The net 0 mentality implies when budgeting, that you will use up every budgeted dollar. You will not leave a single one left over for next month. Although this sounds bad this isn’t exactly what you might think. This doesn’t mean spend as much as possible until you reach 0. We’re just going to try to make the best use for every dollar possible. For example if you make $1,000 for the month and you have $800 in expenses how can we maximize those extra $200?

Let’s say your projected budget is $800 and you will have $200 left over. How can we force it to be net 0? If you haven’t budgeted for saving yet you might want to include some left over money to your savings account. Maybe save half and use the other half for investments. Now you have your $800 budget + $100 savings and $100 investments. Leaving you with $0.

So this doesn’t necessarily mean spend every dollar possible, it means maximize every dollar earned. By doing this you maximize your return and make sure every dollar is actually working for you.

Let’s face it leaving a few dollars unworked will cause them to be eaten up by inflation, or right now not taking advantage of high interest to use it in your favor. This same principle goes for unpaid debts. The more unpaid debt you have, you want to reduce this as much as possible so you won’t have to pay too much in interest (or preferably no interest at all).

This strategy works well, since the more money you make you can just adjust more money to save or invest. You will make more money but your projected expenses will stay the same. For example if you end up making $1,200 that month. You now have an extra $400 to save or invest.

By doing this you can build wealth and it will create healthy money habits that will eventually help you maintain that wealth. This strategy has helped me save money the past couple of years since it creates a scarcity mindset. Treat savings and 401(k) contributions as a mandatory bill that has to be paid. After a while you won’t even notice the “extra” money.

Thank you for reading and I’ll see you next Sunday,
– Pablo