The zero-based budgeting strategy

The zero-based budgeting strategy is one of the most commonly used budgeting strategies for your personal finances. This article will help you decide if this strategy is right for you by looking at:

• What’s zero-based budgeting
• The pros and cons of this strategy—Understanding what’s good, and potentially not so good about this strategy can help you decide if it’s a good fit for you.

What’s zero-based budgeting?

Zero-based budgeting is when your monthly income minus your monthly expenses and savings equal zero. 

The goal of this budgeting strategy is to give a purpose for every penny throughout the month. In other words, you must divide and allocate your money to spending categories that are part of your priorities. Examples of such categories are debt, savings, investments, entertainment, clothing, etc.

Let’s say you make $3000 a month, and that you have $2000 of monthly fixed expenses. Therefore, every month, you’ll have $1000 to divide and associate to all the categories you choose.

So, for every month, you’ll be making decisions about where you want to allocate your money, and adjust your budget accordingly.

Pros of a zero-based budget

You can reach your financial goals much faster

By allocating all your money to different expense categories, you find yourself spending less on things that don’t matter. 

Keep in mind that this budgeting strategy is not necessarily about restricting yourself from spending; it’s about determining what are the things that are most important to you, and making the decision to allocate your spending to those important things. 

A more flexible budget

Since the amount that you can spend and save depends on your income, your budget can be more flexible. This makes zero-based budgeting a good option if you have an irregular monthly income because it requires you to review and make adjustments to your budget on a monthly basis.

It helps to stabilize irregular incomes

You can set up your budget so that you’re spending last month’s income on the current month’s expenses. 

Cons of a zero-based budget



Requires a lot of commitment

You need to commit to this budgeting strategy to maintain an accurate zero-based budget, because you must keep track of every expense. 

May not work in the long-term

To benefit from a zero-based budget, you must review and make decisions about your spending every month. If you’re not ready to invest that kind of energy and time each month, then this budgeting strategy won’t work. 

If these drawbacks really speak to you, then you might want to check out the MIZA budget app, which uses the budget splitting strategy.