Sunday, April 23, 2017

Wealth: Equal to Zero Budget

Making more money each month is hard. Saving more money is easier. When one is trying to put together their own dividend scythe or simply just trying to put away money, the easiest way to do so is to learn how to budget effectively.

A budget can come in many forms. I'll be detailing many different budgets on the blog soon but first I wanted to start with one of the most common - the "Equal to Zero" budget. If any of you have ever read anything by Dave Ramsey, you've likely become very familiar already with this type of budget. If you haven't, I'll try my best to walk you through how you could create and use this type of budget for the very first time.

Don't worry if you have never put together a budget before. They aren't as scary as everyone talks them up to be. They simply require a little time and a good bit of control in order to work. The particular budget that I want to talk about today requires only two columns that pretty much anyone could emulate.

I've attached a sample copy to this post. If you click the picture, it will enlarge and show you a better look at it. In order to use this budget, simply add your income to the left column which is titled, INCOME. Add all of the results from this column together and obtain a total. This is the total amount of money that you bring into your household each month.

Next, move onto the second column that is labeled EXPENSES. Fill out each category with either your known cost each month or what you would like to give yourself to spend in each category in the coming month. Once you've filled all the fields in, add them up and get a total at the bottom.

If your total INCOME and EXPENSES aren't the same, you'll need to start changing some numbers in your EXPENSES column until you make sure that the numbers are the same. Then, in the month to follow, simply make sure to only spend what you have allotted yourself in the EXPENSES category for each category. For instance, if I gave myself $50/month for gym expenses and I am paying $50 for the next month to go to the gym, I should not look to spend anymore while I am at the gym during that month. It's pretty easy.

The benefits of this type of budget is that you can know exactly what you have to spend on numerous items in your household each month starting at the beginning of the month. You can then either use a running calculator to keep track of how much you have left in each category or use envelopes with the amounts to keep track. Whichever works for you is the best system. If envelopes work, use envelopes. If having a running document on your phone works, use that. As long as you stick to the budget, you can end up saving exactly what you budgeted to save for that month.

The drawbacks of this type of budget are that it can feel a little constricting and it relies on you being able to say no once the money you've allotted for a certain category is spent. If you spend it all in the first ten days, you have to get by for the rest of the month on no money going into that category. This can drive some to simply break the budget and start reaching into other envelopes and it is exactly why this particular budget didn't work for me. It did however work for my wife who used it religiously when she first moved out of her parent's house.

In conclusion, this type of budget can be a very reliable way of saving money each month. It budgets certain categories down so that one can know ahead of time how much they wish to spend on each type of item. Whether it be through a system of envelopes or a document on your phone, it can be very useful when tracking your spending. It can however feel constricting and it can also lead others (guilty!) to simply go off of the budget and get frustrated with the shackles. If this sounds like a good budget for you, please feel free to hijack my sample above or even create your own off of the same system. The only real rule is that INCOME is separated from EXPENSES and that both totals equal zero when subtracted from each other.

Thanks for stopping by,


  1. A very interesting concept, I can see the benefits of this, that way your could possibly buy some more stocks in the long run. I hope I am right in thinking this. Still getting my head around it. Cheers

    1. More savings equals more stocks. More stocks equals more dividends. More dividends equals earlier retirement :)

  2. If you budget correctly to begin with and allot yourself enough money for what you need it for, then there shouldn't be any issues needing more. Any budget that allows someone to save more money and invest in more dividend stocks, I can get behind.

    1. We can agree on that! Budgets can help "discover" more saving power however by forcing you to look at certain areas you may be spending too much on.