Zero-Balance Budget

There are a plethora of different ways that people choose to budget. Each one has its strengths and weaknesses I am sure. In the reading and research I’ve done, and what we’ve practiced as a couple, I have found that a zero-balance budget makes the most sense for us. Right now I would like to simply outline the approach that we take to budgeting each paycheck.

First off, I get paid every 15 days or so; twice a month. It makes the most sense to me to budget for whatever time frame your pay comes in. I used to get paid once a month, so we did a monthly budget before. I know that many people have irregular incomes, or are commission-based so I won’t speak to that for now, we’ll save that for a post on a later date.

First, I list out all of our expenses and give them a value. Over time, you can figure out where you can cut back, or where you might need more. For example, we first started budgeting about $150 per month for gas. I work from home, and we almost live on campus for Jos, so our gas budget moved a bit and shrunk to the $80 that it is now (benefits of a Prius). On the other hand, our first budget had no “fun” or travel money. We both have loved exploring Oregon, so we started factoring in $100 per budget to get out and about. Paying off debt is a sacrifice, but it doesn’t have to be a death march. So here is an example list of expenses. You may have some we don’t have, or may not have some that we do.

  • Internet
  • Rent
  • Gas
  • Compassion International (child we proudly sponsor in Ecuador)
  • Missionary friend we support
  • Oil changes/car maintenance
  • Cell phone bill
  • Medication
  • Electricity
  • Insurance
  • Allowance (we each get a bit of fun money that doesn’t count toward the budget)
  • Miscellaneous expense
  • Eating out
  • Student Loan payments
  • Fun/Trips
  • Groceries
  • Tithe (we are followers of Jesus and believe in supporting the Christian body and others through our local church)
  • Haircuts

This is just an example list that we start from each pay period. It’s a decent place to start. The next step is to assign an amount to each category. Some expenses are easy like the Internet is always $40. But some expenses are variable, like electricity. Make an educated guess based on past bills or what you usually expect to pay. Reviewing past months’ spending can be helpful. It may also shock you, so brace yourself! 🙂

Once you have listed an amount next to each expense, add up all your expenses. Then subtract your expenses from your paycheck. For example, let’s say my check was $1,000 and my expenses came to $920 for this two week period. I would have $80 “left over.” However, with the zero-balance budget, we need expenses + savings + debt repayment (insert other items here) to equal our paycheck. So in this example, that extra $80 goes towards an extra student loan payment! Now our paycheck of $1,000 is equal to our total expenses of $1,000.

You may be discouraged if you find that your total expenses are larger than your paycheck. This is the case for a lot of people, they just don’t know it. So they might make $1,000 but unknowingly spend $1,200 in that same time frame. That extra $200 can probably be found on their credit card balance. Yikes! With a budget in place, you spend what is in each category, and when it is gone, it’s gone! No more eating at restaurants or fun money for a couple days until that next paycheck comes in. A little self-control goes a long way.

The point of creating the budget is to analyze what you need and don’t need. Are you paying for cable? How about an expensive $1,000 phone you’re making payments on? Maybe you have a car payment you can’t afford. Even little things like a $10 subscription service to a music service might need to get the ax. Creating a budget can be extremely eye-opening. And it should be! We are trying to make a positive change!

For Jos and I, we subtract our expenses from our paycheck, and then the entire remainder goes straight to student loan debt. Might sound crazy, but we’ve made some awesome progress with this approach. It becomes a bit of a game, doing your best to maximize the leftover to make a large payment. Remember, making a payment now saves your future self a lot of money. Do your future self a favor!

Zero-balance budgeting is great because it gives every dollar an assignment. There is no guilt for spending money in a category that is allocated to that expense. And it helps establish healthy boundaries. When a category runs out, wait until that next check comes in. Don’t forget, you can make adjustments. You may find you consistently have money left over in a category. Go ahead and reallocate those funds elsewhere. Or perhaps your grocery budget just isn’t enough to get you by so you may need to expand it by a few bucks. Find what works for you. Be reasonable and do your best to be a bit frugal where there is room for it.

“Budget” can be a swear word to some people. But it doesn’t have to be for you. A budget can spell freedom if it is followed and refined along the way. Don’t know where to start? I would love to get you pointed in the right direction. Feel free to reach out to me through the Contact page on this site.

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