Zero-based budget spreadsheet: give every dollar a job

A zero-based budget gives every dollar of monthly income a planned line before the month starts, so the planned amounts add up to the income. In a spreadsheet that takes two checks: income minus the total of planned amounts should read 0.00, and each line's remaining amount should be its planned amount minus what was actually spent. The zero-based monthly budget on Sheet Reserve sets up both checks. This article shows how to fill it in and how to read a finished month.

Zero is a planning target, not a spending target. You can spend on any line. The rule is that each dollar has been given a line first, so a surprise shows up as a number you can see.

Key takeaways

• Planned amounts should total your monthly income. When they do, the income-unassigned cell reads 0.00.
• Remaining per line is planned minus actual. A negative number means that line overspent.
• Savings and debt payments are planned lines too, because they use income.
• A row with a missing amount turns the totals into "Missing input" until the row is complete.

What does zero-based budgeting mean?

Zero-based budgeting began as an organizational method. Peter Pyhrr developed it in the 1970s. It requires expenses to be justified and approved in each new budget period, starting from a zero base rather than the previous period's amounts (Zero-based budgeting, Wikipedia). A household version applies the same idea to one month: start from income, list what will take money, and give each dollar a line.

It differs from a percentage split. The 50/30/20 budget rule sets targets for needs, wants and savings as shares of income. A zero-based plan sets an amount for each category and checks the total against income. The 50/30/20 split can give a starting total for each group, and a zero-based sheet then makes the line-by-line decisions.

How is the zero-based budget sheet laid out?

The working tab has one input cell for income, B8, and a table of 60 rows from row 11 to row 70. Each row is a category with a planned amount and an actual amount.

Each formula is wrapped in a check that shows "Missing input" when a number it needs is blank or is text. The Notes tab explains the method and the range limits. Blue cells are inputs. Dark cells are formulas, so overwrite only the blue ones.

How do you build a zero-based month?

1. Enter monthly income in B8. Use the money that reaches your account after tax. Gross pay overstates what you can assign.
2. List each category in column A with its group. Start with fixed bills, then savings and debt payments, then flexible spending such as groceries and leisure.
3. Type a planned amount for each line in column C.
4. Watch B6, income still unassigned, and adjust the amounts until it reads 0.00. A positive number is income without a job. A negative number means the plan asks for more than you earn.
5. Enter actual amounts in column D as money leaves or moves. On a savings line, the actual is what you have moved into the savings account.
6. At month end, read column E. Negative numbers mark lines that overspent, and positive numbers show money that was planned but not used.
7. Change next month's planned amount for any line that was wrong two months in a row.

How do you read a finished month?

The example below uses $4,000 of monthly income and seven lines. The figures are illustrative. They are not the sheet's sample data.

Income still unassigned reads 0.00, because the planned amounts total $4,000. The remaining column adds up to $835, which equals planned minus actual: $4,000 minus $3,165. Two lines overspent, groceries by $30 and utilities by $15. Leisure came in $60 under plan.

The emergency fund's $820 is not a surplus. It is the transfer that has not been made yet. Once the money moves, enter it as the actual, and the remaining amount falls to zero.

Where do savings and debt payments go?

Savings and debt payments use income, so they belong in the plan as lines. If savings is a line, the question is how much goes into it this month, not what happens to whatever is left at the end. A transfer between your own accounts is one planned amount on the savings line. It is not an extra expense on top, and the sheet's assumptions say the same.

Extra debt payments work the same way. Each extra payment is a line with a planned amount. The debt avalanche or snowball question explains how to choose the order of those extra payments.

How do irregular costs fit a zero-based plan?

Car repairs, insurance premiums and gifts arrive in lumps. A zero-based plan handles them by budgeting for them in advance. A sinking fund planner calculates the monthly contribution: the funding gap, which is the target minus savings so far, divided by the months remaining. A $720 gap with 12 months left needs $60 a month.

Enter the monthly contribution as a planned amount. When the bill arrives, pay it from the fund and record it against that fund's line, not against a regular line such as groceries. That keeps the regular lines honest.

How is this different from a monthly budget log?

The monthly budget spreadsheet fills its Actual column from a transaction log with SUMIFS. The zero-based sheet's Actual column is typed. That suits a shorter list of categories, or a month when you total each category from the bank statement yourself. If you already keep a transaction log, copy each category's total into column D. The other budgeting templates on Sheet Reserve are listed in one place.

What mistakes break a zero-based budget?

• Planning from gross pay. Taxes and deductions cannot be spent. Use the amount that reaches your account.
• Leaving income unassigned. A positive B6 is money with no decision attached. Give it a line, such as a savings goal or a debt payment.
• Planning more than you earn. A negative B6 means the lines add up to more than income, so something has to shrink.
• Leaving a row half finished. If a category has a name but its planned or actual amount is missing, its Remaining cell shows "Missing input", and the totals show it too.
• Typing totals. Every total in the sheet is a formula. A typed total does not change when a line does.
• Treating one line's surplus as spending money. Money left on one line does not pay for another line unless you move it on purpose.

Frequently asked questions

What is a zero-based budget?

A zero-based budget assigns every dollar of income to a category, such as rent, savings or debt payments, before the period starts. The planned amounts add up to income, so nothing is left unassigned.

Does zero-based budgeting mean I spend nothing?

No. Zero refers to unassigned income. You can spend, save or repay debt as you choose, as long as each dollar has a line. The remaining column shows where actual spending moved away from the plan.

How is a zero-based budget different from the 50/30/20 rule?

The 50/30/20 rule sets three targets as shares of income. A zero-based budget sets an amount for each category and checks that the amounts add up to income. The 50/30/20 split can supply a starting total for each group, which you then divide into lines.

What if my income changes from month to month?

One approach is to plan from the lowest income you can reasonably expect. If a month brings more, assign the extra to a savings or debt line before the month starts.

Can I add more than 60 lines?

Yes, but the sheet's ranges stop at row 70. Copy the formulas into new rows, then extend every range that refers to rows 11 to 70, including the totals in B5 and B6. The Notes tab describes the range extension.

Why does the total say Missing input?

One line has a name but a blank or text entry in its planned or actual amount. Find the row whose Remaining cell says "Missing input", and enter both numbers as figures.

Related reading

• Monthly budget spreadsheet you will keep using: budget versus actual, with a transaction log and SUMIFS.
• Subscription cost tracker: find what each plan costs a year: monthly equivalents and annual totals for recurring charges.
• Debt avalanche vs snowball: months to payoff with NPER: how to order extra debt payments.