Comments on: Why I REALLY Hate Zero-Based Budgeting

By: Luke

Luke — Thu, 10 Dec 2009 17:09:55 +0000

You could use software like http://www.neobudget.com to handle your budget. It uses the envelope method (like Ramsey recommends), but it doesn’t have to be zero-based. My wife and I use NeoBudget to track our spending in different envelopes, but we always maintain a 1-month padding in our envelopes. So this month, we’re spending from what we saved last month and income is going toward saving for next month. In this way, we don’t have to worry about when in the month a bill will be paid because at the beginning of the month, we have saved everything we need for all bills and expenses for that month. It works great!

Of course, we also have an emergency fund in place too. The padding isn’t our emergency fund, it’s just sitting in the checking account to help pad things a bit and cushion for reality.

By: jessica w

jessica w — Sun, 25 Oct 2009 16:53:04 +0000

Travis,

We’ve been zero-based budgeting and using the envelope system for a month now.

I’m positively flabbergasted at how well it has worked for us. I just reconciled the budget for the end of the month last night and planned the November budget.

It really, really does work well. Despite “murphyisims” like a tire replacement (it was in the budget) and some items that appeared that weren’t planned, we actually got everything taken care of with room to spare. $57.61 to be specific with really massive debt payments. It feels good to be this close to freedom.

By: Travis

Travis — Sun, 25 Oct 2009 15:20:36 +0000

Granted you may only have $1,000 standing between you and the “real world,” per se, but at least you got rid of 34k in debt… definitely not a bad move there. While I’ve never tried this “zero-based” budgeting myself, it seems to be gaining popularity throughout the online world.

By: Ned

Ned — Tue, 13 Oct 2009 11:47:50 +0000

Dave’s zero based budgeting approach is not as much of a financial exercise as it a psychological exercise. It helps you make a paradigm shift in the way you approach your finances. That is why it is hard. We are used to the run and spend method.

What helped me the most was dumping plastic and switching to cash. When you hand over a credit card to make a $100 purchase it stings a little. When you hand over five $20 bills and look at an empty wallet – it stings much more.

Good luck and stay positive!

By: Rachel

Rachel — Wed, 07 Oct 2009 05:50:58 +0000

I have been using Dave’s Allocated Spending Plan for…Wow! Nearly two years! I make copies out of the book, and now I have modified them so that I have 8 pay periods on one sheet. Anyhoo, I love it. You will find your own groove with everything. I did order his envelope system after getting tired of fumbling for the right envelope at the store; it’s now all tattered, and I am too cheap to order a new one…
I have found that the most valuable aspect for me, IS seeing the money spent on paper. It really keeps me in reality. I know where every penny goes, and were I ever to look at the account and think, “Hey look, we have extra money! Let’s spend some!” Noooo, that money is earmarked, and I know what for. Your ‘unplanned for’ category is perfect; I too leave a little extra $ in the account for incidentals; school pictures, field trips, or a forgotten auto-pay. Stuff like that can come out of that without causing stress, or needing an “emergency budget meeting.” I also budget our housing payment in two increments, so that half of it is in the account for the whole month. So the account will have money, we just don’t spend it.
The process is addictive, in my opinion. I now can’t spend any money until it’s all written out; the thought makes me sick. I think it’s just the fear of going back [there]- to the mindless spending place. I even HATE using the debit card, it makes me nervous, plus it is so much easier to balance the checkbook (which I never did before Dave anyway) when there are few transactions.
So let’s hear it for financial OCD! I’ll tell you, having your money go where you tell it to is very empowering. Looking forward to reading more from you! As always, best wishes!
For Glenda- you know, every penny goes either way, it’s just that this way, you know where it’s going/where it went. Hopefully, some of it is going right into your savings account, vacation fund, whatever, instead of…??? Hang in there!

By: Don @abovethenorm

Don @abovethenorm — Wed, 07 Oct 2009 02:59:56 +0000

Let’s not be so quick to jump past the “heart” of the zero-based budget.

Every dollar gets a PURPOSE, not every dollar gets spent. If I recall correctly from Dave’s methodology, the $1000 e-fund baby step is a launching point, ultimately you should have 3-6 months worth of expenses in savings. Why stop at $1000 initially if you’re uncomfortable with it. If Dave had suggested $2000 would you feel differently? $500?

Why are you cashing everything? Maybe you could try a modified version of the envelope system where you write the amount on the envelope, purchase and put the receipt in the envelope and subtract to find the new balance. Each purchase, instead of going for cash you can just look at the envelope for what is left from your plan. Just a thought.

Your mileage may vary, but what we found when we started to budget a purpose to every dollar, we actually started SAVING money. By purposing to only spend $100 in groceries each week – and actually spending $92, or $95, etc we started to accumulate balances in each envelope above what we planned to spend. Multiply that by a dozen or so envelopes and we’re talking pretty significant savings. That excess money helped us either knock out debt or build up our savings. Our account wasn’t dropping to $1000 each month, quite the contrary, it was growing as we became more conscious of our spending and spent less.

I like most of what Dave suggests but I will add that the Baby Steps (in my opinion) are more psychological than mathematical in nature. You don’t have to do them in the exact same order to get results; the order has just as much to do with how we feel about our finances and what changes most people can tolerate in a step by step plan. Whether you actually put cash in the envelopes or track your receipts, its your behavior that’s changed – that’s what matters.

By: jessica w

jessica w — Wed, 07 Oct 2009 02:55:17 +0000

Thanks everyone for enduring my whining on the subject of zero-based budgeting. We’ve been at it a week now with the envelope system and it’s working beautifully. It’s just a pain in the kiester (no more than guessing how much to pay on a bill in hopes we won’t need the money later, I guess) .

It’s nice to know that everything is planned for–we even have an “unplanned for” category to catch anything we might have missed for the first couple of months.

No more shuffling, guessing or juggling. Payday comes in two days and we know exactly where to put every nickel.

By: John DeFlumeri Jr

John DeFlumeri Jr — Wed, 07 Oct 2009 01:25:16 +0000

Zero based budgeting is real boot camp. Survive it and become stronger forever!

By: Kathryn

Kathryn — Tue, 06 Oct 2009 13:58:07 +0000

I agree with you! I really hate zero based budgeting for the same reason. It stresses me out! Especially with kids in the picture, something is always going to happen. I’m a big fan of reverse budgeting.

I wrote an article on it here: http://www.milliondollarjourney.com/budgeting-simplified.htm

Love your article!

By: Dogfood Provider

Dogfood Provider — Mon, 05 Oct 2009 19:20:12 +0000

I agree with Mike D., I think you can allocate some of your zero-based budget to buffer.

I just read Total Money Makeover, and I was really resistant to the idea of a zero-based budget. However, now that I have set one up, I am finding that my money actually goes where I tell it to — I have much less of it wandering off unaccounted for, which is essentially what happened to every penny that wasn’t automatically allocated the day I was paid.

I also don’t take all of my cash at once. First off, I’m only paid bimonthly, so I cut my monthly budget into two parts. Second, I pay the vast majority of my bills online, so the money that those payees will get stays in my account. They are not all paid on the same day, so cash stays in there. Third, now that I’m onto this budgeting thing, I really like it! Both last week and the week before I spent less than I allocated for going out to lunch — I talked to my close coworkers and we decided to bring our lunches. I left that “extra” cash in my checking account as buffer. Now, granted, that’s about $65, but that’s a lot to me.

This is what works for me, I hope you figure out what works for you! It’s only the 5th of the month, too — it took you a while to get into the habit of acquiring debt, it will likely require a little more time to get into the habit of getting out of it, too. At least that’s what i tell myself!