The ZERO DAY is a concept I’ve been teaching in my financial management class at my church. Most folks have never heard of this concept, but it is very simple.
This is the day each month that your after tax income covers your monthly costs. If your monthly expenses are $4,000 and your monthly income is $4,500 then your ZERO DAY is the 26th of the month.
If you earn $12,000 per month and still maintain $4,000 per month in expenses all your bills are paid by the 10th of each month. That’s a great financial position to be in!
If your ZERO DAY falls early in the month you’re in good shape, if it falls in the last few days of the month you’re headed for financial trouble.
Part of being financially secure is keeping your expenses modest, even while your income increases. I put a picture of my home on this post… I bought my place for $157,000 back in 2003. Even as my income went up I resisted the urge to get a more expensive home… I even doubled down and put solar on the roof of my home and an electric car in my driveway, which further lowered my monthly energy costs by $300!
My income in the solar biz can fluctuate month to month, but my ZERO DAY usually falls before the 10th of each month, if not sooner.
If you have no idea what day is your ZERO DAY sit down for 20 minutes and figure our your monthly household income after taxes, then look at your monthly expenses.
This month the solar business has been quiet, so my zero day fell on November 14th. In October all my expenses were met by October 6th! That was a good month, indeed.
When I have a high commission month I take that extra money and pay my mortgage down. That’s my last debt piece, and my goal was to pay off my home in 2020…. until Covid19 started to muck things up!
The best way to prepare for lean times is get your expenses down in good times. I drive a used Chevy Volt, don’t use credit cards at all… stayed in my small house with a minimal mortgage and low property taxes….