How To Make Zero-Sum Budgeting Work For Your Life

How To Make Zero-Sum Budgeting Work For Your Life

I used to stress out a lot about budgeting and financial management. As someone who wants to go to grad school without getting into too much debt, sticking to a budget and saving is super important to me. So today, I’m going to tell you all about the method that’s saved my life and kept me organized every since I started working: zero-sum budgeting.

What is Zero-Sum Budgeting?

Most budgeting methods focus on what you’re spending. They ask you to count your income, subtract your fixed expenses, then budget the rest.

This is a totally fine system, and it works okay, but the focus doesn’t work for me. Like I said earlier, saving is what’s really important to me, not spending. So budget systems that focus on spending just aren’t catered to my needs.

That’s where zero-sum budgeting comes in. The concept of zero-sum budgeting is a little bit different. Unlike regular budget systems, it takes into account all of your money – not just your income.

This is really important because having a good idea of your entire financial situation is key to having healthy personal finances. Instead of just budgeting your income minus your fixed expenses, you budget all the money in as many bank accounts as you might have.

The name “zero-sum” budgeting means that once you’re done budgeting, you should have zero dollars left over. Every dollar you own should be allocated to some category. This allows you to see how much you are spending and saving. Even more importantly, it shows you what you are spending on, and it helps you decide what you are saving for.

Right now, I’m working on saving for my MBA. Because I use zero-sum budgeting, it’s easy for me to make sure that I’m budgeting enough towards my savings every time I get a paycheck. More than any other system I’ve tried, it encourages me to save – and we could all use more of that!

zero-sum budgeting

How to Budget With The Zero-Sum Method

Zero-sum budgeting can seem complicated at first. I know I had a really tough time figuring it out when I first came across the method. So let me break down how I use zero-sum budgeting in the easiest way possible.

  • First, count up all your money you have in every account you own. This include bank accounts, but that’s not where you stop! Count up all the cash you have on hand, and all the money you might have in apps like Venmo or Paypal. In order to develop a holistic financial picture, you have to keep track of all of your money.
  • Then, decide on your budget categories. I have three big budget categories: Short-Term, for all the money I’m going to spent in the next two weeks or month; Sinking Funds, for the money I might spend a couple months down the line; and then Long-Term, for the money I’m not going to spend for a couple years.
  • After that, develop your sub-categories. Within Long-Term, I just have two sub-categories – “Retirement” and “MBA”. Both of these are things that I’m not going to be spending money on for years and years, but they’re both important savings for me, so I make sure to include them on my budget! With Sinking Funds, I have categories like “Emergency Fund” and “Vacation”, and with Short-Term, I include categories like “Dining Out” and “Groceries”.
  • Finally, allocate all of your money to each of your sub-categories. Unlike usual budgets, you’re not just budgeting your income – you’re taking all of the money you added together from step 1 and spreading it out to each sub-category. Once you’re done, you should be able to look at each dollar you have and know exactly what you’re spending it on.

This might be difficult at first! When I started doing zero-sum budgeting, I didn’t know what I was using all my money for. So I had a category that I called “Leftovers” that I put a bunch of money in.

As the months went on and I kept using this system, I found new things that I wanted to save for. Or I found sub-categories that I wanted to spend more money on! In these cases, I use money from the “Leftovers” category to make my wants work with my budget.

If this system sounds confusing, don’t worry – it gets easier the more you do it! If you want a quick start to using zero-sum budgeting, sign up for my newsletter below. You’ll get access to a cute, easy-to-use budget worksheet that’ll get you all ready to start implementing zero-sum budgeting in your life!

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zero-sum budgeting

Tips To Make Zero-Sum Budgeting Work For You!

Zero-sum budgeting can be tricky to figure out. So let me give you some tips to make it work perfectly for your budget!

1. Keep track of your budget often. I compare my actual spending to my budget every two days, if not daily. Because of this, I know exactly how I’m doing at any given time, and whether I’m close to overspending in any sub-category. Which leads us right to our next tip!

2. Don’t be afraid to change it up. If you realize in the middle of the month that you spent too much on eating out, that’s fine! Just increase your “Dining Out” budget and decrease your budget for another sub-category. Plus, this helps you so much when it comes to making informed decisions, because when you overspend, you actually have to choose which category you don’t get to spend as much on anymore.

3. Keep as little money in your “Leftovers” category as possible. As time goes on, you should put less and less money into your “Leftovers” category. If you have money that’s stagnant there for a few weeks, try putting that money into one of the sub-categories you’re saving towards.

4. Don’t stress out about it. Money can be a serious topic to a lot of people. Your budget doesn’t have to be. It’s okay to make mistakes – just adjust and move on! Zero-sum budgeting is super flexible and friendly once you get used to it.

zero-sum budgeting

The Last Thing You Need To Know About Zero-Sum Budgeting

There you go! At this point, you should be ready to jump into zero-sum budgeting. If you’re still unsure about the system, I’d suggest trying it out for a couple months. The longer you stick to the system, the more you reap its rewards. It’s seriously a great, great way to become more financially healthy.

If you have any questions at all about this system, feel free to let me know in the comments below. I’d love to help you out! And if zero-sum budgeting becomes your new best friend, remember to share this post with your friends. What do you think this budgeting method could help you with? What would you like to save for?

Remember: if you want to kickstart your zero-sum budgeting journey, sign up for my newsletter below! You’ll get access to my exclusive budget sheet just for my subscribers, and my help and support with any questions you might have. Just leave your email below to get the goods!

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This Post Has 10 Comments

  1. I’m always looking for budgeting tips, but like you I want to save more! I’ll have to try this!

    1. Thanks for the comment, Rachel! If you try it out, do let me know – I’d love to help you out where I can!

  2. This was a great post. I’m definitely going to try out this method!

    1. Thanks for the comment, Kelly! If you need any help trying out this method, let me know – I’d be happy to help out!

  3. Wow! This seems like a really fresh and different way to look at things!
    I might give this method a go; I already shift money between my coffee budget and non essential food budget quite frequently.

    1. Thanks for the comment, Ruth! I really love zero-sum budgeting – if you need any help implementing it, let me know! I’d be happy to help out 😀

    1. Thanks, Morgan!

  4. I just bought a house and I feel like zero-sum budgeting is just what I need right now!

    1. It’s a really, really amazing form of budgeting, and I’m sure it’ll help you a ton. If you ever have any questions about implementing it, let me know! I’d be hapy to help out! 😀

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