I Was Bad at Budgeting Until I Tried the Zero-Sum Budgeting Method. Here’s How It Works.

A lot of people are on again, off again budgeters. I get it – that used to be me.

I’d start the month off making a list of my bills and spending categories and then I’d assign the categories a random amount that I thought I would be able to stay within. Maybe it would last a month or two, but more often than not, two weeks in I’d have gone over one category and feel defeated, or be surprised by an “unexpected” expense and throw the whole month away. Or, I’d have not followed through consistently with tracking my spending and then feel overwhelmed and lost.

I wasn’t making as much progress as I wanted on my financial goals, so a few months in, I’d give the whole budget thing a go again. I tried using a homegrown excel sheet, Mint, and other random apps, but nothing seemed to stick.

That is, until I found You Need a Budget (YNAB).

YNAB is different from other budgets because it’s based on the concept of zero-sum budgeting and is based around four simple (but powerful) rules.

If you have struggled with budgeting before, I highly encourage you to give zero-sum budgeting a try, whether you use YNAB or do it on your own.

How Zero-Sum Budgeting Works

The premise of zero-sum budgeting is that you budget with the money you already have, not what you’re going to make — and that you “spend” every dollar. Or in YNAB’s words, you give every dollar a job.

So, if you were to put this in practice you’d look at the amount you currently have available in checking, savings, and cash, and then figure out what that money needed to do before you got paid again. You might apply it to upcoming bills, food, gas, debt repayments, gifts — whatever it needs to do.

You give every dollar you have a job — even the ones you don’t plan on spending. Yes, even the dollars you are saving should have a job.

Maybe it’s for a future vacation, building your emergency fund, saving for the upcoming holidays, opening a Roth IRA, or making an extra payment on your student loans. Whatever it is, that dollar needs a purpose; it needs to be put to work creating the life you want.

And then every time you get paid, you do this again with your new dollars. You give them all jobs until you’re down to $0 uncategorized. There’s no such thing as money left over at the end of the month. That’s because dollars without “jobs” tend to get thoughtlessly spent rather than put to work creating the life you want.

Zero-sum budgeting forces you to view money as the tool that it is and make decisions based on both your immediate needs and your priorities.

Because zero-sum budgeting asks you to budget what you already have rather than make a budget on your projected income, it helps budgeters prioritize their spending.

The idea is to eventually get at least a month ahead, meaning that the money you earned last month is what is paying for this month. Once you’ve reached this point, you’ve officially broken the paycheck-to-paycheck cycle and have some breathing room to start thinking about other financial goals you might have.

Between the benefits of zero-sum budgeting, YNAB’s second rule of “Embracing Your True Expenses” (aka creating sinking funds), and the fact that YNAB syncs with your accounts to make tracking your spending a breeze, I attribute a very large portion of my financial success to this company.

YNAB isn’t a free budgeting software, but I think it says a lot that even though I’m someone who is very intentional with their spending, I happily hand over the annual subscription fee. I know that I make back much much more in the savings I’m able to make by using YNAB.