Zero budgeting for the newly frugal

Everywhere you look in personal finance space, there is almost guaranteed to be someone telling you that you need to have a budget. In many cases, it is considered the done thing.

While budgets are great for those they work for, we’ve realised that we actually spend more money when we budget, compared to when we don’t. What we do instead, is zero budgeting. 

Save all the money

The basic premise behind zero budgeting is simple: You start with the assumption that you will spend no money. Life, however, being crazy and unpredictable, means you’ll spend some money on stuff like food, unless you’re already living in the woods and growing your own, of course.

So when we go to the grocery store, we want to go out again as close to zero as we are capable. This means looking for offers and stocking up on staples when they are on sale.

However, because we are value-based spenders it also means balancing the cheap with things that are important to us, like say, fairtrade chocolate if we really want chocolate Bananas and coffee fall in the same category for us. These are things we buy rarely, so we can afford to spend a little extra on it.

We know that there are other brands in addition to fairtrade doing good out there, so it doesn’t have to be that particular brand, but we do due diligence with these products especially.

By allowing ourselves to spend money on things we value, we do not feel deprived when we optimise for price in the rest of our grocery budget. This balancing act takes some fine-tuning, and it something we continuously evaluate.

Why this works for us

While living in London, we discovered that when we tried to look at last month’s expenses and prepare a realistic budget from that, we continuously spent more money. If we wanted to have the freedom to buy a new garment or other personal item each month (AKA “fun money”), we would have to add that into the budget.

But our desires were not such that we wanted or needed something new every single month. So when that item was in the budget, it prompted us to go look for something we wanted instead of saving the money.

This was before we discovered the financial independence community, so that had something to do with it as well. The thing was just that, for us, when we tried to budget for every possible thing that might crop up in any odd month, we ended up over-budgeting.

Instead, we could’ve just accepted that there will be different expenses in different months, and planned our spending accordingly.

It might very well be that we were not following optimal or good budgeting strategies. This is a fair comment, as we were just slushing along on our own, trying to do what seemed to make sense.

By comparison, zero budgeting accepts all these little extra expenses each month without any fluff. Like when we were moving into our flat, we knew expenses would be much higher than usual, even with the furniture being free. There is just so much that goes into stocking up a living area from scratch, such as replenishing the pantry and kitchen, and finding bed sheets that fit your almost free used duvet.

If we had used those extraordinary months as a basis for our spending henceforth, it would have been a ridiculously bloated budget. But extraordinary expenses do crop up with fair regularity, enough that they shouldn’t really be called “extraordinary” (birthdays and Christmas comes to mind).

Is zero budgeting for everyone?

I don’t know. I imagine it might present a challenge to dive head first into zero budgeting if you truly get into it with the assumption that you will spend nothing. That is not how life works, and we know it. So if that will make you feel an overarching dread and despair for having “failed” at zero budgeting, perhaps a traditional budget is more up your alley.

Conversely, it you go on a limb the other way, you might argue that those cute tops on sale were a rare treat, when your spending (which, of course, you are tracking) shows that it is actually something you do once or twice a month.

As with anything, awareness is key to success. Both Mr. E. and I are naturally frugal people and don’t feel a need to go out and spend money. I imagine this helps. But then again, it would have helped us no matter what sort of money-management train of though we chose to adopt.

Don’t be afraid to try something out. In fact, I strongly encourage you do give something new a go if you think you might be something out of it. Perhaps you don’t adopt it entirely, but on the other hand, maybe you’ll discover a new trick or two that you can take with you back to your usual system.

Over to you

Do you keep a budget of your monthly expenses? Are you tracking your spending either by an app or manually?

Here in Norway, banks are not allowed to disclose spending information to a third party provider. This means that all the traditionally recommended apps like YNAB, Mint or Personal Capital do not work here. You have to enter your spending manually (which, I will admit, has deterred me more than once from making a silly purchase, just because I don’t want the extra work of logging it).

Have you found a style of money management that really works for you? We’d love to hear about it, we’re always looking for new tips and tricks to tweak and optimise our system!

Zero-budgeting for the newly frugal

13 Comments on “Zero budgeting for the newly frugal

  1. I love how you explain zero budgeting. I do a monthly budget and aim to update it weekly. This year was rough since I wasn’t able to keep my usual process due to health reasons. Even with the roughness I stayed out of debt and saved enough to put a down payment on a new kitchen.

    • Well done, go you!

      We find the tracking a bit of a drag sometimes, but at the same time it really helps, so we consider it worth it. ?

  2. With this headline, I thought you meant zero based budget by transferring all your savings up front, which I know some people do, but wouldn’t work for us. However, the way you’re describing this is EXACTLY what we are now doing since I implemented our “no spend” November. We might go over by a little this month, but we are definitely saving a TON more than we would otherwise. Our grocery budget, for one, would have been much larger had I set an amount just for that. Totally on board.

  3. I track my expenses but don’t necessarily have a budget. I like to see the results which is why I track and I generally self-correct my expenses when I see that they’re falling out of line with the saving goals I set for myself at the beginning of the year. I did a Q3 goal review recently and saw that I was behind on my savings rate goal for the year so I cut back on a few things here and there in the last few months to help me hit those goals.

    • That sounds a lot like what we are doing. Tracking is so important for self-awareness and accountability.

      Good job hitting those goals!

  4. I’m not sure if zero budgeting would work for us, but I’m willing to give it a go. I’m not great at budgeting anyway, but it makes much more sense to aim to spend as little as possible. Worth trying!

    • Yeah, budgeting takes some dedication. Especially the larger your family gets. I find it really helps with accountability though, good luck! ?

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  6. This makes total sense to me, budgets have just never clicked. The way of thinking you’re talking about here is one of the fundamental ways I turned my finances around. I do use the whole move-your-savings-out-up-front thing. I realize that’s not for everyone but my brain seems to need a hard stop. Hopefully I’ll train myself out of that. Thanks for sharing!

    • Yes! That part is so important to me too. If I don’t move it to savings, you’ll be sure it’ll start leaking out of my account with much less conscious thought to it. Having to either spend less or transfer from the savings account is such a deterrent from moving money back into the checking account if we can avoid it.

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