On Monday, I discussed my first ever budget. On Wednesday, I discussed the budget that didn't help me through my early twenties. Today, I'm talking about our budget and our marriage. I am a huge fan of budgeting precisely because of the profound effect that it has had on my marriage.
In my opinion, our rigorous, zero based budgeting system has been the single most helpful tool that has helped us to recover from a deteriorating marriage. It has helped us to turn expectations into contentment, complexity into simplicity, disparate goals into a shared vision, and to prioritize our relationship above other goals. Our zero based budget helps us to amplify every pillar in our Agile Personal Finance Manifesto.
What is a zero based budget
Our zero based budget is built on five principles (that are similar to, but not identical to You Need a Budget's Four Rules).
The first principle is that during a given time frame, every dollar has a job. The second principle is that the dollars that have jobs are dollars that you already have. The third principle is that you can predict almost all your expenses. The Fourth principle is that shit happens to everyone, but you can recover. The fifth principle is that the dollars are ours not his and mine.
Zero sum budgeting is much easier to implement if you happen to be sitting on about two months worth of income when you decide to implement. If you're living paycheck to paycheck it might be more difficult because big expenses like taxes or insurance could really wipe out. The reason I suggest two months of income is this:
One pillar of zero sum budgeting is living off of the previous month's income. If you have this on hand, in cash, you can begin at any time. The other cash dependent pillar is that you can predict almost all your expenses. I'm not calling this extra month of income an emergency fund. This is the seed money for your "sinking accounts" for irregular but important expenses. This is basically money that's already spent, just not yet.
We have sinking accounts for car repairs, home repairs, home renovation, taxes, insurance, Rental Repairs, Rental HOA dues in the event of vacancy, clothing, medical (now that we have invested our HSA), giving (we like to reserve a small amount of giving money, so that we don't have to feel stingy if something pulls at our heart strings), and emergency travel (enough for flights home should one of my grandparents die). If you're complicated like we are, you need at least as many sinking accounts.
To get started, you simply divvy up one month's income among your various sinking accounts, and then tell every single dollar of the next month's income what to do. Start with investing or debt repayment, rent or mortgage, food and utilities, then move on to insurance and sinking accounts, then if anything is left over, you can invest more or splurge a little. It's really up to you.
Then, every single month, you draw up a unique budget for the month, and you tell every single dollar what to do. It has to be a unique budget, and you have to tell your money what to do. If you don't do both of those, your doing some other form of budgeting, but not zero sum budgeting.
If you don't have this much cash on hand, I guess the ideal plan is to spend as little as possible until you do have that much on hand.
Okay, end boring technical sidebar.
Newlywed Bliss... and you're pregnant.
My husband and I got married when I was a few months shy of 24, and he was 28. If you read the "financially flailing post" you'll understand that our marriage started when I had no clear goals related to money, and neither did my husband. At least we were on the same page financially. In his defense, he maxed out his retirement accounts each year, something that I started after we got married.
Anyhow, our marriage began in a phase of newlywed marital bliss. We loved each other like crazy, we had good friends, and we had plenty of money to do whatever we wanted. I think we took five trips in the first nine months of our marriage. It was a good time.
The only sore spot in our life was that my husband was feeling trapped in his job. He had no advancement opportunities, and he had trouble securing interviews for engineering positions because neither his degree nor his ability to market his experience lent themselves to pass through computer tests. His network wasn't very helpful either.
We began to seriously discuss having him drop out of the workforce to go back to school to get his PhD in Materials Science Engineering, so that he would be able to pursue his dream job (which, I don't totally understand but has something to do with chrystal wafer growth and LED lights. Ten bonus points if you know what he's talking about). Since we had no kids, and more money than we knew what to do with, this seemed like a great choice, and he started applying to schools around the country. And then he got a new job. And then I found out I was pregnant, and then life sort of started to implode.
How to make your marriage implode quickly
Having a child is one of the best things that ever happened to my husband and I, but we were woefully unprepared. We had to grow up, and we only had about seven and a half months to do it. During this time, we made a lot of life decisions really quickly. We agreed that Rob should go to school, which led us to accept a grad student position across the country, which led me to do some job searching and ultimately accepting a work from home position, which led us to buy a house, which led us to find renters for our condo, and our child was born which led to post-partum depression and then we moved across the country, and I was trapped in the house working and using a breast pump while someone else cared for our newborn baby.
And I blamed all my problems on Rob. Which isn't fair, since I had willingly gone along with every decision, and even encouraged him in his pursuits. But nonetheless, he was feeling like shit, because I was making him feel that way. The lovely fun woman he had married was nowhere to be seen. I was angry, and I made it clear that it was his fault.
In retrospect, Rob looks even more like a hero. Because rather than try to get me to see that perhaps not every problem was his fault, he really tried to solve them all. He pushed me to get out of the house and make some friends. He encouraged me to work out. He offered to drop out of school and get a job so that I could stay home with Kenny. And on the day he offered that, I knew how much he loved me and our son.
And I realized just how far we had drifted apart. It was then that we resolved to work together to fall in love and to make our marriage better than it ever was before. There were a lot of practical steps that we took to do this, but the single most helpful was this, we got on the same page financially by sharing a life vision.
Enter Zero Sum Budgeting
Even though we had been doing great financially from the time we found out we were pregnant, our wealth had no purpose because it did not reflect shared goals, and it took a zero sum budget for us to figure this out.
We had learned about zero sum budgeting from listening to the Dave Ramsey show on the radio, and we decided to implement it immediately. I wanted to implement the budget for this reason: to see if it was reasonable for me to stay home with our son on $20K per year- my husband's grad school stipend.
What we learned had nothing to do with me staying home or not. Instead, what we learned was that our Minneapolis Condo (the one we were renting out for a profit of about $100/month) was an anchor around our lives. I lived in fear that the renters would skip a payment (though they were always on time). My husband feared that they would destroy the place (which they didn't, though one renter smeared boogers on the wall). That place needed to go- we were on the same page.
A few months later, we figured out that our transportation situation wasn't working for us. We had been a single car family, and my husband had 100% of daycare drop off and pick up duties. While this was fine when he was only a student, as a research assistant, he needed more time in the lab. The budget told us that buying a second car would take us farther from the goal of me being home. We figured out a dual bike car situation that helped meet both our needs.
Each month, we met for a budget meeting. Each month, my husband and I both had the opportunity to explain our hopes and dreams. We explained why we wanted to spend money on X, Y or Z. We discussed investing, insurance, and our future. Zero sum budgeting helped us to define our shared values, to hash out our differences, and it helped me to step out of the victim's mentality and into the shared life mentality.
Exactly how much money do we want?
Zero sum budgeting has led us to answer an important question. It has allowed us to answer exactly how much money do we want to achieve our ideal lifestyle. The number could be different for you. But for us, the amount is about $35K. Although our baseline living and sinking accounts put us around $27-28K which would be just barely covered by Rob's stipend and our rental income the extra $7K is what we feel we need to continue to make forward motion financially. We want the freedom to invest either in college funds, in retirement or in rebuilding and emergency fund should we need to.
Zero sum budgeting has also been the impetus behind developing financial principles that will guide us in our relationship to money. We are pursuing rapid financial independence, but not at the expense of our relationship, our shared life vision, simplicity, or contentment. All of these are much more important than money to us. Interestingly, it took a financial tool called zero sum budgeting for us to learn that.
And that's why I am a zero sum budget Evangelist. You're welcome!
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.