Spend everything you earn.
Yes, you read that correctly. Moneystretching recommends that you spend every single penny you make every month. And you need to do this every month. And here’s the surprise… it’s not very easy. But before you drop your phone or keyboard and run out on an epic shopping spree, let’s go over exactly what we are advocating.
The difference between how an individual budgets and how corporations budget can be pretty extreme, but in reality they shouldn’t be. In fact, you and your family are a corporation, of a sort. Families budget based on what they are relatively guaranteed to bring in, month after month. Sure, there are some career paths that are based on sales, commissions, or bonuses but the idea is generally the same. You likely have a pretty good idea of what your monthly income is going to be. Corporations budget based on projections and comparisons from years prior. They spend money they are expected to earn, but there are no solid guarantees. But make no mistake, every penny is accounted for.
In your own personal budget, there is a high probability that you are taking a look at what you make and making decisions on what you can afford, trying to leave as much left over as you are comfortable squeezing out. This is a traditional approach, and it works well for the most part. But there is a different way of looking at your monthly financing that may make more sense.
Simply put, we recommend taking your entire monthly income and spending it ALL. This means if you subtract what you spend each month from what you take in each month, you should have exactly $0 left. Does that sound reckless? It’s not. It’s all in what you are spending it on. This is what’s known as budgeting to zero.
Spending money by putting it into savings (or retirement) is the smartest way to spend. Traditional budgeting can leave money left over each month. Money with no purpose has a high probability of being wasted. Don’t orphan part of your income, put it ALL to use. Budgeting to zero will help you do this. If you are fortunate enough to know the exact amount you will be taking in each month, put a purpose behind it all and leave no amount unallocated.
This method is different from what we are used to, and it will take some time to get comfortable with. But you will almost certainly learn more about your expenses, save more, and gain control over your monthly income and your future. So, if you are ever asked how much you have left over each month after your budgeting, you can proudly say $0. And that’s the way you like it.
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