Growing social media interest in method of tracking spending and saving prompts banks to get in on the act

Each month 20,000 people tune in to watch 27-year-old Beth Fuller work out how to spend her salary.

For a year and a half she has, on payday, opened a spreadsheet and written out in granular detail what she will owe in bills, exactly what she wants to do in the weeks ahead, how much it will cost and how much she intends to save.

She recently started sharing all the figures on TikTok, to a surprisingly rapt audience. Doing this has helped her clear £8,000 of credit card debt and finally feel on top of her finances.

“Every penny has a purpose,” says Fuller, a digital product manager from Newcastle, quoting the mantra of the near evangelical followers of “zero-based budgeting”.

This method of meticulously tracking spending and saving began as a business accountancy technique, credited to Peter Pyhrr, an accountant in the 1970s. Instead of basing your budget on previous years, you analyse each expense to see whether it still justifies allocating some of your funds to it.

Zero-based budgeting has since been adopted by personal finance experts such as Dave Ramsey in the US and is gaining popularity on social media among people struggling with debt and the cost of living crisis.

To capitalise on the trend, an increasing number of firms and individuals are selling zero-based budgeting-related merchandise. When we looked, there were more than 4,000 different zero-based-budget planners, spreadsheet templates and software programmes for expense tracking available to buy on the online marketplace Etsy.

So how exactly does it work?

“Zero-based budgeting simply means your income minus your expenses should equal zero,” says George Kamel, the author of the book Breaking Free From Broke, who co-hosts The Ramsey Show radio programme and podcast.

“If you make £5,000 a month, everything you give, save, spend and invest in that month should equal £5,000.

“Every pound has a job, a goal. You don’t want your pounds unemployed.”

You start by listing out your income, and then all your expected expenses, broken down into categories, from your rent or mortgage to energy, the supermarket shop, takeaway coffees, clothes … whatever feels important to you.

You create savings accounts for the future – a rainy day fund, for example – and a pot you can dip into so that if you overspend in one area, you won’t bust your budget completely.

You subtract all these expenses from your income, and try to get to zero.

You then track your transactions throughout the month.

“You can use old-school pen and paper or a budgeting app,” says Kamel, who recommends EveryDollar, based in the US. YNAB (You Need a Budget) and HyperJar are also popular apps that are available to UK users.

“If you do your budget and you’re in the negative, that’s a problem, but don’t freak out,” Kamel says. “You’re spending more than you make, which means you need to get out your metaphorical hedge clippers and trim that budget.

“Spend less on eating out, cut a subscription or two. Make adjustments as you need to throughout the month. If the electric bill is higher than you expected, tweak another line item to make up for it. For most people, it takes about three months of budgeting to get it dialled in. Don’t give up.”

What do fans say about it?

Fuller credits following zero-based budgeting content creators online with making her realise she could find an extra £700 a month, as well as pay off her credit cards.

“Funnily enough, it was when I started to earn more money at work that I got into debt. I had a perception of how my lifestyle should be with that income, and I think I had it conditioned into me that the answer was to grow my income.

“Now, before I buy anything or any money leaves my accounts, I will plan the month. My bills don’t really change that much but I will look ahead and think: OK, there’s a friend having a birthday, family visiting, there will likely be a takeaway then, I want to take my daughter to the farm at the weekend and this is how much tickets are. I know exactly what I actually need for spending. I also put money into emergency savings.

“It sounds so sad but I love it. I have no automatic payments set up – I manually pay childcare, and manually pay my credit card every month.

“I feel like I know my money better than I ever have.”

How financial firms are jumping onboard

Banks have noticed the increasing popularity of this budgeting method and are introducing features to make it easier to not only track expenses and set budgets but to pay expenses from allocated budgets, too.

Rachel Kerrone, a family finance expert at Starling Bank, says the bank’s most popular feature is “Spaces”, where customers can ringfence money for certain things.

A customer can then use Starling’s virtual cards, which can be added to Apple Pay or Google Pay, to shop directly from one of their “Saving Spaces”.