When your income is stretched, it’s easy to feel like your money disappears the moment it lands.
That’s where a zero-sum budget can help — by giving every dollar a job, you’ll stay in control, even in tight times.
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What is a Zero-Sum Budget?
A zero-sum budget means every dollar you earn is assigned a specific purpose — whether it’s covering bills, paying down debt, or building savings.
Your income minus expenses equals zero, on paper. That way, your money works harder, and nothing slips through the cracks.
How to Make Your First Zero-Sum Budget
There are a few steps to take to create a zero-sum budget that works and helps you reach your financial goals.
To help you get started, here’s a practical example of how a zero-sum budget might look for a typical household:
🧾 Example: Zero-Sum Budget for a Family Household
Monthly After-Tax Income: $6,000
Budget Allocation:
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Housing (Rent/Mortgage): $1,800
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Groceries: $800
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Utilities (Electricity, Water, Internet): $400
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Transport (Petrol, Public Transport, Car Maintenance): $300
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Insurance (Health, Car, Contents): $250
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Debt Repayments (Credit Cards, Loans): $500
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Savings (Emergency Fund, Retirement): $500
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Entertainment & Dining Out: $300
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Clothing & Personal Care: $200
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Miscellaneous Expenses: $250
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Annual Expenses Savings (e.g., Gifts, Holidays, Registrations): $700
Total Allocated: $6,000
In this example, every dollar is assigned — to bills, savings, or future goals.
Your amounts will differ, but the key is the same: make your income minus expenses equal zero
Figure out where your money is going.
Before you start, track your current spending.
Check your bank and credit card statements, or jot down expenses in a notebook or app.
You need a clear picture of where your money is actually going.
Plan for Variable Expenses.
The downfall of most budgets is variable expenses, but a reasonable budget will address those costs and keep you on track.
Look ahead at birthdays, holidays, and annual bills. These variable costs trip up many budgets — but with a little planning, you can stay ahead
Some not-so-common costs to consider are:
- Gift-giving – Christmas or holidays
- Birthdays
- Council rates/property taxes
- Annual car registrations and inspections
- Insurance premiums
- Vet expenses
- Family holidays
- School fees
Pro tip: To ensure you have the money available when these expenses come due, open separate savings accounts and set up automatic transfers based on how much you need for each item.
Group Your Spending and Assign Amounts
Now that you know where your money is going, it’s time to create spending categories.
Every family is different, but grouping your expenses into categories like housing, utilities, groceries, restaurants, medical bills, entertainment, clothing, and transport is a great place to start.
You’ll also need to include insurance premiums, utility bills, and any other recurring monthly expenses you have.
To ensure your money is going where you want it to go, you’ll want to allocate a specific dollar amount to each category.
If you’ve tracked your expenses and discovered you’re spending more than you thought on entertainment or going out to eat, now is the time to trim those costs.
Just make sure to set realistic goals and don’t try to go from $1,000 a month on food to $200 a month. Instead, work out what you can reduce sensibly.
Add Up Your Income.
Now add up all your income — wages, benefits, side hustles, child support, and anything else.
If your income varies, pay yourself a ‘salary’ from the average amount you earn, and use good months to buffer the lean ones.
What to Do If Your Expenses Are Higher Than Your Income
If your expenses are more than your income, it’s time to either cut back or find ways to boost what’s coming in.
Start by going through your spending and see where you can trim the fat — things like takeaways, subscriptions, or buying stuff you don’t really need.
Cut Costs First
Look for easy wins:
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Eating out: Cut back on takeaways and make the most of leftovers. A bit of meal prep goes a long way.
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Groceries: Shop the specials, plan your meals, and don’t be afraid of home brands — they’re often just as good.
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Power bills: Switch stuff off at the wall, run full loads, and keep lights off in empty rooms.
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Clothes: Buy second-hand, shop sales, or simply wear what you’ve got for a bit longer.
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Car payments: If you can, drive a decent second-hand car with no loan. No repayments = more cash in your pocket.
Also have a go at negotiating things like your insurance, internet, or mobile plan — you might be surprised how much you can save with a quick call.
Check out our monster list of frugal living tips for more ideas to slash your spending.
If That’s Not Enough…
If cutting back isn’t enough, look for ways to bring in extra cash:
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Sell things you’re not using
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Pick up a side hustle or extra hours at work
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Offer a skill or service in your local area
The key with a zero-sum budget is balance. /
Try not to rely on credit to plug the gap — that just kicks the can down the road.
Instead, use your budget to take control and make sure every dollar is working hard for you.
Keeping Your Budget on Track
Setting up your budget is just the start — the real trick is sticking to it.
Here are three simple ways to help you stay on top of your spending:
Autopilot
Automate as much as you can.
Put your bills on direct debit to avoid late fees, and set up automatic transfers to savings or debt repayments.
That way, your money goes where it needs to without you having to think about it.
Use the envelope system
If you like using cash, this old-school method still works.
Withdraw your budgeted amounts and split them into envelopes — one for each category (like groceries, petrol, or eating out).
When the envelope’s empty, that’s it till next month.
It’s a great way to stay accountable.
Track with an app
If digital is more your style, link your bank accounts to a budgeting app like PocketSmith.
It’ll help you keep tabs on where your money’s going, send alerts if you overspend, and show you how you’re tracking against your plan.
My Real Life Zero Sum Budget
Above is my actual budget.
I budget every cent and have a “spongy” account – whichever financial goal is the highest priority, currently rebuilding the emergency fund – that vacuums up the difference so I can get a nice even number.
I use Sinking Funds (those accounts named on the left) to hold the different amounts for each category.
A zero-sum budget helps you take control of your money by giving every dollar a job — so you can stay on top of bills, plan for the future, and make your income work harder for you.
It’s the strategy I use myself, and one I absolutely swear by.
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