Do you hear the word “budget” and groan?
Do you feel overwhelmed and think that money management isn’t possible for you? You’re too busy. There is too much going on. How can you possibly add accounting for every penny?
I’m working on building a financial course. And one of the big things about managing money and being financially independent is the necessity of a budget. No matter what you call it: a spending plan, a budget, the anti-budget. It all comes down to the same thing. Mindfully spending and saving your money. Doing anything else results in years of debt. And spending your retirement debating between food and medication. Because you can’t afford both.
The simplest of the budgets I’ve run across goes by the name of the “Anti-Budget.” In the interest of full disclosure, I don’t like the name. But I didn’t name it. I personally am a fan of detailed budgets that get into the nitty gritty. It allows you to see where you’re spending your money. As well as pinpointing exactly where you can save. But for those who aren’t a fan of the grit, the anti-budget is flying into the rescue.
It’s a simple three-step budget.
- Choose a savings rate.
- Pull the savings directly from the top of your paycheck and put it aside.
- Live on what is left over.
Let’s go into the steps in a little more detail.
Choose a Savings Rate
If you don’t think you can save anything, start with 1% the first month. Up it to 2% the second month. 3% the third month. Etc. The small decreases in living expenses should be manageable.
Your ideal savings rate is personal. But 10% is the absolute minimum you should be aiming for. 20% is generally accepted as ideal. The earlier you start saving, the longer compound interest and investments will go up. It’s vital to start saving early. Of course, if you’re 50 and haven’t saved a penny, you need to save more than 20% if you want to retire in any level of comfort.
Put Savings Aside
Where you won’t spend it. Here’s where I note that savings means multiple different things.
Savings includes paying off debt. The key here is that if you throw that extra money at the debt, it DOESN’T mean you can rack that debt back up. You have to be serious about paying down your debt.
Savings includes building up an emergency fund. I wrote a great article: “Emergency Fund Or Pay Off Debt” if you’re trying to decide which is more important for you.
Finally, savings includes investments. After your debt is paid off and you have an emergency fund, you HAVE to start saving for retirement. And if you just throw it into a savings account, inflation is going to eat your retirement. You need to start investing. Start with an index fund. They follow the market and are a great long-term option for those who know little (or nothing) about finance.
Live On What is Left Over
This is the step that I hate about this budget. I’m a track every penny, categorize your spending kind of girl.
But it works for people just starting out in the budgeting world. You’re already freewheeling. You’re estimating in your head and paying bills when they come due. So you just keep doing the same thing. Except you have started saving. Yay!
The Biggest Objection
I can already hear some of you. You’re saying “I need every dime of my spending money. I can’t save a cent.”
Here’s where the tough love comes in.
You’re either: 1) not being serious about saving money -or- 2) already living well beyond your means. For example, let’s say you make $3,209 every month.
In the case of #1, are you seriously spending EXACTLY $3,209 every month? There’s nothing out of that $3,209 you can cut? Going meatless for one day a week? A dinner out? Coffee? Alcohol? A concert?
In the case of #2, I’m assuming that you’re racking up credit card debt in the background. In that case, something more than the anti-budget is called for. You’re digging into a serious, long-term problem. That only gets worse each month. You need a SERIOUS budget. As well as trimming expenses. And maybe increasing income.
Lastly, if you’re really, really spending every cent of that $3,209. And can’t cut a thing. It’s time to look at increasing income. The freelance model of work is becoming popular. You can drive your car for other people. You can rent your car. You can walk dogs. But saving for the future is a must. Unless you want to spend your final years in abject poverty, you have to start saving now.
There is are various alternate versions of the anti-budget running around.
1) Allocate vital expenses, & then spend. In it, you skim the savings off the top (just like above). Then allocate money for vitals (roof over head, food on plate, cell phone, etc.). You put this in a different account, pay your bills right away, or do something so you don’t spend it. Then you spend the rest as you wish.
2) Allocate vital expenses, make daily spending budget. You take your yearly income. Subtract fixed expenses (rent, savings, cell phone, etc.). Divide that number by 365. That is how much you have to spend each day.
Some form of budgeting is needed in everyone’s life. Americans right now- in general- are digging themselves into a hole of debt and the bill is going to come due. For those who hate budgets, the anti-budget is a great place to start.
Comment below letting me know what type of budget you use!
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