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Originally Posted by Smithie
 "zero-based budgeting"
Can you tell me a little bit about this? I'd love to have a name for my philosophy other than "Oh, Mommy/Wifey/Aunt Smithie is being neurotic about not spending more than she makes (or has earmarked in savings for a vacation, etc.) in any given month, so we can't get Chinese food tonight!" |
It's a system of paying your bills by pre-spending every dollar of it. Basically, your income and outgo are identical. This week, we sat down with our paychecks and divided the money up by starting with the things that NEED paid (based on due date), then looking at the expected expenses (gas, food, daycare, church, etc) and setting aside money for those, then looking at the remainder and figuring out where to put it.
For example, one week we had $218 left after we did all of our pre-spending so we started on our list and applied the money to them. We set aside $200 for our line of credit and put $18 in the vacation fund on the counter. Then, DH went to the bank and took out $420 for the kidsitter and $18 for vacation and then put childcare money in an envelope and the vacation in the jar. I took out $100 for groceries, spent $32 and put the other $68 in an envelope. Every pay we do the same thing but the envelopes and amounts vary. For instance, we fund a medical envelope and put $140 a month into it - we'll use it for copays and then deposit the right amounts in the bank to cover ordered prescriptions. Some months will be lower so the extra will sit in there to cover the higher months.
What we do, though, was SPENT EVERYTHING. We have a zero balance, in essence. By doing this, we are telling our money where to go and how to be used and (more importantly) don't have the option of wasting it. By stopping ourselves from wasting this money, we are able to use it.
I fell in love with the idea in TMMO. If I hadn't already returned it to the library I would be happy to give you a page or chapter to look at!
