Can’t find the money to save or pay off debt? Try my zero-based budgeting method

When my clients first create a budget, I notice they often make one major mistake: they don’t factor in saving or paying off debt.

They budget for expenses they know they will have to, like rent and essentials. Then they assume they will spend the rest of the money on other things, but that is secondary. At the end of the month, they have no money left to spend on new things.

As a financial coach, I am a huge advocate of the zero-based budgeting method, or as I like to call it, the “spend it all strategy.” Using this method helped me pay off $72,000 in student loan debt in less than a year. Since then, I have taught this method to thousands of clients who wanted to get rid of their debt and increase their savings.

I like that zero-based budgeting teaches us that spending money is not bad, as long as you build a smart framework. This method of budgeting may seem awkward at first, but it can change your relationship with money forever. I know it did for me.

What is zero-based budgeting?

The zero-based budgeting model requires that for every penny you receive each month, you assign a task so that no money is left over.

It was hard for me to unlearn the old saving strategy because my dad taught me that it’s good to have extra money after meeting basic needs.

So I added my own zero-based budgeting style and created the “spend it all strategy.”

How to Start Using the Spend It All Strategy

Implementing a spend-it-all strategy starts with a mindset shift. Instead of treating leftover money as a windfall, embrace the idea that every dollar has a purpose.

Proactively assign every dollar of your income to a specific expense or financial goal. Here’s what that might look like:

Let’s say you budget $2,500 per month for essentials like rent, groceries, and gas. If you have $3,000 in monthly income, you need to figure out what to do with the remaining $500. If it’s not assigned to a goal, you can put $100 into a high-interest savings account that you use to build an emergency fund. Now you’ve “spent” $100 in a way that will help you reach your financial goals. You’ll do the same for the remaining $400.

You can track your income and expenses with pen and paper or spreadsheets, but I highly recommend a budgeting app that is compatible with zero-based budgeting, such as EveryDollar or Monarch. A budgeting app makes it easier to track every dollar because you can quickly make changes from your phone with less chance of oversights or mistakes.

I use Monarch because it handles my budget and tracks my net worth. One of the benefits of Monarch is that you can share your budget with your family and financial advisor without sharing your password.

It’s not about depriving yourself of anything

Allocating all your income doesn’t mean giving up the things you love or have to spend money on. Instead, giving every dollar a purpose helps you control your spending without sacrificing fun purchases.

For example, instead of spending $100 at Target on impulse, you can spend $100 on non-essential purchases. This will give you money to splurge, which will help you stay within your budget without feeling deprived.

What to Remember When Creating a “Spend It All” Strategy

When you’re ready to try the “spend it all” strategy, here’s what I want you to remember.

No budget is perfect

I don’t expect anyone’s budget to be 100% accurate, including my own—and I’m a financial coach. But if you approach zero-based budgeting with an all-or-nothing mindset, you’ll probably feel like it’s not working for you.

Instead, I tell my clients that using this budgeting method is a win-win 80% of the time and that an unexpected bill or unplanned purchase is OK when using this strategy. As long as you understand where your money is going, you can make changes to your budget as needed.

Don’t confuse activity with achievement

When new members join my online community, they often stop at the value of tracking every penny. But focusing on tracking expenses is like checking off a to-do list, not changing your financial habits. Instead, tracking your budget should be the first step in identifying spending habits you can work on if you need to.

Tracking every penny is usually only useful at the beginning

People who have achieved financial freedom don’t waste time tracking every penny. They are forward-thinking. You may need to track your spending for the first three months to better understand your financial habits, but over time you will understand your spending and learn to plan for the future.