How to Repay Massive Amounts of Debt With a Zero Sum Budget

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Updated May 3, 2017

A few years ago, I was successful at zero sum budgeting for the first time, and it helped me pay off my student loan.

I was inspired to pay off my student loan because I wanted to pursue a dream of running my own business full-time. Doing that with student debt wasn’t something I wanted to do.

I had tried budgeting before but was never able to stick to the process.

So, I tweaked my budget method to make it work for me.

I thought what I came up with was a unique budget idea.

I later found out it has a real name:

The zero sum budget (also called a zero based budget)!


In this post, I’m going to share with you how it works. Prepare to be amazed!

zero-sum budget

(Before we head into the budget, I put the step-by-step process in a workbook that you can use to fill out your own. Holla! Grab it here


The Zero Sum Budget Explained

With a traditional budget, you make estimates of how much you’ll spend in each area for the month.

Then you monitor how much you’re spending for each line item.

If you spend over in one area, you make adjustments in others to compensate.

For me, there’s too much gray area in this type of budget.

I don’t have the presence of mind to check my budget daily or weekly to make sure I’m on track. So I tend to fall off track even if I’m using a nifty budgeting app like that logs my spending automatically.

This type of budget, in my opinion, gives you an overview of your spending, but not how it relates to the actual money being brought in.

You can estimate all you want, but if what you spend sums up to be more than the cash you’re bringing in you’ll eventually rely on credit cards.

A zero sum budget is a little different.

It’s called a zero sum budget because your income minus expenses, debt, savings, investments, etc. should equal zero.

The budget is more centered around your income.

This means every dollar and cent of your income has a purpose. After you use this budget to pay off debt, it will help you avoid debt in the future since it’s a cash-based budget.

Way, way less ambiguity here.

To create this budget, you write down your income then list all of your expenses and the amounts you want to put towards debt, savings goals or investments.

At the end of this calculation, you’ll either have money remaining or a negative balance.

If you have a positive balance remaining – you can use the extra money as an allowance, which is what I did. Or you can redistribute some of the money back into your other line-items.

If you have a negative balance (not enough money to go around) – you can cut from non-essential parts of your budget or the amount going towards savings or debt. You can also negotiate for lower reoccurring bills. (Here’s a service I recommend if you have trouble reducing your bills).

Whatever you do, keep tweaking the budget until the ending balance is $0.


Putting the Zero Sum Budget into Practice

Okay, so you may be thinking the zero sum budget seems like a regular old budget. (Or a little confused by how it works. Don’t worry; we’ll go through an example.)

When I put it into practice, the zero sum budget was easier to keep track of than a traditional budget.

Since I knew exactly how much I could spend in each area and there was no money left over, I didn’t fall off the plan. And I only needed to check my budget each paycheck, which is when I distributed money according to my budget.

I kept a simple checklist in my day planner I took out each payday. It laid out where the money I earned should go whether to my checking account for groceries, bills, debt or savings.

Here’s a super simple example of how to create this budget.

First, write down your income, expenses and due dates for your bills.



Then subtract your income by expenses.

After doing the math, you’ll see in our example; there’s $1,005 left over to play around with per month.

In this situation, you would figure out what goal you want to put that extra money towards.

Let’s put:

$300 to an allowance (and to serve as backup in case line-items like gas or groceries go over a little.)

$400 more to debt.

$305 more to savings.


Now, here’s the updated budget:



Here I played around with the numbers to get the budget to equal zero.

Remember, we tweaked the savings, debt payment and added allowance.

Now, every one of the dollars has a purpose and the budget balance is $0.


Getting Jiggy Each Pay Period

The next step I took is checking the due dates of each of my bills and organized what I could cover with each paycheck by the due date.

Essentially, using my first paycheck of the month for bills due around that time and the second check on bills later in the month.

Again, I had to tweak and split some of the line items throughout both paychecks to make sure bills were paid on time.

Here’s an example of it broken down by pay period:



Getting this budget started will take some time to organize and a calculator to crunch the numbers…

…but once you do its smooth sailing.

All you’ll need to do is use your budget as a checklist each time money comes in.

To hold yourself accountable, you can draw cash for line items like gas and groceries to avoid overspending. If you’re disciplined enough, you can simply keep this cash in your checking account.

But make sure you transfer money for savings and debt so you avoid having it in your grubby hands.

I always thought budgeting was tough, but this totally dumbed down version of the budget I did with a pen and paper is what I found helpful for aggressive debt repayment.

What can you do next?

If you want a template to create your own budget, head here.

If you want some more tips on how to save money (particularly when you’re broke) head here.

— This post or page may contain affiliate links. Don’t worry, though. I only promote products that I’ve used or truly believe in.

Taylor K. Gordon is a writer and money blogger. She writes on how to live your best life without going broke.

  1. Reply Latoya @ Life and a Budget July 13, 2016 at 11:18 am

    For me automating bills out of one checking account works best. It cold be a little better because I need to reallocate spending from allowances. My hubby and I have our own checking account in addition to our household checking so we can each monitor our own spending. I hate having to look over numbers all the tI’m and found that by keeping the numbers consistent each month and coming from one account, it helps us avoid digging ourselves into a hole.

    • Reply Taylor July 13, 2016 at 11:23 am

      Yup, me too! That estimating each month just didn’t work for me. It’s a lot harder now that I have a variable income to do this. But it worked so well when I had the regular bi-weekly paycheck. Tiffany from The Budgetnista shared a percentage budget with me that I’m attempting. Where each time you bring in money you divide it by the budget percentages.

  2. Reply 4 Things to Start 2017 Off Right – Musings of Mind and Matter December 31, 2016 at 1:37 pm

    […] a wealth of great tips for financial freedom. I went with the zero-sum budget method as outlined here as well as signing up for saving through the Digit App that I learned about in her post […]

  3. Reply Hilary Boslet January 6, 2017 at 11:16 am

    Another suggestion for you. I have done this for years after I got myself out of some debt.
    I get paid on the 1st and 15th of the month. I pay my mortgage and HOA on the first of each month. I pay all my other bills on the 15th. I have called each of the vendors I do business with (State Farm, Verizon, Century Link, etc..) and have the due date changed to the 15th. They actually give me a few days grace period, but I pay everything on the 15th. It’s a really stress free way to know what’s coming and what I need to do.
    I also use budget billing for my Xcel (gas & electric) bill. If you have lived in your home for at least a year they will average the monthly bill. Yes, the summer may be a bit higher than the actual bill, but when the winter is really cold, I don’t get smacked with a crazy high bill.

    • Reply Taylor January 6, 2017 at 11:21 am

      Hilary, Hilary, Hilary… THAT IS AN AMAZING IDEA! I hadn’t even thought about calling in to adjust the due dates, but it makes perfect sense. Because it’s tricky to finesse your bills split between pay periods. Before moving to Atlanta all of the places that I rented from up north had utilities included. So, this is the first time I’ve received utilities bills. I wasn’t sure if averaging the bill would be a real savings, but I’m going to look at it closer. Thanks for that tip! P.S. I’m going to add your adjusting dates thought above too bc it’s mega valuable.

  4. Reply Kelsey January 6, 2017 at 4:55 pm

    After a ridiculous year, I’m ready to get back on the “pay off my debt” train. I’ve had for a few years now and love it, but always am frustrated because I am estimating what I “might” spend, whereas with this zero sum version, I know exactly what I should expect to spend every 2 weeks. Makes perfect sense to me, and seems like a great way to start the new year off right!! Thanks for a great post.

    • Reply Taylor January 6, 2017 at 5:08 pm

      Hi Kelsey! Thanks for stopping by 🙂 I agree, I refer to for a big picture view of all of my accounts in one place. But, from day to day it’s harder to budget your money that way in my opinion.

      If you prefer apps than writing down your budget, LevelMoney and Mvelopes are worth a look. Both kinda follow this same zero sum approach. LevelMoney tells you how much “spendable” money you have after your other expenses which is like the allowance idea above. And with Mvelopes it’s like a virtual envelope budget system which is when you withdraw cash for all budget line items. When you run out of cash, you know you’re tapped out in each budget category for the month.

      Also, Hilary’s comment above is epic about changing your bill due dates so you can allocate your money for each pay period much easier.

      Cheers to budgeting and paying off debt this year!

  5. Reply C January 31, 2017 at 1:57 pm

    I’ve done this for years, except my zero sum is $660.07. Its the amount I need in my account for the 1st of the month in order to cover all the automatic payments and I track it on a rolling 12 months. Every month money gets “transferred” to things like mortgage, bills, property taxes, credit card payments and savings accounts. The numbers change as needed so that I can always end at $660.07 or more. The goal is that my savings number increases as I keep my credit card amount low for each paycheck. I get paid bi-weekly though so rolling total works much better for me.

    • Reply Taylor January 31, 2017 at 2:59 pm

      Just like Hilary’s comment above, this is another GREAT way to approach it.

      The textbook definition of zero-sum budgeting suggests getting ahead by a month which wasn’t feasible me. But, the idea of keeping enough in your account for the automated payments the beginning of the month is very, very smart and doable.

      It’s funny how we have access to tons of innovative tools for budgeting, but just a simple strategy can have longevity.

  6. Reply Life Commentary - "Oh S&%t, I Broke My Budget" - Life and a Budget February 21, 2017 at 6:53 pm

    […] How to Repay Massive Amounts of Debt With a Zero-Sum Budget – Tay Talks Money […]

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