What is a Zero Sum Budget?


Without doubt, life is much easier when we get control and command of our finances. Our money is often our most important asset, but many of us don’t use our money very well. To be blunt, many of us don’t budget and it cause us untold damage. In the past, I’ve had problems with budgeting effectively – the same as most people, I would imagine. The solution that was told to me, and to others, comes from financial guru Dave Ramsey. It’s known as a zero sum budget, and it’s so useful to making committed financial changes.

With that said, what is a zero sum budget?

A zero sum budget is the process of making sure that every penny you earn has a specific job to do. Instead of seeing any money left after your expenses as ‘fun money’, this process teaches you to start using every penny to actually do and achieve something. It’s so useful for money management, and a big part of financial wellness. I cannot recommend trying out a zero sum budget plan enough. So, how do you make this work?

Getting started with a zero sum budget

All that you need to start with is a spreadsheet app or a simple pen and paper. Get a calculator too for making sure you can throw all of your sums together without mistakes. Let’s say that you have managed all of your expenses and you are left with $100 at the end of the week. That’s good – a $100 that you can use to do whatever you want with, right? Wrong!

Your $100, in a zero sum budget, is used to do something progressive with the money. You will need to use that $100 for something that you find useful. It could go towards a higher quality of groceries, building a retirement fund, or going into a savings account. Rather than just blowing it on material goods, a zero sum budget teaches you to use every penny for something.

Basically, what most people do is they take their wage – let’s say $1,500 for the month for example – and they turn that into a budget. The said budget is split into expenses and then money left over. Let’s say that after all of your expenses – food, utilities, bills, transport, insurance etc. – that you are left with the $100 we spoke about. This technique, instead of spending that on yourself for clothes or a night out, a zero sum budget teaches you to put that money to work somewhere.  In turn, it could be going towards anywhere you feel is valuable.


wise spending

Why should I try out a zero sum budget?

Well, for many people it helps them to save more money and to pay off debts faster. Why? Because you don’t start using the excess money you have for purchases you do not need. Plus, you know as well as I do that it’s easy to have an excess of money one month and a shortage the next. With a zero sum budget, your saving habits mean that you are much less likely to have a shortage one month and a boon the next.

It helps to form a consistency in how you spend and how you save, meaning you always have some kind of safety net building. This is at the same time as making more progress on paying off debts and managing your expenses. Having a zero sum budget is always likely to have your money doing more for you than it is today. Also, it makes you avoid spending money on frivolous purchases that feel good today but hurt you later on down the track.

And the issue with spending your minimal excess each month is that you often don’t get much in return. If you were to save that money up each month, in a year or 18 months you could use that saved money to buy something valuable. Whilst most people will use their excess for fun and leisure, putting it to work via having a zero sum budget is the best way to go.

financial planning

What next?

I recommend you start trying to build up said zero sum budget. Trust me, it might not seem like a huge deal to you today but it can make a huge difference in the long run. You are much more likely to get a lot of value out of your money if you put it to good use. Missing out on a bit of fun today might seem regretful but you will benefit in many more ways down the line. Thanks to the savings made today. Zero sum budgeting helps you to make your money do the hard work for you, so why not try it out?

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