A zero-based budget is when your income less your expenses equals zero. This is just another way of budgeting where you know exactly where your money is going every month.
Write down all of your monthly income from all sources including your employment income, investment income, spousal support, child support, child tax benefit, HST rebate, employment insurance, and the sale of personal items.
Next, you are to write down all of your monthly expenses. These include food, housing (mortgage or rent), utilities, transportation, insurance, debt, savings, and taxes. Don’t forget to include your seasonal expenses such as Christmas, birthdays, weddings, bridal or baby showers, and anniversaries.
Once you have all income and expenses accounted for, subtract your income from your expenses and they should equal zero. If the expenses are greater than your income, you can either increase your income or decrease your expenses. Every dollar in your budget must belong to a category.
Just because it is termed a zero-based budget doesn’t mean that you don’t have money left in your bank account. It just means that you don’t have any money leftover in your budget.
Dave Ramsey has an app called Every Dollar app (or you can log into the website and use it online instead) and has a great interface. I have used it but not to it’s full potential, but I have a client who has had amazing luck with it. She is currently saving to purchase her first home. We just happened to be talking one day about budgets and I showed her the app. She is happy with the results, and is very disciplined.