3 Zero-Based Budgeting Examples to Reduce Debt - No BS Investing
Posted 204 views April 8, 2022, 10:00 - Dylan in Financial Planning

3 Zero-Based Budgeting Examples to Reduce Debt

If you’re looking for the best budget to help you get out of debt, zero based budgeting is an excellent option. 

This budgeting method helps you keep detailed track of your income and expenses. Every dollar you receive is designated to a particular spending category so you’re in control of how much you put towards debt each month. This increases how fast you pay off debt!

Let’s dig into exactly what ZBB means, analyze three zero based budgeting examples, and cover why they work for debt payoff. We also include a free Zero-Based Budget Template to help you get started! 

Key Takeaways:

  • ZBB stands for zero-based budgeting. It’s a specific method for budgeting that ensures you keep careful track of every dollar you spend.
  • Example #1: YNAB is one option to digitally create a zero based budget. 
  • Example #2: Envelope budgeting means that you physically divvy up your paycheck into different budgeting categories. 
  • Example #3: Track your income and expenses line by line in a Google spreadsheet (see our template!). 
  • Zero based budgeting is a great way to get out of debt, but can be time-consuming to manage.

ZBB Meaning: Zero-Based Budgeting 

ZBB stands for zero-based budgeting. It’s a specific method for budgeting that ensures you keep careful track of every dollar you spend. You should have zero dollars left over each month. 

You plan out exactly how much of your income goes toward specific categories:

  • Expenses 
  • Savings
  • Debt payments  

For example, say that you make $4,000 per month after taxes. With a zero based budget, you might allocate $2,000 toward expenses, $1,500 toward debt payments, and $500 toward savings. You know exactly how much money is going where in each category. 

Based on this method, your income minus expenses should then equal zero at the end of the month. 

If you have money leftover at the end of the month, move the money into another category if needed. Or use it for next month’s budget.  

Granted, this method requires careful planning and tracking every month. But it helps you stay on top of your spending and make consistent progress with your debt. It also helps protect you from buying things you don’t need. 

Related: 3 Steps to Create a Spending Plan (aka Budget)

Zero-Based Budgeting Example #1:

If you’re looking for a zero-based budgeting app, YNAB is one of the best options. You place every dollar into a budget category before you can spend it. Different amounts of your paycheck are earmarked for specific purposes. 

The app shows you exactly how much you’ve budgeted for different categories such as electricity and internet. It also shows how much you have available in that category throughout the month. Cons of YNAB is that there is a learning curve. 

But if you get past that, the app does provide a semi-automatic way to manage your money and get out of debt faster.  

Zero-Based Budgeting Example #2:

If you want to physically manage your money, try envelope budgeting (another method for ZBB). Envelope budgeting means that you divvy up your paycheck into different budgeting categories. 

Place actual dollars into labeled envelopes each month. The money in each envelope is what you have to spend for that budgeting category.

You’re then less likely to overspend because you can only spend what’s available. Money leftover in certain envelopes can be transferred to another envelope or used for next month’s budget. 

This method is a little outdated since less people use cash. But you can also use software that accomplishes the same goal digitally.  

Related: 5 Top Tools to Automate Your Budget

Zero-Based Budgeting Example #3 (+ Zero-Based Budget Template):

Use a spreadsheet to manually approach zero based budgeting. 

In this example, a Google spreadsheet was used to categorize income, expenses, savings, and debt payments. In the target budget column, all expenses, savings, and investments should equal $0. 


At the end of the month, compare your actual budget with your target budget. Did your income minus expenses equal zero? If so, good work. 

If you were over budget, you might need to rearrange some of your expenses for the next month. For example, you could spend less on eating out next month or determine how to reduce your grocery bill.

If you have money leftover, move that money into a budget category for next month. 

This example is a bit time consuming. At the end of each month, you have to look at your bank statements line-by-line. You calculate up EXACTLY how much you spent, saved, and invested by category vs. how much you made. But this method does hold you accountable to not go over budget. 

Use our free template to get started with zero-based budgeting. Make a copy. Add your own information and budgeting categories. Create new tabs for new months so you can track your spending over time. 

Advantages and Disadvantages of ZBB


Especially if you’re drowning in debt, zero-based budgeting keeps you accountable with spending and payments so you make progress with your debt payoff. 

Here are the top advantages of the budget:

  • Get a clear view of your spending so you know where to cut back. 
  • Track your expenses in real-time. You know exactly how much you are spending so you don’t go over budget. 
  • Prioritize debt payoff and allocate more money toward debt every month. 

The ZBB method ensures that you never spend more than you make. There’s no guesswork involved each month with bills, payments, and spending. 


Despite the benefits with debt management, zero based budgeting isn’t for everyone. Here are a few disadvantages to the budget:

  • The method is time-consuming to manage each month as you track spending line-by-line. 
  • It’s more complicated to implement if you have unpredictable monthly income.
  • ZBB is mentally taxing and isn’t always the best option for beginner budgeters. 

Other budgeting methods work better for different types of budgeters and spenders. For example, if you’re new to budgeting and overwhelmed by the process, the 50/30/20 Budget might be a better option. 

Allocate 50% of your money for needs (e.g., rent), 30% for wants (e.g., eating out), and 20% for savings or paying off debt.

Experiment with different budgeting methods to find the one that works best for you. This way, you’re more likely to stick with the method long-term.

How to Create a Zero Based Budget 

Ready to create your own zero based budget? Get started with a zero based budget in three simple steps: 

  • Add up your currently monthly income (after tax)
  • Tally up your monthly expenses (e.g. rent)
  • Set a target budget for income and expenses (what you want to spend). 
  • Give each dollar a home and assign different amounts to different budgeting categories. 

At the end of the month, go through your bank statements. Calculate how much you spent per category. Income minus expenses should equal zero. It takes time to implement this method. But the results can be worth it!

Use the Zero Based Budget if You’re Drowning in Debt 

A zero based budget blocks you from overspending since you’re left with zero dollars after every paycheck. Every dollar has a home, so you make consistent progress on your debt payoff goals. 

Struggling with debt? Here are a few additional tips to speed up your debt payoff timeline. Combine with your zero based budget. 

  • Create a list of all your debt – from credit cards to student loans. Write down the name of your debt, the amount, and the interest rates. 
  • Set S.M.A.R.T. debt payoff goals to get out of debt faster. 
  • Choose a specific debt payoff method such as the debt avalanche method or debt snowball method. We recommend paying off high-interest debt first. 
  • Make your debt payments automatic so you never miss a payment. 

Want to learn more about budgeting? Take the Personal Finance Masterclass – Easy Guide to Better Finances course on Udemy. In addition to other best personal finance practices, this course teaches you how to create a complete budget and stick to it. Check out the course here

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Elisabeth O. is an MBA graduate with a specialization in International Finance & Investments and over six years of financial writing experience. She is passionate about long-term investing to build wealth, avoids day trading and speculations, and loves a good Warren Buffet quote.