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Get Out of Debt with a Zero Dollar Budget

Posted In:  debt reduction

A shaky economy and stagnant wages means that more consumers are focusing on paying off their existing debts and beefing up savings accounts. If this is your goal, then switching to a zero dollar budget can make those objectives easier to reach.

What Is a Zero Dollar Budget?

The difference between a regular budget and a zero dollar budget is in the planning stages. A regular budget might provide a plan for how all the bills and other expenses get paid, but not dictate how each and every dollar is spent. A zero dollar budget requires that every dollar be placed into a category before you receive your paycheck, leaving you with zero once you balance all of your budget categories. Adhering to a zero dollar budget means that you not only plan how much you will be paying towards bills, but also assign a set amount to savings and other discretionary categories rather than just dumping whatever is left after paying bills into those accounts.

What Are the Benefits?

Zero dollar budgeting offers a great deal of control over your budget. This option is great for those who struggle to save money and those that have trouble figuring out where all their money has gone at the end of the month. If you have a plan for where every single dollar is going, then you can’t be surprised by how much you have spent in specific categories because the amount budgeted to that area is already set. Those that wish to save more regularly also benefit from a zero dollar budgeting system because savings are planned and accounted for right in the budget.

Do You Need a Zero Dollar Budget?

A budget is a good idea for every person, whether you make a lot of money or just a little. Without a plan for where you are spending your money, you can easily find yourself wasting money on frivolous expenses or not keeping up on important monthly bills because you are not prepared for them. A zero dollar budget is a great option if you are focused on paying off debt or saving for a large expense like buying a car or a house. You will want to keep track of every single dollar in these cases because not carefully tracking can mean it takes you longer to pay off debt or meet your savings goals. This budgeting system is also good for those that are new to budgeting because it means that nothing is left to chance.

How to Set Up a Zero Dollar Budget

If you have determined that a zero dollar budget is the system that will work best for you, setting it up can be pretty simple. The key is to remember that you need to end up with a zero balance when you subtract your expenses from your income. Any money not accounted for is money that can be wasted, so make a plan for every dime. You don’t begin in the same way that you can set up other types of budgets. The first thing you will need to do is determine how much you would like to save per month and pay yourself first. This makes savings a priority so it doesn’t end up an afterthought after most of your money is spent.

After your savings amount is established, you need to figure out how much you need for each of your bills and living expenses like groceries and gas. You then need to decide what you will spend on more discretionary categories like eating out and entertainment. The next level is to figure out irregular expenses, like gifts and car maintenance, so you can save a specific amount every month to be applied to these expenses. Once all of your categories are set up, you assign a specific amount of money into each until your balance equals zero.

For those that are using a zero dollar budget to get out of debt, you will want to assign an amount to each debt you wish to pay off as well as make sure that any irregular pay is added to that fund as well. Doing this will ensure that you are contributing as much money as possible to your debts to clear them quickly. This theory also works for large savings goals as well. The key to a zero dollar budget is to make your goals and dreams a priority rather than relegating them to items that you take care of after everything else is paid.

Digging your way out of debt and gaining financial security is a monumental task if you don’t know how to manage your money properly. Using a zero dollar budget can offer you the most control over your finances and give you the best shot at making your debt-free dreams a reality.

Jessica Bosari is a freelance writer and blogger for various publications and her own blog. You can read more of Jessica's work here. If you have any comments or questions about SavingTools or about saving money, leave your comments in the form below or email Thanks!


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