A Step By Step Guide To Creating A $0 Budget

A $0 budget is a budget where every cent of your incomings are accounted for. This might sound strict, but it’s more flexible than you might imagine– as you’ll soon see. The goal of a $0 budget is not to deprive you of funds, but to cause you to examine all of your expenditure and have full control over your finances
If you’re curious and want to try a $0 budget for yourself, then here’s a step-by-step guide to make it work for you. 
Tip: It’s best to use a spreadsheet to keep track of each area of spending; it keeps things nice and simple. 
Step One: A Chronological List Of Outgoings 
Go through your bank statements and compile a full list of all of your outgoings, as in the money you pay out by direct debit and on bills every month. At this point, you do not need to include expenditure like grocery bills– focus on areas such as insurance, your rent/mortgage, car payments, utility bills, and so on and so forth. You should also include financial outgoings that are optional-but-preferable, such as investments and your savings. 
When you have got the full list, place them in chronological order, and you’re ready to move onto the next stage. 
Step Two: A Chronological List Of Income 
Write down a full list of your income, in chronological order. This should include all income, including small amounts you might earn by filling surveys out online (for example). If it’s money that comes into the household, it goes on the list. 
You then need to put this list in chronological order also. This should show you exactly how much money you need and when you need it. 
Step Three: Compile A List Of Living Expenses
Now’s time to add in expenses such as:
  • Groceries
  • Toiletries
  • Fuel for your car
  • An entertainment budget for nights out or takeout meals. 
  • Clothing
  • School supplies 
Many people massively underestimate their outgoings when they first compile a full budget, so get real figures backed by your bank statements or you could find yourself having to obtain a Lawndale Loan to see you through the month. 
Step Four: Assign Your Funds 
You now begin assigning funds from your income to cover your outgoings. This should cover all of your bills first, then start adding in your living expenses. When you have done this, you should have a total of your incoming and outgoing money, as well as the dates on which payments will leave your account– so you can always ensure there’s money there on time. 
You will likely be left with money remaining after this stage, in no small part due to the underestimation problem as mentioned above. What you do have left goes into the… 
Step Five: Create A Contingency Fund
Give yourself an amount as a contingency fund, to be dipped into only if needed. Don’t just put all of your remaining cash in the contingency fund, however; your contingency fund should be a fixed amount.
Step Six: Assign The Rest Of The Funds
If you have anything leftover, then ‘top up’ other areas you have set aside money for, ideally for areas such as savings or investments. 
When all the money is assigned, you’re done: you have $0 money to spend for the month– or at least, $0 to spend that hasn’t been assigned a particular purpose. This helps to ensure that you’re always tracking your expenditure and don’t just spend from loose, unassigned funds, and it can make a real difference to your household budget.

Denny Jones

Hey there, I'm Denny Jones, a seasoned financial writer with over a decade of experience. I'm passionate about simplifying finance and empowering readers to achieve financial freedom. My articles offer practical advice and insights to help you navigate investing, budgeting, and personal finance with confidence. Let's unlock your financial potential together!

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