What is a Zero-based Budget?

by Kay Lynn

I thought I was pretty good about budgeting before attending Financial Peace University.  What I was good at was tracking what needed to be paid each month.  As I alluded to in my first post, I just spent until I was done or there wasn’t anymore money.  Well, to be honest even that didn’t stop me from spending sometimes.

Budgeting was one of the first lessons in Financial Peace University and it’s been a journey getting it down.  The purpose of a zero-based balance is to plan and account for every dollar of cash flow.


The main benefit of this type of budget is really understanding where the money goes. I’m not left at the end of month wondering what happened! A second benefit is creating sinking funds or savings for various non-monthly expenses such as property taxes, car registration and home insurance. Third, important items that can be overlooked when they are not handled as a “bill” do not get overlooked. The non-bill that means the most to be in this category is charitable giving.


I learned a great deal these past months and have made some adjustments. It’s important to reevaluate every month to figure out where I underestimated, overestimated or (in the case of the newspaper) just plain forgot!

Dave Ramsey suggests including a blow category in the budget. I thought for sure I didn’t need that as I would meet all my needs with the various other budget line items. Well that lasted all of one paycycle before getting changed. There are times when you just want to be able to get an extra latte, go out to lunch with a co-worker or just buy a trinket.

Budget surprises have been that I overestimated clothing budget. I was budgeting $75 per month, but we just aren’t spending that much. I cut it down to $50 a month and once I get to $200 built up will suspend until I spend some. I vastly undestimated how much we spend on our pets. Because this is always hidden in the grocery budget, I never added up how much we spend on soft and hard foods for our cat and dog let alone the amount on flea medication, heartworm pills, dog toys and vet bills.

The best part of a zero-based budget is that I don’t spend the money left over after bills or obligations, but instead put that extra money towards my car so it can be paid off sooner.

What kind of budgeting do you do? Should you consider making a zero-based budget? Thanks for reading.

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