Following up on Zero-Based Budgeting

Sooo…. It turns out, we spent the money in our envelopes, we paid the bills that the cash-flow plan told us to, and we still have money. That is to say, we haven’t bounced any checks, but we’re far from rich. There is one surprise though.

We’re ahead of where we usually are by this time in the month.

I haven’t stomped my feet and given up on the envelopes and the zero based budgeting yet, but yes, it is still scary. Another check came in this week and from it, I just started paying down the list on our cashflow plan (it’s in priority order, so that makes it easy). When the money ran out, I stopped paying, and it gets us 2/3 of the way through the list. Not too shabby. Another check will come in before the end of the month—and before the due dates on remaining planned items.

Plan ahead before starting this system

I’ll caution folks that this might be hard to start off on if, like us, you start your plan on the 1st but don’t get paid until the later. My husbands’ checks come on the 10th and 25th. I wish we’d stashed ourselves a bit of cash before we started on this. My income is self-employment income, so the timing is more erratic—depends on how current my clients are staying on their bills.

This does mean that I’ll be paying some items out of priority order simply because of due dates, but it’s no big deal if the phone bill gets paid before the grocery cash gets picked up at the bank—since I know we’ve got enough for both.

Time commitment

This is taking some maintenance time each week, but not nearly as much as I expected. I’d say about 10 minutes a week, though our first budget and cash-flow plan took the two of us a couple of hours to figure out.

How is this new?

The difference between my former method of managing the money and this cash-flow method–is that this truly is a plan. I know exactly what is getting paid based on priorities. It’s not a matter of paying great big payments on the credit cards (and patting myself on the back–only to find out I spent the grocery money), but it’s paying with purpose. There’s no panic or wonder, there’s no stress in it at all. There’s no concern about the fact that our income can fluctuate by as much as $3,000 a month. I simply pay down the list and in order of priority. When there is no more money, I just say “no” and that item isn’t getting paid at this time (the last 1/3 of our list is all debts, so while small payments will get paid in “low” months, I won’t be making giant payments).

It is fortunate for us that we don’t have to worry about not being able to pay something at all–but on this plan, if we were in that position, we’d know exactly where to stop and still be able to support our family.

Overall value

I’m a nerd, and my husband is a free spirit. I always want an extra cushion—and struggle with spending down to the last dime—even if the simple math tells me I can do it. I keep a little more than the plan says in the bank just to ease my mind and get used to the program.  My husband doesn’t like to feel constrained to a “plan.” But both of us are feeling good about this program—because he doesn’t have to feel too constrained (the item is either in the budget, or must be put into the budget—at which point, sometimes it’s less important than initially thought). Likewise, I don’t feel too “loose” with the money—paying it all out pretty much right away, because I’m getting used to some of it being in cash, versus in the bank account.

I suggest giving it a try. One thing we love is that we can’t go over budget on the envelope system on a cash budget item (groceries, gas, etc.). It’s working great!