If you feel like your money disappears the minute payday hits, zero based budgeting could be the structure you need. This method gives every dollar a job – so you’re not left wondering where it all went. In a world of rising living costs and economic uncertainty, creating a plan for every dollar can offer peace of mind – and a path out of debt. That’s exactly what zero based budgeting is designed to do. In this article, we’ll break down:
- What zero based budgeting is
- How it compares to other budgeting styles
- Step-by-step instructions to create your own zero based budget
- Tools and tips to make it easier
- When this method works best (and when it might not)
A 2025 survey by H&R Block Canada revealed that 85% of Canadians are living paycheque to paycheque, a significant increase from 60% in 2024. This highlights a growing need to budget and account for every dollar that comes in.
What is zero based budgeting?
Zero based budgeting (ZBB) is a method where your income minus your expenses equals zero. That doesn’t mean you spend all your money – it means you give every dollar a job. Instead of simply tracking where your money went, you plan exactly where every dollar should go before the month begins. That could include:
- Fixed expenses (e.g., rent, phone bill)
- Variable expenses (e.g., groceries, gas)
- Savings and investments
- Debt repayments
- Sinking funds (for upcoming costs like the holidays or car repairs)
At the end of the month, there’s no money ‘left over’ – it’s all been allocated intentionally.
Let’s take an example. Say you earn $3,000 this month. You assign $1,500 for bills, $500 for groceries, $200 for gas, $300 for debt repayments, $300 for savings, and $200 for fun. Total: $3,000. Every dollar has a purpose.
How is zero based budgeting different from traditional budgeting?
Many Canadians use a basic or percentage-based approach – like the 50/30/20 rule (50% needs, 30% wants, 20% savings/debt). While that can work, it often lacks the precision needed when funds are tight or goals are specific. Zero-based budgeting:
- Requires more planning upfront
- Offers better control over your money
- Helps identify ‘leaks’ in your spending
- Is ideal for people trying to get out of debt or build savings
How to get started with zero based budgeting
You don’t need fancy tools to start – just a calculator, paper, or spreadsheet. But budgeting apps can help (more on that below). Here’s how to get started with zero based budgeting:
1. Calculate your total monthly income
Include your regular salary, side gigs, government benefits (like the Canada Child Benefit), and anything else you receive.
2. List all your expenses
Start with essentials (housing, utilities, food, transport) and move to non-essentials (subscriptions, dining out). Don’t forget debt payments and savings goals.
3. Allocate every dollar
Distribute your income across categories until your budget balances to zero.
4. Track and adjust weekly
Your first month won’t be perfect. Track your spending and tweak as needed. The goal is to get better each month. If you need a helping hand, you might want to use our FREE Budget Template to begin your zero based budgeting.
Tools to make it easier
There are several Canadian-friendly apps and tools to help with zero-based budgeting:
- Spreadsheets: Free and customizable – start with our downloadable template to begin your budgeting
- YNAB (You Need A Budget): Designed specifically for zero based budgeting
- Credit Karma: Helpful for expense tracking, although it doesn’t strictly follow ZBB
- KOHO: Prepaid cards with budgeting features built in
Looking for more hands-on help? A Licensed Insolvency Trustee can work with you to create a realistic budget and repayment plan if debt is part of the picture. As the only professionals in Canada legally able to file all forms of debt relief, they’re well placed to advise you on how best to get on the path to a fresh financial future.
Who is zero based budgeting best for?
Zero based budgeting works especially well for:
- People trying to pay off debt
- Freelancers or shift workers with variable income
- Families who want tighter control over household spending
- Anyone who feels like they’re ‘bad with money’
But it may not be ideal for:
- Those who prefer a looser, percentage-based approach
- People with highly unpredictable or seasonal income (unless adapted)
Canadians who stick to a budget are half as likely to fall behind on financial commitments (8%) compared to those who don’t budget because they feel overwhelmed or pressed for time (16%).
Zero based budgeting: FAQs
Here are some of the most common questions we receive about zero based budgeting:
What are the pros and cons of zero based budgeting?
Pros:
- Total control: Every dollar is assigned a job, helping you stay intentional with your spending.
- Goal-focused: Great for paying down debt, building savings, or planning for future expenses.
- Spending awareness: Makes it easier to spot and cut unnecessary costs.
Cons:
- Time-intensive: Requires more planning and regular tracking than other budgeting methods.
- Can feel rigid: May be challenging to adapt quickly if unexpected expenses arise.
- Not ideal for everyone: Can be tricky for people with unpredictable or seasonal income unless modified.
What is the difference between zero based budgeting and traditional budgeting?
Traditional budgeting often involves estimating income and expenses based on previous months, with some money left unassigned or ‘left over’. In contrast, zero based budgeting gives every dollar a specific purpose – so income minus expenses always equals zero. It’s more hands-on and intentional, making it ideal for those who want tighter control over their finances.
What is an example of a zero based budget?
Let’s say you earn $3,000 this month. With zero based budgeting, you assign every dollar a job until your income minus expenses equals $0. For example:
- Rent: $1,200
- Groceries: $400
- Utilities: $150
- Transportation: $200
- Debt repayment: $300
- Savings: $500
- Entertainment: $150
- Emergency fund: $100
Total: $3,000 – every dollar is accounted for.
How Spergel can help
At Spergel, we’ve helped over a hundred thousand Canadians get out of debt and take back control of their finances – including many who used zero based budgeting as part of their journey.
“[Spergel] made me feel like I can turn my life around. Everyone I have dealt with has been very understanding! Answered all my questions and prepared me to go forward, learned how to budget and handle my money better and learned how to handle credit” – David, Spergel client. Discover more of our client reviews.
If debt is making it hard to budget effectively, we’re here to help. Our team can walk you through your options – from consumer proposals to debt consolidation – and help you build a budget that works for your life. Zero based budgeting isn’t about restriction – it’s about intention. Whether you want to crush your debt, save for the future, or just stop feeling stressed about money, giving every dollar a job can help you get there faster.
Ready to take control of your money?
If budgeting hasn’t worked for you in the past, you’re not alone. At Spergel, we help Canadians create realistic, judgment-free plans to get out of debt and take back control. Whether you’re just starting with zero-based budgeting or feeling stuck under financial pressure, our Licensed Insolvency Trustees are here to help. Book your free consultation today and take the first step toward a debt-free future.