$17 in checking and zero-based budget

How low does your checking account have to get before you squirm?

$100?
$50
$10?

In the winter of 2009, things were desperate. Just divorced, house for sale at the bottom of the market, new city, new job.

But I had money in the bank:

$17

My bills were paid. I was out of debt any my 2 doggies and I were housed and fed.

I was too proud to ask for help and knew that I could hang on until the next pay day.

And I had just begun to follow 2 of Dave Ramsey’s guidelines:
No more than the following of take-home pay:
*25%housing+util+tax
*15%car+ins+gas

Month after month I kept at it. Paying off bills, having faith, living below my means.

Years later, I would learn about Financial Peace University, the Total Money Makeover book and cashflow from Mr. Ramsey.

The days of $17 and little more in the bank haunted me for a long time. And once I saw $100 or more in there, I liked having a cushion of money to feel secure. The cushion grew a bit and I wasn’t sure how to best use it for the future.

What does he mean by “cashflow” and a “zero-based budget?” It simply means that your money should “0 out” each month.
What?! Keep $0 in the bank?

No. Keep a little cushion in there that comforts you.
Maybe it’s $50, $100 or more.
At the beginning of the month, each dollar has an assignment: “sir, yes sir!, I shall pay the mortgage!”
“M’am, yes, m’am, I will buy groceries!” And so on.

And any remaining money? It has an assignment too: it goes into your sinking funds-those things you want to save for: a new sofa, a down payment, paying off the mortgage.

How on earth was I going to do this in the Budget in Excel? Ramsey has paper forms to use on his site. That’s great if using paper and pencil helps you-in fact he encourages this tactile exercise to feel the budget and see it on paper.

I’m a spreadsheet nerd. So, I made space at the top of our family budget to go to “0” each month.

Like this example:
Cashflow: $0
(Pay-expense-sinking)

Post tax pay: $3000

Total actual expenses:
$2800

Sinking fund:$200
(Pay-actual expenses)

Ding! See how the leftover $ starts to fund the sinking fund?

Conceptually, I always thought I understood this but until I saw it on my spreadsheet, I could not have any idea how much we could expect to put into a sinking fund.

The leftover money was not employed. Flopping about in the basement and playing video games into its 30’s.

Now it has a job and its title is “sinking fund team lead”. When we get good at this, it may become “night manager”.

After I figure out how to create a calculator online, I will share a template.

For now, you could just use the free cashflow forms from Dave Ramsey: once you see it on paper, it’s life-changing:

http://a248.e.akamai.net/f/1611/26335/9h/dramsey.download.akamai.com/23572/daveramsey.com/media/pdf/fpu_monthly_cash_flow_plan_forms.pdf

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s