget more flexible and fun.

Here are 3 budget categories I recommend for any budget.

Personal Allowance Budget Category

This is a BIG ONE.

Build a personal allowance into your zero based budget every single month. You can spend this money on whatever you want, completely guilt free. This is especially great if you have a partner.

I get a $50 personal budget that I can spend anywhere, anytime and I don’t ever have to check in with my wife about it.

Last week I bought a new dungeons and dragons digital book. I love dungeons and dragons and play it all the time with my friends and the after school club I lead.

My wife uses hers to buy scrapbooking supplies, clothes, gifts for other people, and anything she wants.

Personal allowance was a game changer for us, and I think it will be for you too. Choose how much makes sense for your budget and make adjustments as you need to.

Your Hobbies Need a Budget Category

I’ll repeat, a budget doesn’t mean that you cut out everything fun from your life and live on eggs and beans.

Your budget gives you permission to spend money on anything you want, and that should definitely include your hobbies and things that bring you joy.

So, what brings you joy? What hobbies do you love?

I love blogging and hanging out with friends. So we have a budget category for each of those.

My wife and I love going on dates and being generous with our money. That means our budget has a “giving” and “date” category.

If your budget feels restrictive, add budget categories that are fun!

Miscellaneous Budget Category

No budget is perfect, and you’re going to forget things in your budget. Or unexpected expenses might pop up.

That’s why every budget needs a miscellaneous budget category.

It’s a safety net for your budget and helps you categorize expenses that don’t fit neatly anywhere else.

If you go over in a budget category, your miscellaneous budget can bail you out.

It’s just plain and simple, a good idea.

Remember to add yours immediately.

Are You Ready to Start a Zero Based Budget Spreadsheet?

Zero based budgeting can help you become more aware of your spending, make intentional choices to save money, and align your spending with your true goals, values, and priorities.

Budgeting doesn’t have to be complicated or time consuming, and using an annual budget or monthly budget spreadsheet can help you get started right away for just $5.

It’s time to get your financial house in order, and using a realistic, customized budget is a great step toward eliminating stress, frustration, and reaching all of your money goals. Take the chance to change your life.