Maternity Leave for Women Entrepreneurs

maternity-women-entrepreneurs-600x450-ray-dumas[1]In addition to the steady paycheck, another big perk of working in the corporate world is often the benefits package. For some, that includes six to 12 weeks of maternity leave.

When you become an entrepreneur, the safety net quickly vanishes, and you’re left all alone to find your way. For this reason, many female business owners barely take a break after giving birth — because they simply can’t afford to be away from their company for an extended period of time.

Fortunately, there are ways to prepare beforehand so you can spend quality time with your new bundle of joy without putting your business at risk. Here are a few factors to consider before taking maternity leave, and how to transition back into the office without feeling overwhelmed.

1. Create an Action Plan

So, you’re going to be a new mom? Congratulations! Now, it’s off to the drawing board you should go, almost as soon as you learn of the exciting news.

While I’m not suggesting you hold a conference call, send out a mass email, or gather all your employees to fill them in right away, it’s definitely a smart idea to start making mental preparations until you can no longer hide that you’re expecting.

When the word finally gets out, don’t be surprised if your employees are taken aback or worried about what the future holds for them. There’s always the chance that you’ll fall so in love with your new bundle of joy that you’ll abandon the business to become a stay-at-home mom.

To put their mind at ease, communicate that you’ve been working on a plan of action behind the scenes, and that business will continue as usual while you’re away.

Wondering what this plan should entail? A few suggestions to help you get started:

  • What is the primary function of the business? Who will ensure the company stays true to its mission during your brief departure?
  • Is there someone working by your side that can oversee operations while you’re away?
  • What are your day-to-day tasks? Start identifying individuals who can fall fill the voids.
  • Are staff members cross-trained?
  • In the event that your leave lasts longer than expected, are your backups equipped with the tools needed to handle the increased workload for an extended period of time?

And most importantly, don’t forget to keep your clients in the loop once the news is public.

2. Build Up Your Cushion

Do you have several employees, or are you a one-man show? The answer to this question will dictate how aggressive your savings goals need to be to cover your absence.

If you’re fully staffed, your employees will probably be prepared to steer the ship while you’re away. But if you’re a solo-preneur, chances are you’ll be delegating a bulk of your workload to a trusted confidant and professional during your maternity leave. Both scenarios come with their own set of unique challenges.

Fully-Staffed Business

As I mentioned in 15 Money Principles for the Newly Self-Employed, no one will be as passionate about your business as you are. Next to your biological children, including the bun in the oven, your business is your baby.

So you know exactly what it takes to keep things running smoothly and foster expansion. Unfortunately, those who will assume back-up roles in your absence may not be equipped with the same vision required to properly identify opportunities for growth or potential risk factors, so you need to build a financial cushion to hedge against risk and declining revenues in your absence.


It’s my hope that things go as planned and you have a healthy baby. But what if things take a turn for the worse?

You could deliver far earlier than expected, or be forced to remain in the hospital as a patient or at your newborn’s side due to complications during the birthing process. Your health and that of your baby will take priority, which means your business could suffer a major financial hit and even be forced to close its doors. So be sure to set aside enough funds to keep things operational if complications arise.

3. Slowly Transition Away From Office Duties

The toughest part about trying to make arrangements for maternity leave is the small thought that lingers in the back of your mind: What if things don’t go as planned and I’m forced to stay away from my other baby (your business) much longer than I expected?

As much as I try to prepare moms for the uncertainty of childbirth, many fail to heed my warning and are left picking up the pieces when everything comes crashing down. That’s why it’s important to develop a Plan B. Once you’ve identified who will cover for you in your absence, slowly begin to delegate functions so they can get acclimated with their soon-to-be roles and ask any questions or tie up loose ends before your depart.

If you’re a control freak like me, this may be more difficult than you imagined. But it could also be a blessing in disguise. You may learn that someone else is better at a function than you are, and relinquish the task permanently so you can shift your focus to core business activities.

Every woman desires a pleasant birthing experience that aligns perfectly with her personal plans, but I know firsthand that babies have a mind of their own. The first time around, I didn’t know what to expect — nor did I grasp that what awaited was far more nerve-wracking than anything I’d ever imagined. My first son was born only two weeks early, but with digestive issues that resulted in endless wailing and fits at feeding time. And of course, we were walking zombies for several weeks until our bodies finally adjusted. The second time around, I thought I had prepared adequately. That’s until he also decided to make his grand entrance ahead of schedule — three weeks early.

4. Disconnect for a Few Weeks (or Months)

Before I gave birth to my first son, I was reminded on several occasions to cherish the younger years — because once they’re gone, you never get them back. And I have to agree that this statement is spot on.

As a fellow mommy-preneur, I understand how passionate you are about the business you started from scratch and how you fought to keep hope alive even when the road was rocky. But I can assure you that missing those precious moments for the almighty dollar bill isn’t worth it. Money is tangible and more can always be made; time isn’t.

My suggestion: Plan to completely disconnect from your entity for a least a few weeks after giving birth so you don’t miss out on all the joy your new arrival will bring to your life. It may be the most difficult thing you’ve ever done, but I can assure you it’s a decision you won’t regret, especially if it’s the first time around.

Although my first son was rather fussy due to stomach discomfort, he was so precious during his first few months of life, and I can’t imagine how I would’ve felt had I not spent as much time as I did with him. My heart melted each time he gripped my finger, rested his little noggin on my chest to hear my heartbeat, or gazed into my eyes and smirked at me. Nothing in the world meant more to me during those moments, and I’m sure you’ll feel the same.

5. Schedule Follow-Ups

After several months of waiting patiently (or impatiently) to meet him, your new baby is finally here. A few weeks pass and your body is beginning to adjust to your new life as a mom. You’re more than eager to get back into the swing of things, but let me be the first to warn you that diving back in head-first may not be such a good idea.

Instead, follow the reverse pattern you used to delegate tasks before departing, and ease your way back in. You may not be fully prepared for what awaits you on the other side.

If you’re accustomed to working non-stop, boredom may have taken its toll while sitting at home. But returning to major administrative or operational issues is sure to evoke unnecessary emotions, especially if your hormones are still imbalanced, that could send you flying off the handle.

A better alternative: Schedule meetings or working lunches with each of your department leaders, or those who were left in charge during your absence, to discuss current operations and any major milestones achieved or concerns you need to be made aware of. This is the perfect way for you to get up to speed and process the information so you can develop an action plan prior to your return. And it’s proactive on your behalf — extinguishing a fire burning all around you is the exact opposite.

6. Balance It Out

I used to cringe each time I heard the phrase “work-life balance,” but now I understand the significance. Although my children aren’t at all babies anymore, I sometimes find it extremely difficult to balance it all.

Being a wife to a very business-minded entrepreneur, a mother of two active young boys, and a business owner — all at the same time — is extremely hard work. But over the years, I’ve found ways to make time for both the people I love the most and my third baby, the business. Here are a few tips if you struggle to find your balance:

Make the Most of Nap Time

Your new baby’s needs will most likely require you to completely adjust your schedule. And at the top of the list is sleeping patterns. Unfortunately, most newborns have their days and nights mixed up, so you may find yourself worn out after many restless nights and unable to do anything during nap time but nap yourself.

But as your baby grows older, her sleep patterns will (hopefully) change and you’ll be able to find more rest. When this happens, take advantage of any nap times throughout the day. It may not seem like much, but you’d be surprised by how much you can accomplish in that brief window.

Become an Early Riser or Night Owl

If you’re finding it difficult to spend time with your new arrival and manage all the work-related items on your plate, try getting caught up during hours when you know your little one will be asleep.

This is definitely a major sacrifice, but you’ll feel accomplished and maybe even rest easier once you’ve caught up on your long to-do list. And if you’re able to check off a few additional items, you may even get to squeeze in a nap yourself during the day.

Take Advantage of Favors

Was a friend or family member gracious enough to lend a helping hand so you can unwind? You may have reservations about letting your little one out of your sight, but that doesn’t mean you have to reject their offer. Instead, invite them over to keep the baby entertained and tend to their basic needs while you get caught up on a few projects in the other room.

Prioritize Tasks

Lunch date over forthcoming deadlines? I think not; well, at least not in my world. In fact, I can count on one hand the times I’ve headed out with a pal to grab a bite to eat when there was a pile of work on my desk that I desperately needed to complete. While it’s true you need to take a break on occasion and clear your mind so you don’t burn out, doing so with a bunch of projects lingering in the back of your mind sort of defeats the purpose.

Begin With the End in Mind

To be honest, I don’t look forward to completing or even starting every item on my to-do list. But if it’s there, that means I don’t have a choice; it’s essential for my business to function properly. Most importantly, I understand the repercussions if I choose to go against the grain. Anyway, I’d rather suck it up so I can make a decent living and spend more time with my children, because otherwise it’s back to the cubicle.

So, when the going gets tough, I’d strongly suggest you take a step back, reassess the situation at hand and remember why you started. That should motivate you to get back on track.

Bottom line: The precious moments you’ll share with your children are priceless. Money is temporary, but memories last a lifetime! So take as much time as you can with your new arrival — because once it’s gone, you can’t ever get it back.

Ten Questions to Ask Yourself Before Making a Purchase

10-questions-to-ask-when-choosing-a-doula[1]There are few things that leave me feeling worse than an impulsive purchase that wound up being a piece of junk or wound up sitting in the closet gathering dust.

Not only am I frustrated with the item itself, I’m also frustrated with me. It was my own personal choice to go ahead and make that purchase. It was my money that vanished into something poorly made or something that I didn’t find useful.

That money represents lost opportunity. I could have saved that for the future. I could have spent that on something that was genuinely useful or something that I genuinely enjoyed.

My solution to all of this is to be rather careful about how I spend my money. Before I buy anything at all, I ask myself at least a few of the questions on this list. Before any significant purchase, I ask myself all of the questions on this list.

I don’t make a purchase unless I can get honest answers to those questions.

That doesn’t mean that I stand there in the grocery store thinking to myself about everything I put in the cart. My meal planning system generates a grocery list and all of the items on that list have already faced the questions and survived, so I can buy those items without thinking. I do the same thing when I go into department stores – I usually have a purchase or two planned in advance and I usually avoid making any others.

For a major purchase, I work through these questions at home. Some of them just go through the back of my head while I’m doing other things. Others might require some research. In either case, before a major purchase happens, I’ve thought about all of these questions.

I don’t apply all of these questions to things that come out of my personal spending allowance, but I do use many of them. I even want to use that money – the money I can spend freely on whatever I want – as intelligently as possible, buying stuff that I’ll get lasting joy out of.

Here are the questions I use to evaluate my purchases.

1. Do I already have something that can do the job?

Whenever I buy something, I have some sort of purpose in mind for it. If it’s clothing, for example, I intend to wear it. If it’s a new skillet, I intend to cook foods over the stove top with it.

This question simply looks at whether or not I have something that already fulfills that purpose. Do I really need this clothing item? Are there items I already have that fill up that perceived gap in my wardrobe? What about that skillet? Do I already have skillets or cast iron pots that can do what I’m hoping to do with that skillet?

This question does a great job of pointing out the times when I am thinking about upgrades that aren’t entirely necessary. Do I really need to upgrade my laptop? Do I really need to do something with it that my old laptop doesn’t already do or my desktop computer doesn’t already do? When I start making a use case for what a new laptop could do that my current computer couldn’t, it becomes a lot less persuasive.

Sometimes, this involves looking for things in our home that can do the job in an unexpected way. For example, a chef’s knife does a pretty good job of “pressing” garlic on a cutting board, making a garlic press largely unnecessary unless you’re using it several times a day. Since I already have a chef’s knife, a garlic press isn’t very necessary at all.

2. Can I borrow it from someone?

Often, when I need an item just for a one-off use or for an extremely rare use, it makes a lot of sense to just borrow it from a neighbor or a friend.

For example, I was installing several shelves recently and found that our cordless drill was not providing enough torque to be helpful beyond two or three screws before recharging was necessary. Usually, our cordless drill does what we need, but not for a bigger job like this one. Instead of talking myself into a corded drill – after all, we had a great use case for it right there in front of us – we recognized that this was a pretty rare case for us and just contacted a few friends. It turned out that one of them had a corded drill with a lot of torque. I borrowed it a couple of days later and finished the project in about half an hour.

The best way to get this kind of borrowing started is to be very giving and lend your stuff to your friends whenever they ask for it or even when you hear them lamenting a task that they need to complete. If a friend needs a few extra casserole dishes for a large party, hand yours over. If a neighbor needs to chop some large branches, bring over your branch trimmer. You’ll find that if you’re very willing to give, they’re much more likely to be willing to lend, and the end result is that you’ll have access to rare-use items that you might have otherwise purchased.

This does require some awareness of the items that your friends and neighbors actually have. One good way of knowing that is to work with them on projects, both indoors and outdoors. Offer help when they need it and don’t be shy about asking for it when you need it. You’ll find that borrowing becomes second nature after a while if you have a great relationship with friends and neighbors.

Another great example of borrowing comes from your local library. Instead of buying a book, why not just borrow it from there? You can do the same with DVDs, CDs, and audiobooks as well. I love stopping at the library and picking up an audiobook before a long road trip, for example, and you better believe that I use it to check out books of all kinds. I generally only buy books that I’ll reference a lot or highly discounted ebooks for my Kindle at this point.

3. Can I trade someone an item or a service for it?

What if you need to “borrow” something that isn’t something you can return when you’re done, like some food items or a few hours of their time or some skill that they have? That’s when a trade can solve your problem perfectly.

It’s simple. If a friend or a neighbor has an item that you’ll rarely need, ask to borrow it instead of buying it yourself when that rare need comes about. Often, you’ll have items or skills or time that your friend or neighbor needs in his or her rare moments as well and you can give them in exchange.

I’m a big fan of “indirect” trading with my friends and neighbors. When they need help with something, I just offer it without hesitation. That way, when I need some help, they’re usually willing to offer it right back if I ask. The same goes for items that can be used up – if a neighbor needs to borrow the proverbial cup of sugar, I’ll happily hand it over under the assumption that when I’m in a pinch, I can do the same thing.

This keeps me from buying a lot of little things. It also keeps me from hiring repairpeople.

4. Have I asked my social network about it?

Beyond the direct borrowing of items and bartering for items, friends and neighbors can also be extremely useful in terms of offering ideas and suggestions that you might never have considered.

For example, let’s say you’re looking at buying a new laptop and you’ve already considered many of the other factors in this article. Instead of just heading straight for the store to buy one, you instead send an email to several friends and write on Facebook about how you’re searching for a new laptop and are looking for advice or discounts that your friends may know about.

In my own personal experience, I’ve seen friends jump forward with store discounts that they’re eligible for or access to special buying programs. I’ve seen people offer free software items and other things that they have around. I’ve seen family members jump in with lengthy detailed recommendations about what exactly to buy to get the best “bang for the buck.”

All of that stuff is incredibly valuable, both in terms of making a more informed purchase and in terms of finding a nice discount. Sometimes the value can be even better than that – I’ve had friends just give me things due to a Facebook post or an email, keeping me from buying them altogether.

Use your social network. They’ll rarely let you down.

5. Can I make it myself?

There are a lot of household items that we buy that we can simply make ourselves. Sure, there are the simple things like window cleaners or laundry soap, but you can also assemble a lot of food items yourself, like loaves of bread or frozen burritos.

Many of these items are ones where you’re actually just paying extra for convenience. I can make a good frozen burrito for half the cost of the same burrito in the store, for example. I can make homemade laundry soap for a fraction of the cost per load of soap from the store. Buying those items at the store doesn’t save me anything but time.

Thus, those purchases are weighed solely on the convenience factor. Is it reasonable for me to just make some laundry soap while sitting on the couch in the next week or two? If so, I’ll just buy the ingredients and save about 80% of the purchase price. Do I have time to make a couple of loaves of bread in the next day or two? If so, I’ll just buy flour instead of bread loaves.

Most of the time, there are some real fringe benefits to making things yourself. You have far more control over what kinds of chemicals are in the item. You have far more control over the quality of ingredients. You have far more control over the environmental impact of what you’re making. You have far more control over the flavor of the end product and the healthiness of the end product. Those benefits are usually on top of spending money.

In the end, many grocery and household purchases boil down to convenience, but there are times when convenience should be set aside to have better results for less money by contributing a bit of your own time and effort to the mix.

6. Can I delay it?

What exactly happens if you wait a month to buy this item? Six months? A year? Are there life problems created from waiting on this purchase?

If you can delay a purchase a month or two, you probably should do that. It means that you have an appropriate short-term solution to the problem already in hand.

If you can delay a purchase for a year or more, you should be asking yourself why you even need to make this purchase at all. If you don’t need it for a year, why on earth would you be buying it at the moment?

Unless there’s a real reason for buying now – your current item is failing, for example, or there’s an incredible bargain available to you if you act immediately – you should try hard to delay that purchase for a while. The longer you delay, the longer the lifespan of your previous item and thus the longer you’ll be able to wait before you have to replace your replacement.

Another great factor for this question is that it causes some purchases to vanish entirely. Let’s say I convince myself that I can wait a month for some item that I really really want. More often than not, at the end of that month, my desire for that item has completely cooled off. Sometimes, I’m left wondering why I even wanted that item in the first place.

7. Have I looked for lower-cost alternative solutions?

Sometimes, there’s a good solution for your problem that’s looking you right in the eye, but you somehow managed to overlook that great idea again and again and again.

Perhaps you’re caught up in buying a new car, but the truth is that you can just as easily commute using mass transit and don’t actually need that car at all. Maybe you’re obsessing over a new television, but you actually don’t watch it that often except for background noise and a simple small television will work for your fairly limited needs. You can then look on websites like to find a remote that works for your new television, whichever one you end up buying.

Sometimes, when you’re looking to buy something you, you don’t need to match or exceed what you already have. Instead, you should sit down and look at what your actual needs are related to that item. You may find that a simpler solution – usually a lower-cost solution – is a better option for you. Bigger and newer and more feature-laden is not always better.

This question does require some creativity. One good way to rethink the alternatives for any purchase you make is to simply visit blogs that discuss this type of item. Many of them do a great job of looking at alternatives to your originally considered item. For example, I had decided not long ago that I needed a better headset for listening to music and podcasts and handling Skype calls while I work. After a bit of research, I had settled on a particular headset, but when I spent some time reading blogs about headphones and found some posts on good headphones for listening in mono (I’m deaf in one ear, so everything is essentially in mono), I ended up going with a much less expensive setup that almost perfectly met my needs.

8. Have I looked at a thrift store or discount grocer or consignment shop for it?

At this point, I’ve eliminated a lot of purchases, but there are still many buys that seem like a good idea. If you’re still convinced that you need to make the purchase that you originally planned, the best first step you can make is to start at the thrift store or the consignment shop or the discount grocer.

In other words, start at the low end and don’t ignore used items.

The reason for this is that quality items often “slip through the cracks” and find their way into thrift stores and discount grocers with an absurdly low price tag. I’ve found amazing clothing items for my family at thrift stores. Sarah and I used a toaster that came from Goodwill for many years and we had a few furniture items from Goodwill in our living room for many years.

As for groceries, we often buy marzipan, stollen, and many other items at highly discounted rates at Aldi, paying half or less of what the items would cost elsewhere.

The nice part of shopping at secondhand stores and discount stores is that if you don’t like the quality of the items they have on offer, you can always just say “no” and walk away.

9. Have I looked online for discounts for it?

If you’re still looking, let the internet be your friend. There are very few purchases out there that can’t be chopped in price by finding a discount online or a low-cost website somewhere on the internet.

My first step is to price-check the item across every reputable online seller I do business with. I always check Amazon for almost everything for starters, and I also check out sites like Overstock and eBay. If it’s more of a niche item, I try to find discount retailers that serve that niche, like Coolstuffinc (for board games).

If an item isn’t urgent, I’ll use tools like Camel Camel Camel to wait until the price comes down to the level that I want to spend before jumping on the purchase.

For groceries and household supplies, I’ll also search for coupons on any item that I might be buying. I frequently check weekly coupon sites like Redplum and save the coupons for anything I might buy. I don’t use them immediately – instead, I wait for store sales on those items so I can stack the coupon on top of the store sale. This sometimes gets me items for free.

Final Thoughts

For any major purchase, I use all of these questions essentially as a checklist. The goal, at first, is to make sure I actually need the item. Then, if I can actually show myself that this item is a significant need, then I’ll start moving through the steps to secure a truly low price on the item.

I don’t use all of these questions on smaller purchases, but I do use some of them on everything I spend. Mostly, I try to evaluate whether or not I actually need the item I’m considering and, when I’m honest with myself, I recognize that an awful lot of what I’m spending my money on is a want – and a short-term one at that.

Using this list of questions has really helped me to make smarter spending decisions in almost every dimension of my life, from items bought for personal pleasure to the items found on my grocery list, from items I personally need to the items bought for my children, from big-ticket items like expensive electronics and cars to the toothpaste in our bathroom. The process, in the end, is the same: we trade our hard-earned money and expect something in return. I want the most – and the best – when I trade away my money.

How and Why to Use a Zero-Sum Budget

zero-sum-camera-dollar-600x400[1]Sometime around 2010, my husband and I realized that we weren’t making the most of our income. We knew we were wasting boatloads of money, yet we weren’t sure why it was happening or how to make it stop. In an effort to figure things out once and for all, we began tracking our spending to see where all of our money was going. And although it was a necessary step for us, it was both a painful and scary experience.

For starters, tracking our spending took a lot of time and effort, eating into the very little free time we had. Even worse, what we discovered about our spending was downright scary, mostly because we were spending way too much money on food, entertainment, and home repairs. Something had to give.

Small Spending Victories

And something did. As we tracked our spending from previous months and kept an eye on current ones, we found little and big ways to cut our expenses down to a reasonable level. We quit eating out at restaurants so much, for example, and cut the cord to our cable TV. And since food spending was one of our biggest problem areas, we began cooking most of our meals from scratch and avoiding convenience foods, too. The savings started adding up… and quickly.

Although those victories were huge for us, they still weren’t quite enough to make us happy. We wanted to make sure that the changes we made would be permanent, and that we wouldn’t accidentally fall back into old habits.

Somewhere along the line, we discovered a specific type of budgeting that was already popular with millions of people, although we didn’t know it at the time. It’s called zero-sum budgeting, and many experts believe it is far superior to any other type of budgeting system out there.

What is Zero-Sum Budgeting?

A zero-sum budget forces you to spend every dollar you make — just not in the way you think. The basic premise of the budgeting strategy is that you must “give each dollar a job” to prevent waste and maximize your income, with the ultimate goal of reaching zero at the end of each month.  However, zero-sum budgeting works by usinglast month’s real income to pay this month’s expenses, so it is important to have a savings cushion equal to at least one month’s expenses before you get started.

Here’s how zero-sum budgets work, according to personal finance author Dave Ramsey:

“The point of a zero-based budget is to make income minus the outgo equal zero. If you cover all your expenses during the month and have $500 left over, you aren’t done with the budget yet. You must tell that 500 bucks where to go. If you don’t, you lose the chance to make it work for you in the areas of getting out of debt, saving for an emergency, investing, paying off the house, or growing wealth. Tell every dollar where to go.”

Basically, zero-sum budgeting forces you to allocate all of your dollars to something, whether you use the money for bills, debt repayment, or for savings. All of your dollars. Because, according to many budgeting experts, money “without a job” will likely get spent — often carelessly.

And that’s why many believe a zero-sum budget is the ideal financial plan for most hard-working families; nothing is wasted and every dollar has a purpose. When you create a comprehensive budget that accounts for everything, you theoretically shouldn’t have any cash left over to waste.

How to Create a Zero-Sum Budget

A zero-sum budget might sound like exactly what your family needs, but it can’t happen overnight. Certain steps need to take place in a certain order for a zero-sum budget to work effectively and help you accomplish your goals. Here’s how we created our zero-sum budget (and how you can create one too):

  • Track your spending for 1-3 months: Before you get started, you need to know where your money has been disappearing to. If you use credit or debit for all of your spending, this can easily be accomplished by digging out your old credit or debit card statements. Some bank and credit card websites even offer spending tracker tools to simplify the process. (Or look into budgeting apps such as Mint and Level.) If you pay cash for everything, you need to start tracking your spending from this point on by saving receipts or writing down all your purchases in a notebook.
  • List your common spending categories: Once your bank statement is right in front of you, figure out which categories the majority of your expenses fall into. These categories will be different for everyone, but might include things like groceries, restaurants, medical bills, entertainment, clothing, and transportation. You also need to list out all of your recurring monthly expenses such as your mortgage, insurance premiums, and utilities. Also make sure to create a category for miscellaneous expenses.
  • Assign your spending to a category: Once you’ve written out all of your categories, go through each month (from first day to last) and assign each expense to the appropriate category. Add up each column to see your total spending in each category for each month.
  • Zero in on problem areas: Seeing your spending in black and white might shock you. For example, you might find that you’ve spent far more than you ever dreamed at restaurants over the past few months, or that you’re overspending on hobbies to the tune of thousands of dollars. Regardless, this might just be your defining moment. Once you see how much money you’re wasting, you will be forced to make a change.
  • Assign each category a new dollar figure: Discovering that you’re overspending in several areas can be a painful experience, but the only thing more painful is continuing on the same path. In order to make meaningful change, assign each category a new dollar figure that is reasonable, yet restrictive. For example, if you’ve been spending $1,000 on groceries each month, start by cutting that number down to $700 for the following month.

Once you’ve created a new budget with updated categories and dollar figures, you need to compare that budget to your actual earnings. In the best-case scenario, you’re spending far less than you earn and can immediately begin allocating your surplus funds to debt repayment and/or savings. In the worst-case scenario, you’re still spending more than you earn and you need to make additional cuts for your budget to work.

Getting a Month Ahead

Since zero-sum budgeting uses last month’s income to pay this month’s bills, you’ll need to get one month ahead on your finances to make this work. Getting one month ahead can be accomplished by saving one month’s expenses in your regular savings account and using those funds for the following month’s budget.

If you already have at least one month’s expenses saved, you are already a step ahead of the rest. Simply use those funds to pay the expenses you’ve outlined during the next month’s budget, and sock this month’s income away into savings for use during the following month.

Zero-Sum Budgeting Based on Your Real Income

If you earn the same amount of money every month, creating a zero-sum budget should be a breeze. Let’s say you and your spouse get paid the same amount of money every other Friday, and two paydays occurred during the last calendar month. When creating your budget for the upcoming month, you will simply add up the pay you received during that month and create your next month’s budget based on that figure.

Since zero-sum budgets use last month’s income to pay this month’s bills, irregular incomes are also compatible with this budgeting style. Simply add up your paychecks from last month in order to figure out how much money you have to work with this month — and make cuts as needed.

One thing you’ll notice is that months with lower earnings will squeeze your budget to its breaking point. Use these months to figure out if you have any spending categories that could be whittled down even further. Months with higher earnings, on the other hand, should make the following month an easy one when it comes to your budget. Since you’re giving each dollar “a job,” you can easily allocate those extra funds toward your debts or savings for speedier progress.

Zero-Sum Budgeting in Real Life

Since using a zero-sum budget sounds entirely more complicated than it really is, I decided to create a zero-sum budgeting scenario that will show exactly how the system works in real life.

Let’s start with the Miller family, who took home $6,000 last month after accounting for taxes and pre-tax retirement contributions. If they tracked their spending for last month, it might look something like this:

  • Mortgage: $900
  • Groceries: $800
  • Car insurance: $100
  • Auto loan: $450
  • Cable TV and Internet: $250
  • Cell phones: $250
  • Gas: $200
  • Utilities: $400
  • Clothes: $500
  • Entertainment: $500
  • Miscellaneous: $300
  • Restaurant meals: $600
  • Credit Card Monthly Payments: $750

Total: $6,000

As you can see, the Millers spent every dollar they earned last month — but in ways that are not likely to pay off for them in the long run. Based on their new information, the Millers decide to make a zero-sum budget that will begin on the first day of the following month.

Since they are spending so much on non-necessities, the Millers decide to make some drastic changes in their spending. The fact that they are currently paying $750 per month in credit card bills also sets off a red flag for the Millers, who decide they want that debt gone once and for all. If they created a zero-sum budget using their $6,000 monthly income for the following month, it might look something like this:

  • Mortgage: $900
  • Groceries: $600
  • Car insurance: $100
  • Auto loan: $450
  • Cable TV & Internet: $100
  • Cell phones: $150
  • Gas: $200
  • Utilities: $400
  • Clothes: $250
  • Entertainment: $300
  • Miscellaneous: $300
  • Restaurant meals: $250
  • Credit card monthly payments: $2,000

Total: $6,000

As you can see, the Millers made some drastic changes.  Disgusted with their wasteful spending, the Millers cut their grocery bill by $200, their monthly clothing allowance by $250, entertainment by $200, and their restaurant spending by a whopping $350. Not only that, they also downgraded their cable television and cell phone plans to save an additional $250 per month.

The results of those spending cuts combined adds up to a total of $1,250 – a sum of money the Millers have chosen to allocate to their high interest credit card debt. With a monthly payment of $2,000, they estimate that this plan will help them pay off their credit card debt within 3-4 months. After that, they can then begin saving $1,250 per month for emergencies and the future.

Tips for Zero-Sum Budgeting

Zero-sum budgeting might sound complicated, but it is actually very easy to implement once you get the general concept down. But, as with most things, certain actions do help make the process run smoother. If you’re considering a zero-sum budget of your own, these tips can help:

  • Budget for everything: Creating a zero-sum budget will only work if you are willing to budget for everything – even things you wish you didn’t have to budget for to begin with. When writing out your monthly budget, make sure to include all categories where you spend money. Doing so is the only way to ensure success!
  • Overestimate variable expenses: Variable expenses can be hard to estimate at times, especially when it comes to costs that fluctuate – things like utility bills and gas usage. With these items, I tend to err on the side of caution. If you overestimate how much you will spend, you can always transfer any “leftover money” to savings at the end of the month. Likewise, you can use it to take care of overages in any other category.
  • Track your spending once per week: Your new spending plan might take some time to get used to, but it will be easier to adjust if you’re able to track your spending as the month progresses. For example, your new $600 monthly grocery allowance will be easier to swallow if you check your statements to see where you’re at at least once per week. Checking in frequently with each category will help you discover how much you have left to spend.
  • Prepare for setbacks and adjustments: Your new zero-sum budget might go off without a hitch, or it might be a total nightmare. Either way, it’s important to know that you’ll likely need to adjust and readjust your spending for categories as the months progress. For example, you might think that a $500 food budget is entirely feasible, but find out that it is completely impractical in real life. When those things happen, make a note of it and change things up for the following month. Your zero-sum budget can evolve as you go: It should work as a tool to help you track your spending, but it shouldn’t be too restrictive.

Using a Zero-Sum Budget to Accomplish Your Goals

Zero-sum budgeting might be exactly what you need to get your finances under control once and for all. Why? Because it helps you identify problem areas, create limits you can live with, and make your money work for you. Even better, you don’t have to purchase anything to get started.

All you have to do is face your spending head-on and follow these simple steps to build your own zero-sum budget from scratch. It might not be easy, but you are sure to learn a lot about yourself and your own spending habits along the way.

Like it or not, a look in the mirror is sometimes necessary to make meaningful changes that last. In that sense, zero-sum budgeting will show you who you really are, flaws and all.