Money

Want To Spend Money And Still Save? Why You Need A Zero-Sum Budget

The secret to building wealth isn’t an illuminati conspiracy hidden in ancient manuscripts; there are no tricks or special formulas. At some point you’re going to have to budget, so you might as well get on with it. But it’s not bad news: a zero-sum budget involves spending everything in your account – and will completely transform your finances.

You want more money, right? But you probably can’t work more than you already do without making your existence miserable. You need the money you’ve already got to work harder. There are a few ways to do that, like investing, tax breaks, passive income and high interest accounts – but the simplest way to start is by using a budget.

It’s pretty straightforward: your income should exceed your expenses. A budget looks at the gap between your incomings and outgoings. In trying to get that gap as wide as possible, you’ll learn what you’re spending your money on and take control of your cash.

The beauty of this budget is that it flips the concept of a regular budget on its head. You’re not trying to not spend money – every dollar you want to use now has a purpose so you can spend it. This automatically eliminates frivolous spending, without having to forgo the things you need and like. But the biggest plus is the perception shift: it stops you associating ‘saving’ with a feeling of lack or deprivation. You want to get that amount in your transaction account down to zero because it means you’ve budgeted perfectly for every cent to be money well spent.

Get your sum to zero

Welcome to the world of zero-sum budgeting, where spending everything in your transaction account saves you money.

This system is based off two main principles:

#1 You need a purpose for every dollar in your budget

#2 Your aim is to get your transaction account down to zero each month.

How can you be spending while still saving? You’ll be paying yourself a ‘salary’ from your pay cheque, and everything else goes into savings.

Living off last month’s pay and working your new ‘salary’ down to nothing each month is a ‘zero-sum’ budget. By paying yourself the same monthly amount, you’re allowing good months to balance out the bad, eliminating financial stress at the same time as building up your savings. In this way, a zero-sum budget works for almost everyone, especially those who don’t earn much, freelance or work on a contract basis.

zero-sum budget spend save money

Here’s how to get one:

#1 Figure out how much you earn

How many pay days fall within this month? How much will each paycheque be? If you’re on a salary, this will be easy. Those on fluctuating incomes will have to sit down and work out the numbers.

#2 Work out your baseline

What is the bare minimum you need each month to cover essential expenses? This will become your baseline budget, and includes things such as rent, bills and groceries. List out all your bills and the stuff you can’t survive without. This includes debts.

#3 Calculate discretionary expenses

What are the things you enjoy each month that aren’t ~technically~ necessary? Discretionary expenses are the fun stuff like Thai takeaway and brunch, Netflix, magazine subscriptions and F45/yoga/rugby.

Add your baseline budget with your discretionary expenses and this is your zero-sum budget, or that ‘salary’ you’ll pay yourself each month.

#4 Take a wee look at the state of your affairs

You’ll now have listed out your monthly expenses alongside your monthly income. Suddenly, there’s a clear picture of how much money you should have left over each month. If you’re shocked by the amount because you rarely have any money left over by month’s end, it means you’re spending that sweet surplus on wants.

(If the picture looks bleak because there’s no surplus at all, you’ll need to adjust your strategy. Reassess what you can live without. It might mean saying bye to Netflix, but it could even highlight you’re spending way too much on rent and it’s time for a cheaper place).

#5 Give all your money a purpose

It’s a theoretical saving spree! You now know what your zero-sum budget is spent on each month but what about your left over earnings? Instead of letting any excess cash flow sit in your transaction account willing you to spend it, you have to assign it a reason for its existence.

zero-sum budget save spend money

For example, if you have $700 left over each month, use a percentage portion of it to pay down any debt. The remainder could go into a high interest savings account. Don’t have one? See point #7.

#6 Pay yourself and start living off last month’s income

It’s time to start paying yourself a monthly salary. On the first of each month, deposit your zero-sum budget (your baseline budget and discretionary expenses) into your transaction account. This is how much money you need to live on happily without dipping into savings. Everything else goes into savings, debts and/or investments (or whatever you worked out in point #5).

For freelancers it’s pretty cool to pay yourself a steady salary each month despite the usual earnings rollercoaster. But for anyone using this method, you begin living off last month’s income as opposed to counting on next month’s. This is how zero-sum budgeting can change your finances and have you ahead of the game in no time.

#7 Set up an emergency fund and/or savings account

Everybody needs one. An airbag removes unnecessary financial stress if funds dwindle or there’s a big surprise expense, ensuring you’ll never be left broke or have to put off something important. Put a percentage of each paycheque towards an high-interest savings account (no matter how low the percent). If you’re starting from scratch, use any ‘bonus money’ like tax refunds or birthday cash to boost it.

Hot tip: High interest accounts work best when you deposit money but make no withdrawals (withdrawing means missing out on your sweet interest rate for the month, which is the whole point of having that account). But for zero-sum budgeting, your transaction account should only have your monthly zero-sum budget. Where do you put savings you might need to use at some point? Most banks offer an online-only account linked to your transaction account that has a decent interest rate and allows you to make withdrawals. This account is where you’d withdraw money for car payments, doctor’s visits or that island holiday at the end of the year.

That’s it. You should finish the month with all your bills paid, a chunk in your savings or against your debt, and nothing, zip, zero in your everyday account. You don’t have to think about money from a place of lack. Your zero-sum budget isn’t about depriving yourself: it’s about spending money for a reason.


Sonia was the Founding Editor of The Cusp. You can find her on Instagram @sonnietothetee