Zero based Budgeting works

Make your Budget simple.

Before writing this story, I have to look back on my life in the 20s and early 30s why it was hard for me to save. One of the reasons I joined the US Navy is to help pay for college. And when I became a college student, I worked three jobs to help pay my living expenses. Even with all that, I still accumulated $13,000 in student loan debt in 1996 after graduating from college. It may not be a lot in comparison to today’s student loan balance, but to me that’s huge! Last year, the average college student debt had $37,172 in student loan debt.

How about if you add the credit card debts?

I remember I roughly had a credit card of $4000 balance spread across 5 to 6 credit card accounts. To avoid accumulating lots of interest cost, I’d transfer balances into a new card every 18 months with zero interest rate and pay the minimum. I played this game for years.

It didn’t have to be this way.

We realized debt was our biggest obstacle if we want to live a comfortable life with doing whatever as we please.

We created a zero-based budget in 2015. By having a budget, it gave us the blueprint a road map to pay off our consumer debt. It also gave us permission to spend on other things that were important.

The most important thing we had to do as a couple and making sure we follow the budget works is the constant communication with one another. We have to be on the same page all the time. We tweaked and changed it for months until we agreed on every category. We tracked our budget weekly, and I became a total spreadsheet nerd.

Our typical budget categories breakdown;

  • Housing
  • Transportation
  • Clothing
  • Medical Health
  • Savings
  • Discretionary

There are times our budget category can be way off from the actual expenses. That’s okay. In fact, it happens a lot. As long we are close enough, that’s good enough. I can’t always remember our utilities due dates and amount vary month to month, while others are due on every other month. As long we put an amount for every category, we come pretty close. We like to give ourselves plenty of money to keep us under budget. Any remaining balance we carry forward to the next month’s budget. By having extra cash remaining add another layer of safety net that we might not anticipate on next month budget like unexpected repairs without having to tap into the emergency fund. It helps when you don’t have any consumer debt to service we can allocate where in need the most, mainly the mortgage and savings and some cases towards the vacation fund. That gives us comfort.