Zero Based Budgeting: The Busy Family guide to being Debt Free.

Zero Based Budgeting: The Busy Family Guide to Being Debt Free

October 26, 2015 in Finance / Sensible Living


Let’s address your burning question: What is a Zero based budget?

You may have heard the Zero Based Budget term floating around lately.  It seems to be the new financial buzz word. Budget minded people often hear that they should have a zero based budget, but if you’re new to budgeting and trying to live frugally, it can be hard to figure out exactly what that means. Fortunately, it’s very easy to figure out and even easier to put into practice once you get the basics down.

To start, let’s talk about what a zero based budget is.  A zero based budget is almost exactly like the budget you currently have, or not, but with one big difference. You need to spend every, single, penny.   I know what you are thinking.. sounds like fun right?   Well you’d be right if you know that every single penny must be used and accounted for wisely.  With this type of budget, you will take any money that is left over after you’ve budgeted your expenses and assign it to either savings, debt or investments that’s it.

You might be asking why you need a budget that equals zero dollars left over.  Isn’t the whole point of budgeting to have left over money?  Well, Yes and No!  When you do your budget right now, are you negative, or do you have any money left over? If so, what do you do with it? Do you just leave it sit in the bank? Put it in your savings account? Spend it? When you leave money without a destination, you’re leaving it open to being blown on whatever may come. On the other hand, if you give that money a destination and a “name,” you know where it’s going and are able to guide it to where you want or need it to be. This allows you to know where every single cent of your money is going and helps you to pay off debt or save a lot quicker.

So how do you set up a zero based budget? To start, you do your budget like you normally would making sure that your expenses are as low as possible.  That may mean refining your budget and making cuts in some places.  Especially the big 5 money monsters. We quit ordering take out and relying on convenience foods which is difficult, especially for busy families.  As a family of 6, food is one of our biggest variable expenses even if we budget for it. I started meal planning and cooking most of our meals from scratch. We also went as far as to cut the cord to our cable TV and you know what happened? The savings started adding up… quickly.

Five Money Monsters

If you are spending more money than you make each month, you have to start cutting stuff out.  Sorry, I know you don’t want to hear that, but it’s the only way!  Start meal planning, Price Matching, and using coupons.  Sell items that you don’t need anymore or that you have to make payments on, and STOP GOING OUT TO EAT.  Here is a quick rundown of the top 5 ways the money monsters eat your money:

  • Eating out.  Plan your meals.  Make extra so you can have a break the next day and eat left overs.  Breaking up from your favourite take-out place can save you hundreds of dollars every month.
  • Groceries. Price Match sale items and start clipping coupons.  Use coupons in conjunction with sales for even bigger savings.  Waiting for sales, buying in bulk and and choosing generic store brands can save you a ton of money and really help cut down your grocery budget.
  • Utilities.  Especially electricity!  Get the whole family into the habit of shutting the lights off when they leave the room.  Implement the unplugged rule.  Everything but essential home functions should always be left unplugged.  Only plug items in when you need to actually use them!  Phantom energy can really add up on your monthly electricity bill.  Try reading books instead of watching TV.  In fact, look at cutting off your cable altogether.  Trust me, you don’t really need it.  We did and don’t miss it at all.  If not controlled, electricity and cable costs can eat a huge portion of your monthly utility budget.
  • Car Payments.  Unless you are fortunate enough to have a company car and the company pays your car payment, the best way to start realizing savings to your budget is to get rid of your car payment bills.  Seriously. I’ve seen some of those bills.  I have friends who spend $400-$600 every month on car payments.  This is insane! You can buy a quality car for under $3,000 and it will get you to and from work and all around town just fine.
  • Clothing.  No question, having new clothes makes you feel better even when you’re broke.  But at what cost?  We don’t need nearly as much clothing as we think we do.  No I’m not telling you to go nude. There’s a time and place for that.  Buy pieces you can mix and match to stretch your wardrobe.  Wait for sales and shop seasonally, rather than monthly.  Try going to consignment shops or local clothing swaps (maybe organize your own) Controlling your clothing budget can really help get a hold on your spending and set you up for success with a Zero Based Budget.

Once you are done setting up your budget, check to see if you have any income that hasn’t been assigned to an expense. That money is standing between you and your budget being zero based. Once you have your regular and newly refined expenses put into your budget, take any money that you have left that is available and immediately assign the majority of it to paying off your high interest debt first. You can also assign some to your savings or emergency fund. Whatever you do, don’t just leave that extra money to flounder without a purpose. That is a very good way to waste money and to help yourself get off track with your spending and finances.

The whole point of a zero based budget is to make income minus the outgo equal zero. If you are able to cover all of your expenses for the month and still have $300 left over, you aren’t done with the budget yet. You must tell that $300 bucks where to go. (and I don’t mean to the mall) If you don’t, you lose the chance to make it work for you by getting out of debt, investing, paying off the house early, or growing wealth. You need to tell every dollar where to go.

In a nutshell, zero based budgeting forces you to allocate all of your dollars to something, whether you use the money for bills, debt repayment, or for savings. All of your dollars. Because, money “without a job” will get spent.

And that’s why many believe a zero-sum budget is the ideal financial plan for most hard-working busy families; no money is wasted and every dollar has a job to do.  When you create a budget that accounts for everything, theoretically, you shouldn’t have any cash left over to waste.

As you use a zero based for a few months, you’ll start to see that you have a lot more control over your money and that you’re starting to build traction with your savings and paying off your debt. The zero based budget really is best for most busy families and I’m sure that things will become much easier for yours once you put it into play!


Are you ready to give zero based budgeting a try?

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  • Reply mrdisco1 January 14, 2016 at 8:43 pm

    cdn debt levels are out of control

    • Reply admin January 27, 2016 at 2:33 pm

      They certainly are.. so glad I’m not in that statistic!

  • Reply aliyadaya January 9, 2016 at 2:38 pm

    Interesting concept. I understand the premise that every dollar must have a task… Eating out is he worst part of our budget.

    • Reply admin January 14, 2016 at 8:12 pm

      oooh eating out is the best way to eat away your food budget! Once you can get a handle on that, you’re golden 🙂

  • Reply Nicole a December 14, 2015 at 7:23 pm

    I like this idea and think you have added some good tips.

  • Reply Ladena October 27, 2015 at 4:28 pm

    Ugh, I am so familiar with those Money Monsters! We are SO bad at eating out. We go out as a family at least once per week. I have been making an effort to plan my meals out better. I need to start saving up for a family holiday so at least I have a goal in view.

    • Reply admin October 30, 2015 at 12:07 pm

      Bad, bad money monsters.. hey, a family holiday is a fantastic goal to stop eating out once a week!

  • Reply Randa October 27, 2015 at 1:45 pm

    Planning my meals is the best way for my family to control my spending. It’s not always easy, but sometimes cooking a few things ahead of time really helps me stay on task

    • Reply admin October 30, 2015 at 12:07 pm

      I really find cooking a few things a head of time makes meal planning and staying on track so much easier!

  • Reply Kelly Connor October 27, 2015 at 1:22 pm

    We have a fairly strict budget in place but I did not know about zero based budgeting. The tips you share are great for any and all budgets. Thanks for sharing.

    • Reply admin October 30, 2015 at 12:08 pm

      You’re welcome Kelly! Good for you for sticking to your strict budget!

  • Reply littlemisskateco October 26, 2015 at 10:11 pm

    Went I needed new clothes for work I found some great ones at the second hand, for a faction of what I would have spend at a regular store. Win for back to work, and win for my bank account!

    • Reply admin October 30, 2015 at 12:09 pm

      I agree! I have found some great classic pre-loved articles at second hand stores 🙂 #WinWin

  • Reply Lian Wright October 26, 2015 at 7:58 pm

    I found this to be a fascinating take on budgeting. I never would have thought of making a budget from this point of view. I am going to start budgeting within this framework to see how it fits for our family. Thanks so much for sharing this method of money management!

    • Reply admin October 30, 2015 at 12:10 pm

      If you have bad debt (not mortgage with low interest rate) this can certainly help dig out out much faster 🙂 I’d love to know how you make on with it!

  • Reply carinharris October 26, 2015 at 7:18 pm

    I like the Flipp app for grocery planning – all my fliers in one spot plus it is accepted for price matching. Woohoo! Thanks for these tips!

    • Reply admin October 30, 2015 at 12:10 pm

      I use flipp daily! My #1 favourite money saving app!

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