A Zero Based Budget: Boring & Effective

Written by Jesse Mecham  |  on


I’ve never heard anyone say, “I just want to live a boring life.” It’s not really in our nature probably. Everybody wants some excitement, some new happenings, some big news to come their way. Everyone likes to have things to look forward to, anticipate, and enjoy. There’s probably a little bit of a kid inside each of us that still longs for a good, old-fashioned roller coaster ride.

Except when it comes to one thing: personal finances.

In our personal finance life, everybody probably wants a bit more consistency, less ups and downs, the ability to anticipate a bit better what large, unexpected happenings are coming their way. We all would like to have our personal finances be regular and – let’s face it – boring.

A Zero Based Budget is Boring

That’s right, a zero based budget is about the most boring, uneventful thing you can possibly imagine with your money. It’s so simple, anyone can do it (possibly even the government, although they’re hard-pressed to actually implement it). As boring as a zero based budget is, it is extremely effective when applied to your personal finance situation.

Zero Based Budget Basics

Basically, a zero based budget means that you allocate all of your budgeting dollars to different categories. If you have $100 to budget, you might budget $50 to food, $25 to clothing, $15 to toiletries, and $10 to entertainment. You now have zero dollars left to allocate (and later spend). If you decide you want $15 for entertainment, then you had better pull $5 from one of those other categories (this is where the government begins running into a bit of trouble).

So, let’s pretend your take-home pay is $36,000 per year. That equates to $3,000 per month. At the beginning of each month, you would take that $3,000 and allocate it to all of the different spending categories you’ve decided to use. Many people use the Envelope System in conjunction with a zero based budget. I personally operate zero based a little differently, as can be outlined by Rule Two of my Four Rules of Cash Flow Management.

Either way you cut it, the zero based budgeting approach is extremely effective in helping you reign in your spending, and spend with a plan, instead of just shooting from the hip.

Disadvantages to a Zero Based Budget

Well, I think I just developed writer’s block. I’ve been sitting here at my keyboard staring into space, trying to think of one single disadvantage to operating zero based. I promise I’ll update this article if I think of one.

Do you see why the zero based principle is so powerful? Every dollar must be accounted for and assigned a job. You do not let one single penny slip through your fingers without first being “assigned a home” (Dave Ramsey). The real work comes about when you have a variable income – although in all honesty, the variable income problem can be easily solved.

Keep things simple when you start operating zero based. Don’t worry if your budget needs to be altered. That’s a fact of life. If you’re really having trouble sticking to budgeting money you haven’t yet earned, consider lagging behind one month. You’ll operate your budget zero-based with a full knowledge of exactly how much money you have to allocate each month.

Above all, once you’ve allocated where those dollars belong, stick to your budget. If you budgeted $50 for entertainment, then by all means, go out and have $50 worth of entertaining fun and don’t feel guilty about it. That’s the point of the zero based budget. You decide what you want to do with your money, you do it, and you feel great about it.

Your Next Step

Budgeting is not restrictive. You won’t be spending less, you’ll be spending right. So what do you have to lose? Except all that debt and stress?