Until two years ago, I’d never heard the term “zero-based budget.” I have learned to dread it. In fact, I hate zero based budgeting. But we use it at our house, because it works. It works brilliantly.

Zero-based budget is basically this: Project what you have coming in for the month, and match your budgeted expenses to the income exactly. Yes, exactly. At the end of the month, your checkbook balance should be exactly what it was on the first day of the month.

We know approximately what our utility bills will be for the month—we budget for the high end of the range. Any savings (cash leftover) goes to our charity project for the year, or savings.

We budget for weekly expenses (spending money, gas, eating out, entertainment, grocery shopping, clothing, etc) and put the planned amount of money in an envelope which we spend from the entire month. We spend no more money than is in the envelope. When grocery shopping, if our bill is $152, and only $125 is in the envelope, we literally find a way to put $28 worth back on the shelf. It’s humiliating. It’s restrictive.

It has also cut our spending dramatically, and really has made the difference in getting the rest of our debt paid off on these past couple of months. It’s also putting a lot of money towards our family’s mission trip to South Sudan for next year.

The budget envelopes are also a great, visible reminder for the kids that we are spending only what is available to us to spend.

I will tell you that putting the entire month’s cash in the envelope on the first of the month is too intimidating for me. It’s hard on our cash-flow, and I worry about spending through the month evenly, so we put either 20% or 25% of our budgeted amount into the envelope each Monday, depending on if there are four or five Mondays in the month.

But I have a variable income…

Excuses, Excuses! I do too. I manage this by projecting my minimum income for the month, so I can’t spend more than that. Any additional money goes directly to a list in order of importance, 1. Ten percent to charity, 2. The balance to debt repayment, and 3. The rest to savings until we have our 3-6 months of emergency fund saved.

We learned this system in Financial Peace University, a Dave Ramsey program, which has been a great resource to our family, and a key to honing our budget and financial plan. If you’re new to learning to budget, DaveRamsey.com offers spreadsheets that you can use to learn how to budget.

Good luck!