WalletPrep worksheet · Money basics
How does a zero-based budget work?
Name ____________________ Date __________
Key ideas
- Income minus every planned dollar equals $0. List take-home pay, then assign it to bills, spending, savings and debt until nothing is left unassigned.
- Savings and debt payments count as jobs. Zero does not mean spend it all. Money for savings, sinking funds and extra debt payments is assigned too.
- When one line runs over, move money. If groceries cost $40 more, take $40 from another line. The total still has to equal your income.
Vocabulary
- Take-home pay
- The money that actually lands in your bank account after taxes and payroll deductions come out of your paycheck.
- Zero-based budget
- A budget where you give every dollar of income a job, so income minus everything you assign equals $0.
- Sinking fund
- Money you set aside a little at a time for a known future cost, like car insurance, holidays or a new laptop.
- 50/30/20 rule
- A simple budget that splits take-home pay into 50% for needs, 30% for wants and 20% for savings and extra debt payments.
- Minimum payment
- The smallest amount you must pay on a credit card or loan by the due date to keep the account in good standing.
- Emergency fund
- Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.
Work it out
Leo, 29, takes home $3,500 a month and owes $2,400 on a credit card. He wants every dollar planned before the 1st.
- Take-home pay
- Rent
- Groceries
- Utilities and phone
- Transportation
- Card minimum + extra
- Emergency savings
- Sinking funds
- Fun money
- Left to assign
Check yourself
What does "zero" mean in a zero-based budget?
- A. Your bank balance should reach $0
- B. Every dollar of income has an assigned job
- C. You spend nothing on fun
- D. You have zero debt
You take home $2,800 and have assigned $2,650 so far. What should you do?
- A. Leave the $150 in checking with no plan
- B. Cut $150 from groceries
- C. Give the remaining $150 a job, like savings
- D. Spend $150 on whatever comes up
Your grocery line runs $60 over. What is the zero-based fix?
- A. Move $60 from another line, like fun money
- B. Put the $60 on a credit card and ignore it
- C. Stop budgeting for the rest of the month
- D. Raise your income line by $60
Your turn
Write your expected take-home pay for next month at the top of a page. List rent, bills and debt minimums under it, then add savings and fun money, and keep adjusting until income minus every line equals $0.
Answer key
How does a zero-based budget work?
Work it out
- Take-home pay$3,500
- Rent− $1,300
- Groceries− $450
- Utilities and phone− $220
- Transportation− $300
- Card minimum + extra− $400
- Emergency savings− $400
- Sinking funds− $180
- Fun money− $250
- Left to assign= $0
- Leo lists his needs first: $1,300 + $450 + $220 + $300 = $2,270.
- His card gets $400: the $100 minimum plus $300 extra. Savings gets $400 and sinking funds $180.
- That leaves $3,500 − $2,270 − $400 − $400 − $180 = $250, which becomes fun money. Every dollar now has a job, so $0 is left to assign.
Check yourself
- B. Every dollar of income has an assigned job Income minus everything you assign, including savings and debt payments, equals $0. Your account can still hold money.
- C. Give the remaining $150 a job, like savings $2,800 − $2,650 = $150 is still unassigned. Give it a job, such as savings or an extra debt payment, so the budget reaches $0.
- A. Move $60 from another line, like fun money The total still has to equal your income, so you take $60 from a line that has room.