A prepared pantry means having anywhere from three to six months of storage for your everyday items. Everyday items include food, toiletries, consumables, paper goods, medications, etc. If I were to enter into a no-spend period, that would mean that I would be depleting my storage. That’s not to say that you shouldn’t touch your storage. No! Please cycle through your items to ensure everything stays fresh, but you should always be replenishing. It wouldn’t be great to have a natural disaster hit at the end of your no-spend pantry challenge when you’re coming down to odds and ends and “getting creative.” a  No-spend challenge also restricts you from stocking up on a good deal. What’s the point of doing the challenge if you make tons of exceptions? 

Budgeting and being prepared come hand in hand. It needs to be a lifestyle, not a fad diet. It’s proactive to always be on the lookout for discounts on your everyday product and be working on and restocking your stockpile. Don’t misinterpret that to spend over and buy more than you can afford or consume before it expires, and certainly don’t just buy something because it is a good price. Once you get to a month’s worth of supplies, it’s wise to slow down and make purchases only when you find affordable prices.

Part of what allows this mindset of only shopping sales is the ability to store your items, especially food, properly. Six things that have made it possible for us are (in order of lowest cost to investments) mylar bags, a vacuum sealer, a pressure canner, a dehydrator, a deep freezer, and a freeze dryer.  All of these items give you more control over food preservation and extend the shelf-life of foods. A good example is flour. If you were to buy a large 25 lb bag of flour (and you’re not a baker), the chances of you using that whole bag in six months or before some other pest found its way into the original packaging is slim to none. But suppose you were to package that up into mylar bags, you are extending the shelf life up to 20 years, eliminating the concern of expiration dates and allowing you to make larger, budget-driven purchases without worry.

The scarcity mindset is the other worry you eliminate by not subscribing to no-spend challenges. If you feel restricted, chances are you start your energy on what you can’t have. If you have ever been on a diet, you know that donuts taunt you, and everything sounds better than the salad in front of you. Many people spend their no-spend challenge creating lists of everything they want to buy when the challenge is over. What is the point if you are on an overly restrictive grocery budget this month, only to blow your average budget next month? If you deplete your stockpile this month only to feel uneasy and anxiously restock (regardless of prices) next month, you’re doing more harm to your budget and mindset than any no-spend challenge can help.

No-spend challenges have very limited uses in a budget. They should be seen as habit breakers/makers vs. savings strategies because unless you improve a habit on the other side of the challenge, you probably create worse habits in the long run on top of the stress a no-spend challenge inherently has. 

I would love to hear your thoughts in the comments! Are there any no-spend challenges that helped you, or are you leaving them behind? What are your favorite budgeting tricks?

Habitual Heart is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

We went from being aggressive savers for big goals like our first home, to those who save to protect our finances. That might reflect in what moves we were able to make, but I hope this is is just a source of inspiration for whatever boat you may find yourself in.

We moved back home.

This might not be an option for everyone, but as the largest expense on most of our budgets, you must look for cost-savings here. Call your landlord, call your insurance company, call all of your utility providers. Most people/companies are just as eager to keep your business as you are to stay. In fact, I do this about once a year with all my utility providers, pandemic or not. Simply give a call and use a phrase like “when reviewing my budget” or “this is not in my budget right now.” It’s a magical phrase whether it saves a couple of bucks or a significant chunk.

We took this to the extreme. We were planning on moving into our first home next, not back in with my parents, but the world had other plans. In March of 2020, knew my husband wouldn’t be able to find comparable, safe work any time soon, and with our rent (and utilities) in the Bay Area being $3,000+/month we knew that was the largest expense we would be facing. We took advantage of my indefinite work-from-home position and packed up for Southern California. We knew we would have the flexibility to return if needed, but even if this thing only lasted for two months, we would save $6,000 and not touch our emergency or down payment savings. Here we are five months in and we’ve saved $15,000 and it doesn’t look like we will be moving out before the new year. We are very fortunate that my parents were able to offer us this cost-saving opportunity and if you have an opportunity to “buddy-up” with parents, relatives, or even friends, now is the time to do so. (Even if that is just on a Netflix subscription!)

Rightsize your car insurance.

My car has literal spiderwebs on it. I went from a modest 1-hour commute a day, to nothing. My husband was even more drastic cutting his 2-hour commute entirely. Make sure to take a few minutes to call your insurance provider to update your projected usage and mileage to better reflect how much time you are actually on the road these days. While a few companies are already issuing credits, there is still more to save. We were able to reduce our 6-month rate by $200 in addition to the ~$20 monthly credits we have been receiving.

Goodbye memberships.

I know there is a debate between continuing to support your local small gyms, classes, daycares, etc. My two-cents here is that if you have the income to do so, continue, but that’s often not the case when you come to read an article like this. There is no shame in putting yourself first. Cut the gyms, cut subscription boxes, and try to pair up with friends on streaming services. Prioritize between wants and needs and get hacking.

Cut entertainment budget.

This one happened naturally, unfortunately. There is not much available to do these days. No movies, no concerts, even dining out is not an option for us. Dining out was our largest “entertainment” category spend because we loved to use date night to experience new restaurants. Ironically all the “free” stuff is what we still can do. Get outside. Have a picnic, go to the park, take a hike. Try and flip your mindset from spending money to just staying busy. It’s not the most fun, but you can still find fun in the free activities.

Spend more time to save more money.

Finding deals and saving money takes more time. But when you lose your job, you have a lot of time to look for another position and time to make sure you are not squandering your savings.

I keep up on all my credit card rewards. My travel rewards cards (Chase Saphire Reserve) are shifting to offer their customers some kind of value in the absence of travel. Now I get 5x points on groceries and I can get free Instacart Express membership. I also get a free year of Doordash Dashpass which we are using to fill the hole of our date night routines. Take the time to read those emails and check bank statements. For me, free deliveries came at the cost of switching my payment method from ApplePay to entering my credit card information.

If you also keep up to date HabitualHeart.com, you will know we are expecting. News flash! Babies are expensive. I checked in with insurance to see what we could get covered and a big one was a breast pump for me, but also check for areas of savings or expenses that can be directed to an HSA or FSA card. Just because you lost your job, does not mean that you will lose what you have already contributed to a health savings account. You will have to spend it before the end of your insurance year, so it is very important you find ways to smartly spend.

Also, if you are on the market for any big-ticket items, make sure you check for secondhand-savings or sales. Facebook Marketplace is quickly becoming an easy and abundant marketplace for nearly everything. Also, install apps and plugins like Honey and Rakuten to make sure you are finding the best codes and getting cash back on necessary purchases. I even go so far as to add items to my carts to watch for price changes or get “cart completion” coupons. (Sharing some not so secret knowledge from my past in e-commerce.)

The 50-20-30 Rule

The 50-20-30 rule is a great place to set benchmarks for your budget. The basics are splitting your income to spend 50% on essentials (housing, food, transportation, and clothing), 20% on financial goals like savings and debt repayment, and 30% on wants. Again, this is a great place to start. If you are only spending 30% on needs (go you!) you could choose to put that extra 20% towards rapidly paying off debts or saving for retirement or a 5-star vacation. There is a lot of flexibility in this model, but make sure you follow the order of essentials, savings, wants. If your needs are way over 50% that is when you need to be looking for ways to bring in additional income or lower your needed expenses. Check out my Habitual Heart 50/20/30 Budget Template on Etsy for these equations built right in.

• 50% on Essentials
  • Housing (Rent or Mortgage and insurances/taxes)
  • Utilities (Internet yes, Netflix no)
  • Groceries (food you need to live, not the splurges)
  • Transportation (car, fuel, insurance, public transportation)
  • Health (insurance and co-pay)
  • Clothing (shopping sprees not included)
• 20% Financial Goals
  • Debt (Credit Cards, Student Loans, etc. Mortgage and car payments included in Essentials)
  • Savings (401k, retirement, investments)
• 30% Wants
  • Dining Out
  • Entertainment (Netflix goes here)
  • Vacations
  • Toys
  • Treat Yo’ Self
  • Gifting

Take It A Step Further…

Housing = 30% or Less

Housing is the largest expense for most people so it makes sense there are a couple of rules set up just around keeping housing costs manageable. Keeping housing costs at or under 30% is actually important for a couple of reasons. First, it helps ensure that you can afford other essentials, savings, and needs when you keep your largest cost under control. Secondly, when you are applying for a loan, this is one of the factors loan officers look at. They will check to ensure your future mortgage (principal, interest, tax, and insurance payment) will not exceed 28% of your income. If you can manage to have your housing costs below 30%, more power to you!

Another rule of thumb for home buying is that you should always aim to be able to puy 20% or more down so you can avoid PMI (Private Mortgage Insurance). This is an extra fee you will pay as you are a greater risk without 20% down. Along the lines of not purchasing more home than you can afford, the total cost of your home should not be more than three times your annual income and ideally closer to two or two and a half.

Transportation = 15% or less

Transportation can be pricy and the cost doesn’t often slap us in the face, it creeps ups in little ways. When calculating transportation costs you should take into mind car payments, maintenance costs, fuel, insurance, parking, and public transportation. Using this percentage puts some guidelines on what kind of car payment you can afford.

Retirement – 10% or more

Most financial advisors recommend putting 10% of your total income towards retirement savings (in the form of 401k, IRAs, or individual taxable accounts.) Ideally, this savings starts at the beginning of your career or around your early 20s, but that is not always the case. If you are getting started later you will have to increase that savings rate to meet your retirement goal. That being said, ultimately a generalized goal is to have 20x your annual income saved for retirement.

Given that income changes throughout a career, there is another rule to consider based on your goal retirement lifestyle. Members of the F.I.R.E. (Financial Independence Retire Early) Community follow the “4% rule.” This rule is based on 50 years of historical stock and bond performance that has shown you can withdraw up to 4% of your investments a year without running out of money for at least 33 years. People in the F.I.R.E. community aggressively save to get to their retirement goal, sometimes saving up to 50% of their income or more. However, the 4% rule can work for anyone saving at any pace and it’s an easy number to calculate.

25 x Expected Annual Expenses = Retirement Goal

While the F.I.R.E. movement is not for everyone, it has yielded the formula showing your retirement goal should be 25x your expected annual expenses. Working off a number that does not vary as greatly as income seems a little more realistic and it’s also an important reason to always have a clear picture of your overall spending.

Designing Your Budget

The beauty of a budget is that you can design it to fit your life. The rules above are just guidelines, but if the most important thing to you is that you live in the big city, close to work and you would rather spend money on the perfect place to live over travel or going out that is 100% your call. Make your budget work for you.

Do you have budget tips you live by? Make sure to share in the comments!

Sink funds, not budgets! Unfortunately, your paycheck doesn’t just get bigger when you have a big expense due. You have to make the plan (aka the budget) to prepare for those months when your expenses might be bigger than your income. Sinking funds are a way to strategically put aside money in your budget for larger expected and unexpected costs. A common example is Christmas Gifts. We all know that Christmas is December 25 so no one should be surprised when December rolls around and suddenly we are spending more on Amazon than the typical month. A sinking fund makes sure these types of expenses have a place in our budget year-round. Sinking funds make sure your budget isn’t thrown for a loop and you feel prepared when those funds become due.

Why should you have sinking funds and not just savings?

Remember, a budget is what gives you permission to spend. If you just have a lump savings budget, there is nothing stopping you from spending it all on a luxe vacation even though your car insurance is due the very next month. A sinking fund will set up a protective dotted line that makes sure you spend on needs and wants accordingly. They should eliminate stress for large expenses and keep fun-spending fun.

How do sinking funds work?

Let’s use our example of a Christmas sinking fund and say we are starting our budget in January. Our goal is to have $2,000 set aside by November (when we start shopping). So, January – November = 11 Months. $2,000/11= $182 (rounded). In your budget, you are going to want to put aside $182 every month until you’re ready to shop in November.

What are some typical sinking funds?

Sinking funds come in different packages ranging from wants to needs and expected to not-so-expected. Here are some typical items you might want to work into your budget.

• Auto Maintenance
• Home Maintenance
• Medical Fund (Not to be confused with your Emergency Fund. Think of this as known upcoming costs like contacts, new glasses, braces, etc. Some people have this already created in the form of an FSA or HSA)
• Car Insurance
• Home/Renters Insurance
• Utilities (those pesky ones that are due every quarter or saving up for summer when the AC will be on overtime)
• Christmas/Holiday Gifts
• Birthday Gifts & Parties
• Pet Insurance & Medical
• Technology Replacement (new phones or computers)
• Yearly Subscriptions
• School (tuition, books, back-to-school supplies, and clothes)
• Kids (new baby, sports, clubs, classes, camp)
• Vacation (yay!)
• Taxes (April 15th)
• Bonus: Weddings! (Yours or others! Being a guest is expensive sometimes.)

Storing Sinking Funds

Sinking funds need to be in accounts that are readily accessible, unlike your Emergency Fund which should be a little harder to get to in a high-yield savings account. You can opt to create additional checking or savings accounts to help section off sums of money, but I recommend building your will power and budgeting expertise with most of the smaller funds. You should always be referencing your budget first for permission to spend, not your bank account. Download the Habitual Heary Zero-Based Budget Template and get started today. Alternatively, if you already feel comfortable with zero-based budgeting, I recommend YNAB for a great budget and sinking fund tracking app.

If you have any goals that require money (millennial trying to own a home over here!), you need a budget. If you have an income, you need a budget. If you have a bank account or a credit card, you need a budget. I firmly believe that everyone needs a budget, but I also believe that a budget does not control you. You control the budget and being in control should make you feel pretty dang good.

So what is a zero-based budget?

Income – Expense = 0

Simply put, when the money you bring in minus the money that goes out is equal to 0, that is a zero-based budget. At first that might sound terrible. “What? No money left at the end of the month?” you might say. However, I would say “All money was well spent.”

A zero-based budget is an intentional method of budgeting where all your money has a job to do. Jobs come in the form of paying the bills and buying groceries to fun jobs like date night and dog toys. Some of the most impactful jobs are debts and savings. These jobs attack what is weighing you down and prioritize building wealth. It gives you a plan and permission to spend money how you want to.

How does it work?

Again, the goal is to have all the money coming in – all the money going out = 0. There are five steps to getting there.

1. Income. List all your sources of income. Some incomes you might know exactly how much is coming in and some you might have to estimate based on your job type. Err on the side of caution if you are unsure.
2. Expenses. 
   • Required Expenses. Required expenses should be the things you can’t live without. For most people that is food, rent/mortgage, utilities, transportation, and basic clothing. I like to have the required expenses at the top of my budget for 2 reasons. First, if anything should happen to our income, it’s easy to see what we need to fund first and where we can cut from our budget. Second, you take the sum of your required expenses and multiply it by six months to get a comfortable emergency fund goal.
   • Other Monthly Expenses. Think subscriptions, eating out, entertainment, gyms, etc.
3. Goals.
   • Savings. Savings goals should be the bigger things like emergency funds, down payments, new cars or college.
   • Sinking Funds. I’m not exactly sure where sinking funds got their name, but I like to think of these as things that would sink your budget if you didn’t plan for them. They are things you know are coming, but often creep up on you like Christmas/Holidays/Birthdays, car registration and insurance, back-to-school, etc. For this group, take your savings goal and divide it by how many months until payment is due. Example: Start saving for the Holidays in January (Goal $1000/12= $84/month). It feels great to know you have the money on hand for any occasion. 
   • Debts. Just ew. But it’s going to feel so good to say goodbye to these.
4. Get this all to equal 0! This is the balancing part of the budget. If your budget is in the negative, you need to either find places to cut back or bring in more income. If your budget it positive, you need to find more jobs for that money.
5. Invest in the habit. It takes about three months to really get comfortable with a budget and have it working for you. There is trial and error in making a budget and it requires that you check in with honesty, but I think that is worth all your financial dreams coming true.

Tips on Getting Started

Let’s get pen to paper, or more realistically, keys to keyboard! There are a couple tools I recommend to get you started on the right foot. Get them in this order:

• Mint – This is a free tool from Intuit (makers of TurboTax and Quickbooks). They know a few things about finance so this is a great place to start. While this is not a zero-based budget platform, this is going to help you get honest and familiar with your spending habits as it automatically tracks and categorizes spending.
• Habitual Heart Zero-Based Budget Template! – You do not have to be an Excel wizard to enjoy the features I built into this template. It helps you create that zero balance, highlights overspending and keeps you on top of all your categories mentioned above. It also works on Google Sheets if you don’t have Excel. Give it a “favorite” on Etsy for a special 75% discount email. Just tap the little heart.
• You Need a Budget (YNAB) – When you are a zero-based budget master you can graduate to YNAB. This is a super powerful budgeting tool that comes at the price of $84/year. Try 34-days free with my link and see how it will pay for itself. They have cleverly built a huge community around the tool and like-minded budgeters that is as helpful as it is motivating.