Improve Your Budget with Zero-Based Budgeting

Whether you’ve managed your money for years or you’re a budgeting novice, learn how zero-based budgeting can help you make every dollar count.

When money is tight, your budget should be even tighter. Whether you’re budgeting with a variable income, simply trying to get a better grip on your personal spending, or need to adjust your budget after job loss, a strategy called zero-based budgeting can help you ensure that you make the most out of every dollar.

What is Zero-Based Budgeting?

Zero-based budgeting is a budgeting method that encourages you to account for every dollar of your monthly income. Each month, you start from scratch and create a new budget. Of course, you can use the previous month to help you estimate where your income will go. For example, if you spent less than anticipated on groceries last month, you should put those dollars toward your savings fund.

While it’s a great budgeting tactic for financial hardship, zero-based budgeting is also particularly helpful for anyone with a variable income, or those who may simply need to take a closer look at their personal spending habits.

Zero-Based Budgeting Steps

Before implementing a zero-based budget, you’ll need to take an honest look at your financial situation. This can be an intimidating task — but breaking it down into the following steps can help.

  1. Calculate your income. Start by adding up all of your sources of monthly income. Be sure to include paychecks for full or part-time jobs along with any benefits like alimony and child support. For those with variable income, this is where zero-based budgeting comes in handy. When you start fresh each month, you can base your budget off of your estimated monthly income and create a more accurate projection.
  2. Track your spending. If you haven’t kept a close eye on your spending in the past, it can be tough to understand where your money really goes on a monthly basis. Start by reviewing receipts or card statements and note how you spend your money. From there, begin closely tracking your expenses for a few months. You may find it helpful to use a personal spending tracker worksheet. As you tune into your spending habits, look for places where you can cut back and areas where you’d like to dedicate more money, like an emergency fund.
  3. Categorize your expenses. Zero-based budgeting can help you allocate every dollar of your income — but before you begin that allocation, you’ll need to create expense buckets. Identify all of your expenses — including debt payments, needs and wants, an emergency fund, and any savings goals. If you want to save for a new car, for example, add a dedicated savings bucket to your monthly budget to make that happen.
  4. Stay on track with your savings. Something about using zero based budgeting as a means of saving as much as you can each month. Once you’ve allocated your money into buckets, use the remainder to boost your emergency fund, etc. To stay consistent, you may plan to save a percentage of your monthly income each month. That way, no matter how much you’ve earned in a given month, you’re still working hard toward your savings goals.

You can build a zero-based budget with an app, a free spending plan worksheet, or a pen and paper. The most important thing is to choose a method that works well for you and is easy for you to maintain.

Is Zero-Based Budgeting Right for Me?

While zero-based budgeting can help you get a grip on your spending, especially if you have a variable income, the process can be a bit more time consuming or involved compared to traditional budgeting practices.

If you find that your monthly expenses vary significantly from month to month, zero-based budgeting could be trickier for you to implement. One solution could be to set aside money specifically for variable expenses so that you won’t find yourself shortchanged.

If you decide to give zero-based budgeting a try, it may take a month or two for you to adjust. Be patient and, most importantly, hold yourself accountable for every dollar you can.

Looking for more? Check out our Better Budgeting podcast series for tips, tricks, and insights to help you achieve your money management goals.


This information is general in nature and is not intended to be legal, tax, or financial advice. Although Regions believes this information to be accurate, it cannot ensure that it will remain up to date. Statements or opinions of individuals referenced herein are their own—not Regions'. Consult an appropriate professional concerning your specific situation and for current tax rules. Regions, the Regions logo, and the LifeGreen bike are registered trademarks of Regions Bank. The LifeGreen color is a trademark of Regions Bank.