Start Your Budget at Zero

Have you ever seen a news article shared or story featured where a family was able to keep their expenses low, like really low… surprisingly low? And then you read the comments. It’s funny for me to read people’s reactions. They generally look something like this. “I would hate to live that way.” “That sound like a horrible, boring life.” “What’s the point of life, if you can only spend $x a month?”

I can almost guarantee that those comments come from folks who budget upside down.

What’s Upside Down Budgeting?

People start with a big number. A number that represents happiness for them. Maybe it’s $3000 a month or maybe it’s $8000 a month. But they start there. Unfortunately, spending that happy number won’t help them save, invest or pay off debt. So they start to take things off the budget. They try to trim it. They peel back all the wonderful, lovely expenses. Each cut is painful and uncomfortable. Until they get to the point that the budget can’t be cut back anymore.

No wonder they think that this even smaller number would be a horrible, miserable life!

This upside down budget of theirs has already been trimmed back to the point of pain and deprivation! Any more cuts and they might cry or start a fight.

Upside down budgeting starts with a faulty assumption. And it’s doomed to fail, or at least swim in mediocrity. Your budget will never be the force that transforms your trajectory if you start upside down.

The faulty assumption is this: $xxx of spending a month is what creates my happy life.

Then each cut or trimming of expenses is a trimming of your happiness. See how that sets people up to fail?

The solution is simple. Start your budget at zero.

Starting Your Budget at Zero

When you start your budget at zero, you are starting with a different assumption. You start will all the good things you already possess. All the amazing things in your life that add the greatest value. You start with gratitude. In my life, I start with a strong and thriving marriage. 5 amazing kids. Time to read books. The time I spend writing and creating. Hikes in the nearby state and national parks. Deep and meaningful friendships. Ways that we are contributing to our community to make it a better place for everyone.

I start our budget at $0. After taking count of all the good things in our lives, the things that really matter. THEN we add some expenses.

What expenses do we really need to facilitate this life we want to create? Hum….

And then I thoughtfully consider each one.

Is there a way to get the same result but spend less money?

In reality, spending $80 on the internet isn’t the source of my joy. My life is just as happy and content if I spend $50 a month for that service. (As long as Netflix loads quickly!)

Starting at zero, we add to our happy little life things like property tax. And the water bill. And electric. We add in some money for a tank or two of gas. We spend some on things to eat. Maybe we want to take our happy little life on the road for a week or two, so we add in some extra gas money and camping site fees.

We start with contentment and joy. And we add expenses to that. Just the expenses that add real value, make things possible or are needed.

People can lead happy, meaningful, fulfilling lives and only spend $xx a month. Because their lives were happy, meaningful and fulfilled before they spent the first dollar. Adding $xx a month just added to the good things they already were experiencing.

Upside down budgeting will always feel like deprivation and restriction because it assumes those expenses are the source of your happiness.

But let me ask you this:

Would you be any less happy if you didn’t have credit card bills? Or your car was paid off? Or you no longer had a student loan payment? Would your happiness go down if your home was paid for? Or your cell phone plans cost $28 a month? Do you really get more joy from paying more for your internet service?

Having those things might be nice, but paying for them is never the best day of our month.

Low expenses are the jet fuel to custom designing your life. 

Spending less gives us more

We have rather low expenses. Especially for a family of 7, plus our awesome dog, Cheesy Taco. We keep a rather small Monthly Nut of about $650 a month for our fixed expenses.

We have leveraged spending less to get more. More of the things that matter to us.

We hike more. We play at the lake more. We volunteer more. We were able to adopt a sibling group of three. We travel more. We have taken 5 mini-retirements. We have seen 27 countries. We meet up with friends, near and far.

When you know what your “most important” is…. What makes your short list of things in the life that actually matter to you. You don’t feel any compulsion to waste money on the rest.

When I start my budget at zero, I rarely buy new clothes for me. The dress I wore in the image above is one of my favorites. I bought it 7 years ago at a thrift shop in Scotland while I was taking a class on Scottish literature. I couldn’t love it any more if I had spent $100 on it versus the couple dollars I actually spent. I wouldn’t have been any happier that day if I was wearing a brand new dress. I didn’t need a new dress. Mr. Montana and I had a great coffee date that morning. We walked around downtown. And the way he smiled at me when this photo was taken gave me butterflies in my stomach because I thought he might just up and kiss me.

I don’t spend more on clothes simply because I’m not sure what they would add to my life that I don’t already have.

I start our budget at zero, with all the good things we already possess. And we just add and add and add from there. Maybe $1500 a month or $3000.

The Fly in the Ointment

About 4 years ago I was in a hard season of life. It seemed that everything that really mattered to me was going wrong and I had no ability to fix it. I was doing everything right but was stuck. My oldest son had just passed away. We had planned to adopt but, because of our son’s passing, the process had to be delayed a year. We had been trying to get pregnant for 5 years with no luck. The very expensive and emotionally exhausting fertility treatments weren’t working. We were in the middle of a renovation. And I hated my job. Plus, I had a coworker who was horrible to me.

So some days, when the weight of this felt too heavy to bear, I just wanted to eat my feelings. Which as it turns out tasted a lot like caramel rolls and gourmet ice cream.

Sometimes life is just hard. And maybe spending some money is the only thing that makes it seem better, or at least bearable. I could have spent a lot more money during that time. On trips or vacations or spa days, or eating out, or new clothes. But none of those things would have helped fix the things in my life that felt broken.

Instead, we saved that money believing better things were ahead. 

Because we stayed focused on those bigger goals (other than the occasional caramel roll!), when the time came for brighter days, we were ready. We had grown the gap and guarded the gap. We stood ready with low expenses, some passive income, investments, and savings.

If you have been feeling frustrated with your budget. Maybe you have been budgeting upside down? Try starting from zero. On my resources page, I have all the best tools for tracking your spending.

For Conversation:

Do you track expenses? Any tools you recommend for budgeting?

Have you ever been stuck in an upside down budget mentality?


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32 thoughts on “Start Your Budget at Zero

  1. That’s a great way to think about it. You’re absolutely correct. People start off with a big baseline and it’s hard to trim anything out. It’d be much easier to start at $0 and work your way up. I think that’s the advantage I had because my family weren’t well off when I was young. Our budget is modest, but our lifestyle is way better than when I was a kid.

    • I totally agree about our childhood perspectives can shift the way we see baseline expenses vs luxury! Growing up, we ate out as a family in a real sit down restaurant (where they actually bring you water to your table) just a few times. In my whole childhood, maybe 5 or 6. Mr. Montana’s family did that every week! So our perspective on how often to eat out was reasonable or indulgent or scarcity was VERY different. Once a year seemed rich to me, once a month near crazy. Once a week felt like his baseline. Once a month was a huge dash to his expected lifestyle. Thankfully we have found our new norm. What adds some joy but also gives us a shot at bigger goals.

  2. Ms. Montana, another name for this is “Zero Based Budgeting”, and it’s a great way to challenge everything you truly need to be content. In our case, we simply automate a ton of savings on the front end, and spent whatever’s left. We don’t budget, and we don’t have to watch our spending too closely. The trick for our approach is creating a sense of “forced scarcity” by maxing out your savings automatically on the front end. It works for us, and it sounds like “right side up” budgeting works for you. Bravo.

    • I think taking care of the saving first is a great option! We did that for years. Automate a bunch of savings, auto transfer a few things then spend the rest. Easy peasy. =) But I think it’s something we grow into as we figure out a spending pattern that works.

  3. I’m having a hard time finding happy. It’s just such a fight especially when there’s no real excuse for it. I don’t feel the need for clothes because you are correct – they don’t add anything. I’ve been trying to get rid of my stuff (taking a while…) because I’m trying to go back to zero. I assume zero is where I can makes it easier to see what I do have. It’s a place to rebuild and start again spiritually.

    • Sorry you are having a hard time finding happy. There are times when I have felt that way too. There are two things that really help center me, when I just feel out of sorts. 1. Being out in nature. For an extended period of time. Like a full 8 hours or a few days camping. 2. Serving others. There is just something about serving others in their need or in something they are excited about that always brings me back to center. Helping others make things right in their life, somehow makes everything in mine find it’s right spot as well. Maybe those will help you out as well!

  4. This is perfect. I like “upside down” budgeting. Has a nice ring to it.

    It’s so important too. If my wife and I would have taken our combined incomes when we were dating and tried to build a budget to see if we could get married, it would have never happened. Luckily, we did the upside down budget, and looked at the bare minimum we would need to get married. Then figured out how to get it.

    It works people. Please try this method if you haven’t before.

    • That’s awesome! Our budget was rather tight that first year too! I think we made a whopping 12k…together. And when we were able to add more and more in, it’s just felt extra special. Now we spend $2000-$2500 a month. That’s like 2.5x more than that first year! =)

  5. I have never, ever regretted our low cost lifestyle. We actually life very well while paying off debt. But we were able to cut out the clutter and start paying down expenses like woah. We use a spreadsheet budgeting system with a limit for each budget category. We save money throughout the month and then apply that surplus to our student loans. 🙂

    • I totally agree that I’ve never regretted a low-cost lifestyle! Looking back on so many of the best things in our lives were directly linked back to the money we didn’t spend on things that didn’t really matter. And even the really fun, meaningful things we’ve done, like extensive travel, I’m glad we did it frugally! Spending more on those experiences wouldn’t have added much.

  6. I think I have always started at zero it just seems it can get pretty high from there very quickly. I agree that you have to start with an abundance mentality and just think of money as adding to your life otherwise you will feel deprived. The problem is when people get used to having certain things in their life and they dread having to give them up if they were to go on a budget. But if you never felt like all that stuff was really yours to begin with it’s much easier to let it go and really consider if it’s really adding to your life. I gave up going to Starbucks frequently and actually found that it didn’t really add to my life and I didn’t miss it. My wallet sure isn’t missing it either. At first I was bummed though because coffee is my comfort food but I found fresh home brewed coffee is just as good.

    • I think fasting is a great option to reset ourselves to a baseline. (In many different forms!) If we abstain for a period of time from: certain foods, sugar, coffee (Yikes!), TV, our cell phone, FB, clothes shopping or eating out. It helps affirm the fact that life goes on without those things. In some ways, it’s harder, but we also see there is an upside to taking the thing away for a while. It shows the substance of our lives without the extras, and sometimes we all need that little reminder.

  7. I definitely get stuck in upside down budgeting ruts as you described. Usually it’s triggered by wanting something or wanting to do something that doesn’t fit in my budget right that second (I’m impatient). I’m getting better at realizing that there are very few things that I can’t wait for and that impulse spending isn’t the right way to go.
    I love your suggestion to look at spending through gratitude. Remembering how lucky I am with what I already have absolutely helps when rethinking spending money.

    • Sometimes it’s helpful to weed out the things that would be devastating if they never happen from the things we simply would like to happen. I go through the mentoring questions regularly and keep a short list. Things that I would try to move mountains to make sure they happen in my life. Things that are at my core of goals, values, and purpose. Anything not directly correlated with that list falls on the “nice to have” but not essential list. It helps keep things in perspective for me. Because I never want to trade away my essential, core goals for the nice to have items. I don’t really see it as giving things up, just choosing better things. =)

  8. I love this approach! And I can’t imagine doing it any other way. During school, I barely had enough money to make ends meet. I couldn’t create a budget by beginning with a spending amount that would supposedly make me happy and then slowly peel away expenses. I had to start at zero because it was about surviving and only taking on expenses that were absolutely necessary. Because I was able to survive on so little for years, I think it’s change my perspective on what I need to survive AND be happy now that I actually have a real job and income.

    Cato @thedollarbuild

    • Having a bare essentials budgets can be such a benefit! Our first year married we made $12,000. But it was one of the happiest years as well. When we have the chance to separate our happiness from material comforts, we can take that truth with us into a life of happy frugality. Plus it helps us hit even bigger financial benchmarks, giving us more options to take time away from the 9-5 or switch careers. I’m glad to hear that figured it out early and kept going!

  9. What a great way to frame this – I’m absolutely with you on finding happiness in your current situation and then adding to it. Research shows that only about 10% of your happiness actually comes from external circumstances. The other 90% comes from within – from how you *view* your life. Choosing happiness isn’t always easy and your suggestions to Lily were spot on for helping to choose happiness.

    One more that I find that works really well is to force yourself to write down what you’re thankful for. Personally, I try to do this in prayer – to thank God for the challenges in front of me, knowing that they’ll grow my character. It feels awkward at first – saying thank you for things that don’t feel great in the moment – but finding gratitude changes your perception and that changes how you feel.

    • I think the gratitude exercise is a great idea! Especially if money is really tight and there are legit hard things we are dealing with. It’s easy to feel like a victim of our situation, which never gives us the creativity and gumption we need to take charge.

  10. This is a great way to think about it. This is how we do it, but I am not sure I ever thought of it that way. We track expenses with Mint and Personal Capital. I prefer Mint, as I am more about the monthly budget breakdown, whereas Hubs is more about the big view. So we do both.

    We live on one income, and enjoy life. We are frugal, but we have luxuries that we feel are worth the money. I think focusing on what brings joy and happiness is the only way to build and maintain any type of budget.

    • I think tracking expenses is SO important! It’s the only way to really see where you are and what can change. Otherwise, it’s all guessing. Whenever I work with people 1-on-1, tracking expenses is mandatory. =) Plus it’s the only way to see if you are really getting the value out of your expenses that you had hoped. I love looking at the yearly total, and saying, “So, did that really pay off like we thought it would?” Or “What gave WAY more value than seem reasonable for the dollar amount?”

      • Yes, looking back teaches us so much. When you see what you spent for a year on a certain line item, it makes you really start questioning and double checking your next year’s financial plans.

  11. I’m not stuck on budgeting but I’m stuck. All the anxiety surrounding Groovy Cat’s illness and passing won’t let me out of its grip. I cannot imagine what you went through with your son’s passing — the situation itself, then compounded by what I’m sure were stupid comments you occasionally received. Even with a pet, I’m deliberately keeping away from many people – I just don’t want to hear “Get another pet”. But, as you know, I’m following your advice to Lily about being in nature!

    The “I’d hate to live that way” line makes me laugh. I remember a discussion with someone older than me who had not yet retired. When he heard how Mr. G and I keep expenses low (without difficulty or sacrifice) to pull off early retirement, he said “Who wants to retire if I have to live like that!” He lived in NY and spent winters in Florida eating in restaurants. If I never see Florida again (except for maybe visiting Amy or Vicki) it would be all too soon. And restaurants are for occasional fun, not a nightly thing. Health concerns get to me more than the expense.

    We track every penny. Looking at the last few year’s expenses is key for determining baseline future expenses.

    • Tracking expenses is extra important just before you retire and the first few years! Working with real numbers is key. =) And I totally feel you on the eating out issue. We don’t eat out often when we travel just because it’s fine once or twice, but 3 meals a day for 4 weeks? None of that stuff is actually healthy. I try to keep it to an occasional treat, mostly for health/weight reasons.

  12. I think this is a great way to think about budgeting. It’s not really even about the budget–it’s about your mindset and beliefs about what life is all about, and what happiness is. We have an epic custom spreadsheet we use to budget and track our money, but we only budget on an annual level. The month-to-month turns out just find for us because we have the foundations in place and we have frugal habits, so we know when we can say yes to more travel or more gifts or whatever else crops up.

    • Over time the frugal habits makes the whole thing easier. We naturally adjust to a certain lifestyle that helps us hit our other goals. Plus, you’re right, low costs give the margin to add things in without busting the overall budget.

  13. Spending less gives us more…Amen, sister! The people who comment on “I could never” most likely have never had to or even tried. I have always been frugal, but when I started backpacking I realized how little I really needed to make me happy. Fresh air, beautiful scenery, and good food. That’s it!! Of course, companionship is important as well (in the form of friends, family, my pup), but tangible “things” just don’t add pleasure to my life anymore. I am happy to have learned that early on.

    PS – Loved your Glamour article!! Congrats! 🙂

    • I think you are totally right that when you find real happiness with very little luxury there is an “Ah-ha!” moment. That’s when I found out 95% of the stuff and extras was adding about 5% of my happiness. Even more sad, a lot of the things I was holding on to hoping they would add value where the things actually dragging my happiness down.

      And thanks about the GLamour piece. =) I always knew frugality would find it’s glamorous spotlight one day.

    • Knowing what that baseline number you HAVE to cover is so critical. It changed the way we thought about our work options and passive income. Once we could get those baseline numbers down, so many options opened up. =)