What is a Zero-Sum Budget? Everything You Need to Know

What is a Zero-Sum Budget? Here is everything you need to know to get started budgeting right away!

Why Budget Money?

Putting a budget together is the first step to becoming financially stable because it helps you understand where your money is coming from and what you’re doing with it.

Before I sat down and truly did the math, I was averaging £500 pounds per month on travel-related expenses. Sure I was living my best life, but back then that was 1/4 of my monthly salary!

So I was essentially saving nothing. Whether your Achilles Heel is shopping, eating out, or buying Cosplay accessories, you need to be honest with yourself about where the bulk of your money is going.

Disclaimer: Reminder, this Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Beginner’s Budget Dashboard

If you’re just starting out on your journey, check out my Beginner’s Budget Dashboard.

It’s a Google Sheets template that tracks your expenses, income, investments, savings, and more! There’s even a free video tutorial to help you get started.

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budgeting dashboard for beginners for zero-sum budgets

Budgeting Apps

I used to live in the United Kingdom, so my apps might not be available in the United States. My top budgeting apps are:

Revolut (Prepaid debit card with 20+ currencies!)
Monzo

However, I am American however, so I try to stay hip with the kids as much as possible. Based on what my younger, cooler sister says, a few decent budget-tracking apps include:

What is a Zero-Sum Budget?

In a Zero-Sum Budget, every dollar has a job. At the end of the month, your budget should be equal to ZERO to prevent waste and maximize your income.

In Zero-Sum Budgeting, you need to use last month’s real income to pay for this month’s expenses. For example, if I get paid on March 25th, that paycheck is going to cover my bills from March 25 until April 25. Get it?

In my Zero-Sum Budget, I designate a specific amount of money to be assigned to savings, rent, and whatever other costs I regularly experience. I even have a ‘skincare’ budget because I have my priorities straight.

Implementing a Zero-Sum Budget: How to Create a Zero-Sum Budget

Creating and implementing a Zero-Sum Budget is easier than it sounds. It requires a little basic math, but you got this!! Let’s use a few example numbers to demonstrate how it’s done.

In this example, my Zero-Sum Budget is composed of the following:

Fixed Expenses
Savings & Investments
Flexible Spending

This way, I know exactly where my money is going so I can stay within budget.

Fixed Expenses

In this example, after applying the UK’s 40% tax (yikes lol) on Vanessa’s income, she has £3000 leftover in disposable income. Here are her fixed expenses, or bills that she has to pay each month.

Rent = £700
Phone = £30
Transport (Tube + Uber) = £170
Utilities = £100

Vanessa’s fixed costs are £1000 per month. Therefore, She has £2000 left in her Zero-Sum Budget.

This is the first step to creating a viable Zero-Sum Budget. You need to write down all fixed expenses that you have to pay each month first so you know where you can flex your spending.

Savings and Investment Goals

Vanessa has specific savings and investment goals which she wants to commit a portion of her budget to. This way, that money is given a ‘job’ and she is less likely to spend it.

Savings = £500
Investments = £500

Vanessa moves her £500 into a High Yield Savings (HYS) Account with a 2nd Bank that is kind of annoying to access as she has no debit card associated with this bank.

This will discourage her from using this money because millennials hate going to banks in person. If she’s dying, she’ll do it – but not a second before.

Flexible Spending

After spending £1000 on fixed expenses and £1000 on her personal finance goals, Vanessa has £1000 left in her flexible spending budget. According to Revolut, her flexible spending is typically spent on the following:

Groceries & Eating Out = £500
Travel = fluctuates
Beauty = fluctuates
Shopping = fluctuates

Because Vanessa has different priorities every month, it’s nearly impossible to accurately track the remaining £500 of her budget.

However, she feels comfortable with her budget as she is consistently hitting her savings and investment goals.

She doesn’t lose sleep over her Flexible Spending budget since she’s on track to save and invest £12,000 in the next 12 months.

Whatever she doesn’t spend from the remaining £500 in her flexible spending budget, she invests or saves.

Budgeting Shouldn’t be Stressful

Creating a budget shouldn’t be stressful. It’s perfectly normal to live within your means so you can stay out of debt and in control of your life.

I hope this post was helpful and please check out my financial videos on YouTube for more information!

Disclaimer: Reminder, this Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on wanderonwards.co or my Youtube channel – Wander Onwards – constitutes as a solicitation, recommendation, nor endorsement by Wander Onwards LLC or its owner. All Content on this channel is information of a general nature and does not address the circumstances of any particular individual or entity. Capital is at risk. Invest at your own risk.