Zero-Based Budgeting: What is It and How to Create It?

Struggle with overspending every month and don’t know how to stop overspending. I think one of the most power full way to take control of your money is Zero-Based Budgeting Method.

In this blog post, I will dive you to understanding the zero base budgeting method and how to make budgeting by using this method for helping to to exit this overspending zone.

What is Zero-Based Budgeting

Zero Base Budgeting (often called ZBB) is a method where every dollar of your income is assigned as a specific purpose.

Unlike traditional budgeting methods that use last month’s spending as a starting point, zero-based budgeting starts from scratch every month. You don’t assume anything. You simply take your income and make a plan for how every dollar will be spent, saved, or invested.

Create Zero-Based Budgeting: In only 4 Steps

1. List Down all Your Income

In this first step you have to list down all your income source and total all of them. This includes your salary, freelance income, side gigs, or any other money you expect to receive.

Example:

2. List Down all Your Expense

The next step you have to consider is money that come out of your wallet. List down all your expense, if you don’t know what are your monthly expense is, let think back to your last month or last month before.

Example:

3. Subtract all your expend from income

Then, you have to subtract the total of you income with total of your expense that to list down above.

Total Income – Total Expense = Your Money

Example:

Total Income ($2500) – Total Expense ($1490) = Your Money ($1010)

After you subtract your money already you have to consider 3 condition:

4. Give purpose of your money till it become zero

As I mention from step 3 , the person who has their subtracted money is POSITIVE, this step is for them. you can plan your money for more purpose, such as saving budget, emergency fund or saving for retirement.

Example:

Common Challenge for ZBB

There are some common challenge when you use Zero-Base Budgeting method:

1. I can feel a little bit restrict

I can feel a little bit restrict Some people feel like zero-based budgeting is too tight. But remember—you’re the one making the plan. You can still add “fun money” or “eating out” to your budget. Just be honest about what you want and what you can afford.

2. It Take Time

You’ll need to sit down at the start of every month to plan your budget. But think of it like a habit – I seem like you want to have a dinner, you have to spend your time to cook first, budgeting is also, if you want to stop overspending, you have to spend to create a plan.

3. Must flexible for every month

You have to be flexible when you plan a budget every month, because each month of your spending are different, you could forget list your unexpected expense, such as your best friend birthday gift, or an anniversary party, etc. etc.

Advantage of Zero-Based Budgeting

1. Zero-Based Budgeting vs. the 50/30/20 Rule

The 50/30/20 rule offers a quick way to split your income—50% for needs, 30% for wants, and 20% for savings. While it’s easy to follow, it doesn’t offer much flexibility or detail. Zero-based budgeting gives you complete control by assigning every dollar to a specific purpose. This helps you prioritize better, cut waste, and customize your budget to fit your real-life needs.

Advantages of Zero-Based Budgeting over 50/30/20 Rule:

2. Zero-Based Budgeting vs. Envelope System

The envelope system is great for controlling spending through physical cash categories, but it’s not always practical today. Zero-based budgeting provides the same spending control without needing physical money. It works perfectly with digital payments, and it also includes savings, debt payoff, and other financial goals that the envelope system often overlooks.

Advantages of Zero-Based Budgeting over the Envelope System:

3. Zero-Based Budgeting vs. Pay Yourself First

Paying yourself first means saving before spending, which builds strong habits. But it often stops there, without tracking how the rest of your money is used. Zero-based budgeting includes savings as a priority but goes further—it helps you plan and track all your expenses so you know exactly where your money is going each month.

Advantages of Zero-Based Budgeting over Pay Yourself First: