There are usually ways to save money each month — believe it or not.
For instance, once upon a time, my husband and I were pretty clueless when it came to how we spent the money we earned at our 9 to 5 jobs. We made a decent income but struggled to keep track of where it was all going and, more importantly, why it always managed to disappear into thin air. I won't bore you with the details again, but we ultimately discovered that we were spending ridiculous sums of cash on groceries and eating out, home repairs, and miscellaneous frivolous purchases. But how did we find that out? Now, that is the interesting part.
Using a zero-sum budget
Once we decided that we needed to make a change, we poured through bank statements from previous months and began tracking our current spending. This led to a plethora or discoveries — including the realization that we were eating out more than we were eating at home and were much deeper in debt than we knew. Still, we kept digging through data and strategizing a plan for debt repayment and escape. However, as we put all of our efforts into figuring out how to create some sort of budget, I realized something. Our incomes were fluctuating — a lot. With that juicy detail in mind, we talked endlessly about what we were going to do about it. After all, how could we budget without knowing how much money we would make in any given month? And how could we create a plan of action when the most crucial piece of data (our income) was missing? My light-bulb moment came when it dawned on me that, instead of budgeting on this month's income, we could build a budget based on what we earned last month instead.
How to get one month ahead — and why you should
I didn't know it at the time, but getting a month ahead is actually a popular budgeting strategy and one of the main principles of zero-sum budgeting. Popular budgeting software programs such as You Need a Budget are even built around the idea of getting a month ahead. From their website: “Spend this month, what you earned last month. How? Save enough money to go an entire month without touching your regular income. Then the next month, spend last month's income while earning this month's income. You'll spend this month's income next month.” When we first decided to get one month ahead on our bills, we were unaware that these types of resources existed but still able to conceptualize it somewhat on our own. And, thanks to the fact that we earned a decent income, it didn't take long to figure out how we were going to save enough money to get a month ahead — we just needed to put together one month's worth of expenses. Here's how we did it (and how you can do it too):
- Step 1: Figure out what your monthly expenses are. The first step to saving one month's expenses is figuring out what those expenses are. Thankfully, we had already done much of the grunt work when we tracked our spending and realized how much money we were making (and wasting).
- Step 2: Save enough to cover one month's worth of expenses. At the time, our monthly expenses were around $3,000, so we began our journey by stashing away that much cash plus another $1,000 for debt repayment. If I remember correctly, it took a few months to get there.
- Step 3: Create your new budget based on last month's income. Once we had that money put away, we started a new month with $4,000 to spend. We created a zero-sum budget that used up every cent of that money, then paid bills and kept our spending in check accordingly.
- Step 4: Save the current month's income to spend next month. While we progressed through our first month of zero-sum budgeting, we saved our monthly income to use for the following month's zero-sum budget.
A lot of people would look at this budgeting strategy and think it's far too much work, but it was truly the only thing that made sense in this sometimes backwards-thinking head of mine. To be honest, I just couldn't think of any other way to budget “in the moment” without knowing how much I would earn from week to week. Because, like I said, our incomes were fluctuating a lot at the time. I was working as an hourly employee back then; and the time I put in varied wildly due to seasonal activity, overtime, and other things beyond my control. My husband was paid his salary as a mortician, but was often rewarded with fairly large commissions for selling headstones. Those factors combined meant that our income could be as much as $1,500 higher or lower from one month to the next, with no real method to predict the swings.
Related >> How I Budget With a Variable Income
The benefits of getting one month ahead
Fortunately, getting one month ahead was just what we needed. And once we saved up the sum of cash we needed to do it, we were well on our way to the debt-free and financially sound lifestyle we enjoy today. In a lot of ways, I think getting one month ahead was just as important as budgeting for us when we got started. Here's why:
- It made us recognize how much money we were really earning. When we first started tracking our spending, I made around $30,000 per year and my husband made around $50,000. That's not a ton of money in some parts of the country, but it's a pretty decent living in the rural Midwest. Getting one month ahead made us realize how much money we were squandering by forcing us to come to terms with it as we created our new zero-sum budget each month. Related >> The Power of a Zero-Sum Budget
- It helped us celebrate small victories. In addition to fostering a greater understanding of how much we were earning, getting one month ahead also helped us notice and celebrate small victories. Before we began tracking our spending, any raises or bonuses were spent without much fanfare. Once we started using this method, we noticed any and all income gains … and used them as fuel to go even further.
- It helped us create a zero-sum budget based on reality, not on how we hoped things would turn out. Tracking our spending and getting one month ahead made us far more realistic about our future goals, mainly because it made us deal with real numbers — not the projections or figures we imagined based on wishful thinking.
- It forced us to save a larger percentage of our income. To me, zero-sum budgeting is all about getting real. Once we got real with ourselves and learned to look at our situation for what it really was, it was far easier to transition into a lifestyle where our financial goals were given the attention they deserved. For us, that meant saving more of our income and pushing the envelope in an effort to save more each month.
When it comes to our finances, getting one month ahead was one of the best things we ever did for ourselves. First, it made it abundantly clear that we were wasting not only our resources, but also an excellent opportunity to get ahead. But more importantly, the fact that our spending decisions were finally based in reality and actual dollar figures is what helped us make solid progress for the first time instead of continuing on in some idealistic belief that everything would turn out fine somehow. I'm glad I learned how to get one month ahead on my own, but I'm also happy to discover that there are many resources out there for people who want to take charge of their finances. But, as with anything else, you have to decide it's something you need to do and then create a plan of action to make it happen. If you do, I hope you discover the same thing I did — that you already have more money than you realize. Are you one month ahead on your bills? Have you ever considered using this strategy?
Author: Holly Johnson
Holly Johnson is a credit card expert, award-winning writer, and mother of two who is obsessed with frugality, budgeting, and travel. In addition to serving as contributing editor for The Simple Dollar and writing for publications such as Bankrate, U.S. News and World Report Travel, and Travel Pulse, Johnson owns Club Thrifty and is the co-author of Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love.