How to Have No Money  at the End of the Month (and why it’s a good thing!)

The first time I started a budget I did it all wrong. I started with our monthly income, subtracted mortgage, utilities, car payments and credit card payments. Imagine how happy I was to find money left over! Hooray! We had money to spare after paying all of our bills! Little did I know, I was doing this totally wrong, and it’s part of the reason we stayed in debt for so long. When I saw that we had money left after paying our bills, I thought we were doing pretty good. In this post I want to discuss my three major budgeting mistakes. Why instead of having money leftover, I should have ended up with a total of $0. Unfortunately, most people are making the same mistakes I did. Let’s review what these mistakes are and talk about what you can do to change them. 

*This post contains affiliate links through which I may make a commission. All thoughts and opinions are my own.

Major mistakes

Leaving items off the budget

I did an entire post about major items people often forget in their budgets. In this post, I am going to break them down a little bit more and tell you exactly how to fix them. When I first started my budget, I accounted for all of our monthly bills, payments and memberships. That’s great; I definitely got started on the right track, however, I shouldn’t have just stopped the budgeting there. I had still left out two major aspects of my monthly spending:

• Gas
• Groceries

As a teenager, I had learned how to balance my checkbook. Naturally, I had assumed budgeting these for gas and groceries would mean just keeping track of how much I spent on them. When I went to the store, I would subtract what I spent from my total “leftover money” for the month. The problem was, we were often out of money by the middle of the month. This was happening because I didn’t make any sort of plan for grocery or gas money. Because I had no spending limitation, I didn’t think twice about how much I spent during any grocery store trip nor did I pay attention to how much I was driving.

How was I supposed to budget for these items when they were never consistent and changed from week to week?

Not planning for additional income

By the time we had moved into our “big house” (you can read about our downsize here) I had already built up a big client base for my photography business. Moving into a bigger house meant bigger studio space, more clients and a bigger income. The major, major problem was that I didn’t manage this money wisely at all! This is terrible if you own your own business and terrible when it comes to creating a budget for your family.

Because Tom had a consistent, full time income we just based our bills off of his income and considered any money I made “fun money” that we could spend however we wanted. So bad.

Often times, I was making so much “fun money” that I would take a $1,000 and put it toward my student loans. We would plan last minute all inclusive vacations and purchase brand new furniture without batting an eye. At church, I would grab wads of cash from my wallet and throw them in the offering plate. This may sound great in theory, but really we were causing ourselves to drown because we didn’t make a plan for any of this spending. Even if we had good intentions.

How do you plan for an inconsistent income?

Not expecting the unexpected

Dave Ramsey says one thing you can expect from life is the unexpected. You know at some point you car is going to give out on you. It’s common knowledge that your washing machine won’t last forever. This means that no mishaps in life should be surprising to you. They are expected to happen. Are you planning for them? Things like:

• New tires
• New appliances
• Car repairs
• Home repairs
• School fees (if you have children)
• Medical expenses
• Vet bills

We were barely setting aside money for savings let alone planning for these things to happen. But they did. The truth is, it’s hard to put money aside for something you currently can’t see. Planning for the future is tough when all you see is the present. In fact, studies have shown just how damaging this can be. Read my post all about it. Starting to be financially wise now is the best way to ensure a financially stable future.

How do you plan for what you can’t yet see?

Major budget repairs

Where there are problems, there are solutions! No need to worry. It may take some getting used to but there are definitely fixes to these major budgeting mistakes.

How to budget for inconsistent spending

In order to start budgeting for things like gas and groceries, you are going to need to go through your last 3 months of spending and add up how much you spent on each. You will then take the total amount spent over 3 months and divide that number by 3 to get the average amount spent. So it will look a little something like this:

• Month 1 + Month 2 + Month 3 = Total
• Total divided by 3 = average spending

Do this separately for gas and groceries to get your individual amounts. Now you know your average total for each of these areas. This is also a great way to take notice if you are spending way too much in one of these areas. **Don’t forget to include restaurants, fast food and coffee stops as a part of your grocery budget!**

Now that you have these totals, you can sit down and do a $0 based budget. You can use the simple budget in my Fun Sized Budget Bundle along with my other budget and finance printouts or try Dave Ramsey’s EveryDollar app. It’s a $0 based budget app that you can easily do online or from your phone.

Getting started with a $0 based budget, you must add up all your monthly expenses and be sure to include your new gas and grocery amounts. Once you have added up all your expenses, how do they compare to your monthly income?

You come up short.

If you have added up all of your expenses and find yourself having more expenses than money coming in, then it’s time to take action! Here are the next steps to take:

• Where can you cut back?
  • Reduce your grocery spending. Our family of 5 does $100 a week on average and eats healthy too!
  • Cut the cable bill. More families are opting to cut cable and get a digital antenna. Depending on your cable costs, this could save you over $1,000 a year!
  • Cut back on fast food and eating out. If cooking is not your speciality and you don’t even know where to begin, try the $5 Meal Plan. It’s designed to help you get healthy, budget friendly meals together and even puts together a grocery list for you!
  • Memberships. Have a gym membership that you rarely use? Try working out at home.
  • Drive less. This may be tougher depending on your commute or where you live, but opting to take your bike instead of your car is a great way to get your workout in and save on gas!

Truth be told, you may have already cut the cable, you eat for cheap and rarely drive yet still find yourself coming up short. Chances are this is due in large part to your debts. My biggest recommendation is taking advantage of multiple free credit analysis reports. CuraDebt and the Credit Assistance Network both offer free reports. Because they both offer different services, it is a wise idea to see what each of them has to offer you. This well help you better understand your credit and help you take steps in managing it and paying it off.

You could also get started with the Debt Snowball method that my family and I used to pay off $6,000 in 6 months.

Related posts

• Debt Payoff. March 2018: $800
• Debt Payoff, April 2018: $3,600
• What To Do When Budgeting Goes Wrong
• Should I Save Money or Pay Off Debt?

Paying off credit card debt and still being able to pay for your bills can be a draining experience and it very well may be that your best bet is to find additional sources of income. If you are being as frugal as possible but still can’t manage to squeak by, the best option (and possible only option) is to start looking for ways to make some extra cash.

• How can you make more?
  • Drive for Uber
  • Drive for UberEATS –  Deliver food instead of people.
    • Read more about the perks of driving for Uber.
  • Become a tutor – If you have a bachelor’s degree you can make between $17 and $22/hr by teaching English online in over 32 different countries!
  • Start a blog – Starting a blog is by no means quick money, but it has been my main source for debt payoff income!
  • Stitch Fix – If you have a passion for fashion, Stitch Fix is a great place to work from home while still getting the chance to do what you love!
  • Sell your stuff – Decluttr is a super easy online way to sell your unused things to get the maximum amount of money! Decluttr makes it super easy to see exactly how much you’ll get paid and they offer free shipping as well.
    • Read more about Decluttr and how it works.
  • Use rebate apps – Using rebate apps is a great way to get money back on your purchases, especially groceries.
    • Read about how to make the most of these apps!

There are really so many great ways to make an additional income these days. Sometimes it just takes a little creativity.

Related posts

• 33 Ways to Have More Money in 2018
• 87 Extreme Cheapskates Money Hacks That Are Pretty Normal
• 26 Jobs You Can Do in Your Pajamas (Well, almost.)
• Work From Home by Starting Your Own Subscription Box

I have money left over!

If you have money left over after accounting for your bills, gas and groceries you are off to a good start! Here are some other expenses you may not have considered:

• Savings
• Giving
• Sinking Funds (discussed a little later)
• Fun money

If you haven’t started yet, it is super important that you start building a savings! Having an emergency account in place is a wise safety net to have when unexpected expenses pop up. I will talk about starting an emergency fund a little later. Besides an emergency account, here are other things to consider if you find yourself with money leftover:

• Start putting 10% into savings
• Find charities and organizations to give to
• Create steady sinking funds
• Budget for “fun money” each month

 How to Budget for Inconsistent Income

If you are bringing in additional part time income, like I do, here are some ideas on how to better manage it.

What doesn’t work:

The number one thing that doesn’t work when you are making an inconsistent income is jumping the gun.  I would have photography clients booked for the entire month, so I would add up how much money I would be bringing in. This is not a bad idea. It’s good to be prepared and know what money you potentially have coming your way. That way, you could make a successful plan for it. That’s not what I did. Instead, I planned on that money coming in and would spend it prematurely. I bet you can guess what happened next. You know it… those clients would cancel or have to reschedule. So many times I spent money before I had it and then we’d be left scrambling to stay afloat.

What does work:

Planning ahead does work. Keep track of money you have coming in and start making plans for where you want it to go. It’s very important that you do not spend it before it comes in! A wise idea would be having a separate account for your extra income. By doing this, you can keep your additional income separate from your main source of income. At the end of the month, decide where you want to spend or save this money. Do not spend it as soon as it is in your hand without having a plan first!

Plan for what hasn’t happened yet

Do not let life’s little surprises surprise you. If you do not plan for unexpected events, then you will most likely find yourself blindsided and searching for money to help you get through it. Avoid this by planning far in advance. The best way to do this is by using an envelope system or Sinking Funds.

The first thing you’re going to want to do is get a list together of all the events coming up in the next year that you will need money for. Things like:

• Christmas
• New tires
• Vacation
• Birthdays
• Field trips
• Kid’s sports

Now, get an envelope system together for these expenses. Christmas, for example, if you plan on spending $500 on gifts and events, you are going to want to figure out how much money you’ll need to set aside each month.

• 500 divided by 12 = $42 total amount needed per month

Once you have figured out how much you’ll need to set aside each month, give each category its own envelope and start breaking your expenses off into these envelopes each month.

After coming up with the list for things you know will happen, it’s time to come up with a plan for those little surprises. Since you never know which might surprise you, it’s important to get an emergency fund in place. This account should have a a minimum of $1,000 in it. See how you can do this. Leave this money in this account so that you are covered when unexpected events present themselves.

What if you have debt?

If you still have debts you are working toward paying off, it’s very important to still have this emergency fund in place. Having your emergency fund set up will prevent you from having to dig further into debt during hard times. Once you have your $1,000 in place, it’s time to shift your focus toward paying off your debt. Get a free debt consultation.

You made it to $0

Once you have managed to tinker with your budget until you are at a $0 balance at the end of the month, give yourself a pat on the back. Working at maintaining a budget like this is actually a highly rewarding experience. You will find yourself having more money…even if you don’t actually have more money.

Taking the time to tell your money what to do can be a very liberating experience if you allow it to be. Creating a $0 based budget allows you to be more in charge of your money and your life. Which is just the way it should be!

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