What’s the simplest way to get control of your money if you feel like it keeps slipping through your fingers? Zero-sum budgeting, a tactic created by Peter Pyhrr in the 1970s, offers a clear answer: give every dollar a job before the month begins. This article shows how that approach can help you solve problems like overspending, financial stress, and stalled debt payoff.
To give you a full picture of zero-sum budgeting, we’ve pulled together ideas from The Total Money Makeover by Dave Ramsey, Killing Sacred Cows by Garrett Gunderson, and the economic history of mercantilism. You’ll see why some experts champion this method, why others warn against it, and how the framework influences both personal finance and broader economic thinking.
Table of Contents
Pros and Cons of Zero-Sum Budgeting
We’ve broken down the pros and cons of zero-sum budgeting in the table below. If you want to read the benefits and drawbacks in detail, keep reading for Dave Ramsey and Garrett Gunderson’s thoughts.
| Pros | Cons |
| Gives every dollar a job, helping you get control of your money. Helps prevent overspending, financial stress, and stalled debt payoff. Provides written goals and a monthly plan, similar to how successful people use written goals. Encourages couples to work together on shared money goals, reducing money conflict. Forces you to plan spending before the month begins and commit to the plan. Helps you adjust spending through “emergency meetings” when unexpected expenses arise. Supports debt payoff through the debt snowball method, giving quick wins and motivation. | Creates no new wealth. Encourages a mindset where your gain must come from someone else’s loss. Creates constant anxiety about limited resources. Leads to harmful financial behaviors driven by fear of loss. Can cause excessive frugality that reduces quality of life and can even cause financial losses. Makes people overly risk-averse, causing them to miss opportunities for growth or value creation. Keeps people focused on protecting what they have rather than creating new value. |
Dave Ramsey’s Defense of the Zero-Sum Budget
In The Total Money Makeover, Dave Ramsey recommends zero-sum budgeting to free yourself from debt and set yourself up for success.
Successful people have written goals; simply put, a monthly budget is your money goal. It wouldn’t make sense to build a house without blueprints, nor does it make sense to spend your life’s earnings of $2 million without a plan.
Motivational speaker and author Brian Tracy notes that having written goals is a more important contributor to extraordinary success than education, connections, talent, or inherited wealth. He quotes a study of Harvard graduates, which found that two years after graduating, the 3% with written goals had greater financial success than all others combined. (Shortform note: check out our summary of Brian Tracy’s book, Eat That Frog!, here.)
The Dave Ramsey budget template can be downloaded here.
Here are the basic steps to get started:
- Each month, draw up a new budget for the next month. If you’re married, sit down with your spouse to do this. Conflict over money is the No. 1 reason for divorce in the U.S. Often, this is due to different personalities and money management styles. The way to prevent conflict is to let differences complement each other and work together each month to establish shared money goals.
- List the month’s bills, savings, and debts, then list and allocate every dollar of your income (think of this as spending the money on paper before the month starts). This process is referred to as the zero-sum budget: monthly income minus expenses equals zero. If you have variable income because of commissions or self-employment, use this budget form.
- Once both partners agree on a budget, pledge not to do anything with your money that isn’t prescribed by the written plan. You can’t get control of your spending without working together. If something unexpected comes up—for instance, your car needs repairs—hold an emergency meeting and together reallocate and balance the categories so that the month’s income minus expenses still equals zero.
The Debt Snowball Process
Additionally, Ramsey recommends another method that applies the principles of his zero-sum budget: The debt snowball method. It’s easy to understand, but it takes effort and commitment to pull it off. Tens of thousands of Total Money Makeover converts have proven it works. There are two steps:
1) Make a list of your debts, in order from the one with the smallest balance to largest. Exclude only your mortgage, which will be addressed in another step. A form is available for downloading here.
2) Each month, apply every extra dollar you have to the smallest debt until it’s paid off. Make the minimum payment to stay current on all other debts.
After the smallest debt is paid, apply the payment you had been making on it, plus any additional money you have, toward paying off the next smallest debt. When the second debt is paid off, apply the payment amounts from the first two debts, plus any other money you can find, to the third debt on your list, and so on.
Each time you pay off a debt, you increase the amount you can pay on the next one—your payments continue to snowball until your debts are paid off.
Starting with the smallest debts gives you some quick wins to motivate you, and by the time you get to the largest payments, such as car payments and student loans, you’re in a position to pay over $1,000 a month. You’ll soon be debt-free except for your mortgage.
| Mercantilism and Zero-Sum Economic Competition The theory of mercantilism, which dominated European economic thought from the 16th through the 18th centuries, saw national wealth in purely zero-sum terms: The country that accumulated the greatest supply of precious metals like gold and silver was the wealthiest. Countries adopted economic policies to pursue this goal, such as exporting more than they imported (to earn more gold and silver) and establishing overseas colonies to provide markets for manufactured goods and supplies of raw materials. Since World War II, most of the world has advanced to a positive-sum mentality, where economic activities create value for all participants (though this value is distributed unequally). However, the idea of nations competing against one another in a global economic game still retains popular appeal for many voters and some political leaders. For example, some commentators have argued that Donald Trump views the world as a zero-sum game, where any gain comes at someone else’s expense. According to these commentators, in Trump’s worldview, whoever pays the most is the loser, and whoever gets the most is the winner. This thinking drives his approach to multiple policy areas: On trade, Trump believes countries with trade deficits are losers while those with surpluses are winners. His imposition of tariffs on major trading partners like Mexico, China, Canada, and the EU reflects this mentality, despite evidence that such tariffs don’t reduce trade deficits. |
Why Garrett Gunderson Discourages the Zero-Sum Budget
On the other hand, Garrett Gunderson (author of Killing Sacred Cows) writes that no new wealth is created within the zero-sum framework. There’s a limited supply of existing wealth, and you “win” by claiming as large a share of it for yourself as possible. And because the amount of wealth is finite, your gain can only come from someone else’s loss.
Gunderson says you should reject the zero-sum framework of wealth. Below, we’ll explain why, exploring the costs of the zero-sum mentality and the mistaken theory of value it relies on.
The Cost of Zero-Sum Thinking
Gunderson warns that viewing wealth as finite leads you to adopt inefficient and harmful financial practices that hurt not only your bottom line but also your happiness. He writes that zero-sum thinking creates constant anxiety about resources: When you believe there’s only so much to go around, you become preoccupied with securing “your” portion before someone else claims it. This fear of loss transforms money from an instrument that facilitates your happiness into something you serve and protect at all costs. This manifests in a number of harmful financial behaviors; we’ll explore three of them next.
Harmful Financial Behavior #1: Excessive Frugality
Gunderson observes that people trapped in zero-sum thinking often practice excessive frugality, denying themselves expensive purchases that would improve their quality of life or even generate value over time. For example, a talented web designer with a growing client list might continue using an outdated laptop that frequently crashes and slows her work, causing her to miss deadlines. Despite having $3,000 in savings, she refuses to purchase a new computer, believing she needs to preserve every dollar for “real emergencies.” This decision costs her two major clients due to delayed projects, resulting in lost income that far exceeds the price of the computer she couldn’t bring herself to buy.
Harmful Financial Behavior #2: Missed Opportunities
According to Gunderson, zero-sum thinking leads you to miss opportunities for growth and value creation. He explains that this is because when you’re focused on protecting what you already have, you become excessively risk-averse and fail to recognize what you might gain by exercising your creativity and entrepreneurial thinking.
For example, let’s say two competing restaurant owners, Elena and David, approach a declining customer base differently. Elena, stuck in zero-sum thinking, sees David as her enemy and focuses on taking his customers through aggressive price cuts and negative advertising, straining her margins and staff morale. David instead proposes they collaborate on a food festival highlighting their complementary cuisines (her Italian dishes and his Spanish tapas). The event attracts new customers to the neighborhood, creates media attention neither could generate alone, and allows them to share marketing costs.
While Elena initially feared losing her piece of a shrinking pie, David’s collaborative approach expands the market for both restaurants. This demonstrates how abandoning zero-sum thinking unlocks growth opportunities and creates value that didn’t previously exist.
Learn More About Zero-Sum Budgeting
If you want to dive deeper into the pros and cons of zero-sum budgeting, check out our full guides to the books mentioned throughout the article.
