When my husband and I discovered zero-sum budgeting several years ago, we knew we were onto something. Because of the way zero-sum budgeting works, it required us to account for every dollar we made on paper – to give each dollar a job. For us, that meant scrutinizing every cent of our spending and figuring out how to make the most of our hard-earned dollars. And once we started, we were instantly hooked.
Of course, learning to use a budget for the first time wasn't always easy. Facing our own spending on paper – in black and white – was sometimes painful. However, we quickly learned to enjoy the process and relish the small victories of budgeting.
But we had a problem. Since we vowed to take the budgeting process seriously, our first few zero-sum budgets were almost militant -- down to the penny with almost zero room for error. And, despite the fact that we were driven to stick to our plan, our lack of a buffer meant that we were constantly coming up short at the end of the month.
Eventually, we learned we needed a little wiggle room in our monthly budget and settled on a $200 miscellaneous category that could be used for any additional expenses. In the end, the buffer served us well by absorbing any budget overages and by helping us feel we had more control.
Budgeting Isn't Always Easy
Although the percentage was slightly higher among those with a college education, a conservative ideology, or household earnings of $75,000 or more per year, a Gallup poll from mid-2013 shows that only about a third of American households created and used a household budget that year.
No matter how much money you make and how educated you are, budgeting can be tough. It takes much more than a pen and paper; it takes self-reliance, self-restraint, and fortitude to create a budget, let alone stick with it.
It's hard to tell yourself no when you really want something, and it can be downright stressful to live within limits for the first time. And when you’re used to buying whatever you want, a budget can feel like an enemy, especially when things aren’t going your way.
Here's Why Your Budget Needs a Buffer
But budgeting becomes much easier when you set yourself up for success. And part of the budgeting process means learning how to plan for reality, not just how you wish things would be. In other words, your budget needs a buffer – a few hundred dollars of padding that can help you stay on track. Here’s why:
- To account for overages: When you’re budgeting one month in advance, you generally need to estimate your bills for the month. That may be easy to do with fixed bills like your mortgage and cellphone bill, but it can be much more difficult when it comes to bills that fluctuate – like your electric, gas, or even water bills. When you leave some room for error in your budget, or set aside a certain amount for miscellaneous charges, you no longer have to worry if you underestimate an essential bill.
- Because it’s easy to forget: Remembering your regular monthly bills is a piece of cake, but what about everything else? I’m awful at remembering to budget for my niece's or nephew’s birthdays, for anniversaries, and for oil changes for my car. It’s easy to forget bills that are infrequent, or that you don’t expect. But when your budget has a buffer, you’re covered.
- Because life happens: Even when you prepare for everything, life has a way of derailing your plans and costing more than you expect. One month, you may need surprise home repairs. And another, you might discover your child has completely outgrown their shoes. Whatever the emergency, it isn't always possible to wait until next month, and sometimes you have to fork over the money right away. Your miscellaneous category can help you absorb these costs and stay on track.
- Because you want to succeed: The best part about setting aside a certain dollar figure as a budget buffer is the psychological boost you get from succeeding. When your budget doesn't have a buffer, you're always transferring money to your account to cover emergencies or overages, but when those inevitabilities are part of your plan, you get to feel like a success. That feeling makes it easier to stick with your plan and continue budgeting each and every month.
A budget is simply a plan you create to get the most out of the money you work so hard to make. And if you don’t have a plan, why are you working so hard in the first place?
Life isn't always predictable and things can and do come up. If you want your budget to be an overwhelming success, it's important to set aside some miscellaneous funds that can help keep your budget on track. Your kids will need money for school. Your car will need a tune-up. Your furnace will require an emergency repair.
All of these reasons, and others, make it easy to see your budget needs a buffer. Budget for reality, and not just for how you wish things would be.
Do you leave room for error in your monthly budget? If so, how much?