How to Repay Massive Amounts of Debt With a Zero Sum Budget
A few years ago, I was successful at budgeting for the first time, and it helped me pay off my student loan.
I had tried budgeting before with things like Mint.com but was never able to stick to the process.
So, I created my own budget method with pen and paper that helped me control my money instead of having it control me.
The budget I ended up creating was a unique take on the zero-sum budget. The main difference being that in the textbook definition of the zero-sum budget you use this month’s income to pay for next month’s bills.
I’m guessing right now you don’t have extra bill money laying around to get ahead by one month.
Ha! Neither did I.
Instead, I created a zero-sum budget method where you can use this month’s income to pay for this month’s bills by splitting up my budget and viewing it in pay periods.
This budget legit changed my life.
I went from making the minimum payment on my student loan to paying several extra hundred dollars on it each month.
So, of course.
I made a zero-sum budget workbook with my budgeting method that you can use to replicate the same technique. Grab the workbook here.
But, first, let me explain:
The Zero Sum Budget Explained
It’s called a zero sum budget because your income minus expenses, debt, savings, investments, etc. should equal zero.
The budget is more centered around the cash you’re bringing in than the cash that’s going out.
You look at your income and give every dollar and cent a purpose.
With a traditional money management system like Mint.com, you make estimates of how much you’ll spend in each area for the month.
Then you monitor progress throughout the month.
For me, there’s too much gray area in this type of budget.
I don’t have the presence of mind to check my budget daily or weekly to make sure I’m on track.
This type of projected budget, in my opinion, gives you an overview of your spending, but not how it relates to the actual money you’re bringing in.
You can estimate all you want, but if what you spend sums up to be more than the cash you’re bringing in you’ll eventually rely on credit cards.
A zero sum budget gives you a plan that’s much more likely to curb your spending.
Way, way less ambiguity because you rely solely on cash that you’re actually bringing in.
This helped me increase my student loan debt payment leaps and bounds.
After coming up with a plan for each one of my dollars and cents, I was able to increase my student loan payment by an extra $300 which expedited my payment plan like no other.
Putting the Zero Sum Budget into Practice
Okay, so to create a zero-sum budget you add up your expenses + investments + goals, and then subtract that number from your income.
For modest income earners (a.k.a. someone like me who didn’t have an extra entire month of bill money to play around with), I split the budget into two week spurts by pay period.
When money flowed in from pay day, I put it towards each of my budget areas whether it was rent, debt payments, or other bills that had to be covered that pay period. The first pay period was very rent and bill heavy, the second was for savings, etc.
What I love about this approach is that you only need to check your budget each paycheck (bi-weekly) which is easier than looking at say Mint.com every day to make sure you’re spending within your limits.
I always thought budgeting was tough, but this totally dumbed down version of the budget I did with a pen and paper is what I found helpful for aggressive debt repayment.
Get a Step-by-Step Guide to Creating This Budget…
Back to the budgeting workbook.
I put the basics above to get you started. I put the step-by-step approach I used in this workbook including templates.
The workbook is 50+ pages with tips on how to cut your expenses and how to improve your mindset to be a better budgeter. Find out what’s in the book >>> here!
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