Spendthrift Spendthrift

Zero based budgeting: every rupee gets a job.

Income minus every planned envelope equals zero, before the month starts. Nothing is left loose to be spent on whatever comes up, and nothing sits unaccounted for. Here is the method, and how an envelope app carries it out day to day.

The rule in one sentence.

Take this month's income. Assign every rupee of it to something, rent, groceries, transport, savings, debt, before you spend the first rupee of it. If the plan is right, income minus every envelope equals zero. That is the whole method. It does not mean spending everything; a rupee assigned to "savings" is still assigned, still doing a job, and still counts.

The opposite of zero based budgeting is the common default: money arrives, bills get paid as they land, and whatever is left at the end of the month is either saved by luck or spent by default. Zero based budgeting moves that decision to the start of the month, where it is easier to make on purpose.

A worked month.

  1. Start with what actually arrived

    Not a hoped for figure. The rupees that landed this month, after tax, from every source.

  2. List every job first

    Rent, groceries, transport, bills, savings, debt payments, and the categories that are personal to your own life. Fixed amounts first, since they move least.

  3. Assign until nothing is left unassigned

    Keep assigning, including to savings and to a buffer envelope for the irregular expenses that are certain to happen eventually, though not this month. Stop when income minus envelopes reaches zero.

  4. Let the month happen, honestly

    Spend against the envelopes. When one runs over, it is shown as a real negative, not hidden, so next month's plan can account for it rather than repeat it.

Where an envelope app carries this out.

The method, held day to day

Zero based budgeting is a planning rule; an envelope is where that plan lives once the month starts. See envelope budgeting for how the envelopes themselves work, or the full worked example on the money flow page.

One month, every rupee of it assigned across five envelopes, with the one honest overspend shown as a real negative rather than hidden.

See the full month

Where this meets a shared bill.

A zero based plan gets harder the moment money changes hands between people, a shared dinner, a flatmate's half of the electricity bill. Most budgeting apps stop at the plan and leave the splitting to a second app, which is exactly the gap Spendthrift is built to close: when a shared bill is paid, the payer's own share lands in their own envelope as real spending, and the rest is recorded as money owed back, automatically, in the same ledger. See the split calculator for that arithmetic on its own.

Questions.

What is zero based budgeting

A method where income minus every planned expense, saving and debt payment equals zero before the month starts. Every rupee is assigned to a job in advance, rather than left loose and spent on whatever comes up.

Is zero based budgeting the same as envelope budgeting

They are close cousins. Zero based budgeting is the planning rule, assign all of it, in advance. Envelope budgeting is the usual way to hold that plan day to day, one named pot per job. Spendthrift uses envelopes to carry out a zero based plan.

What happens if I overspend one envelope

The honest answer is shown, not hidden: the envelope goes negative, in the reserved warning colour, and the amount over is stated in words. Nothing is clamped to look fine when it is not.

Do I have to plan every rupee by hand every month

The rule is that every rupee has a job, not that you retype the plan from nothing each month. Most months look like the last one with small adjustments, which is the point of a plan you can see.

Assigning every rupee, including the ones you have not decided about yet.

Three things this page describes but cannot show

Assigning income down to nothing left, what happens to money you have not yet given a job, and reassigning when the month changes underneath you.

ASSIGN UNTIL THERE IS NOTHING LEFT TO ASSIGN ₹50,000 to assign nothing left Rent ₹20,000 Groceries ₹12,000 Eating out ₹6,000 Transport ₹4,000 Entertainment ₹3,000 Savings ₹5,000 Zero is the target, not a warning. Every rupee has a job before the month starts.

Assign until there is nothing left to assign.

₹50,000 arrives and is given six jobs. What is left to assign falls to zero, which is the target rather than a warning.

MONEY YOU HAVE NOT ASSIGNED YET Still to assign it has no job yet, and that is a state, not a mistake ₹5,000 It is not spendable by default It does not quietly count as safe to spend. It is not hidden in a balance It sits on its own line where you can see it. It carries into next month Unless you give it a job before then. The one number most budgeting goes wrong on is the one nobody has decided about.

Money you have not assigned yet.

₹5,000 with no job yet sits on its own line. It is not spendable by default, not hidden inside a balance, and it carries forward until you decide.

WHEN THE MONTH CHANGES UNDER YOU THE BILL CAME IN HIGHER ₹4,200 planned for ₹2,500, so ₹1,700 has to come from somewhere Eating out ₹6,000 ₹4,800 gives up ₹1,200 Entertainment ₹3,000 ₹2,700 gives up ₹300 Savings ₹5,000 ₹4,200 gives up ₹800 The month still adds to the same total. Nothing was invented. A plan that cannot be changed is a plan people stop keeping in the second week.

When the month changes under you.

A bill lands ₹1,700 higher than planned. Three envelopes give up a little and the month still adds to the same total.

See envelope budgeting for the envelope itself, the budgeting apps for couples roundup for how other tools compare, or about for what Spendthrift is in full.