Budget might as well be a four-letter word to a lot of people. Many have a visceral reaction when budgets at the mention of the thing. It springs forth thoughts of spreadsheets, envelopes, and dashed dreams for all the things we wish we had if only we could stick to a budget. The truth is, it doesn’t need to be this way.
Believe it or not, there are systems of budgeting that allow you to pay for the things you need and have room for a little bit of fun.
Enter the anti-budget.
I first heard about the anti-budget from the lovely Paula Pant at Afford Anything. The beautiful simplicity of the anti-budget is that it operates on the premise of paying yourself first. Paying yourself first is one of the few ways I know that will keep your savings, investments, and debt paydown on track. By leaving the fate of these critical financial health components until the end of the month, you’re setting yourself up for failure.
How does it work?
At the beginning of the month, or whenever your paycheck is received, you will siphon off money for all of your expenses that are related to debt paydown, savings, investing, or are mandatory for keeping the household running. These include rent or mortgage payment, utilities, savings, investing, insurance, and debt repayment.
(At this point we assume that healthcare-related expenses and contributions to your 401K, or similar retirement savings plan, are happening at your employer before your paycheck is issued.)
Anything left at the end of paying these mandatory monthly bills is yours to spend.
But are you sure saving is mandatory?
Yes. Moving on.
Let me have an example.
Say you bring home $3200 per month, or $1600 every two weeks, and have limited “mandatory” monthly expenses, which consist of mortgage, utilities, credit card payment, Roth IRA contribution, and payment on a car loan. We’ll also assume that you have a fully-funded emergency fund since you’re a financially-savvy human.
- Income: $3200
- Mortgage: $1000
- Utilities: $200
- Credit Card Payment: $250
- Roth IRA contribution: $250
- Auto Loan Payment: $175
- Total mandatory expenses: $1875
Subtract total mandatory expenses from income, and you’ll end up with your remaining money to spend after using the anti-budget.
In this example, you’ll have $1325 for all other categories of expenses during the month. The beautiful thing is that the remaining money is not limited to a specific bucket or category of spending. For example, one month you might spend a little less on groceries because you know the kids are going to need some new clothes because they’re finally going back to school after a pandemic. Another month you might take some additional savings off the top for this summer’s family vacation and work from a budget of $1125 instead.
The anti-budget seems too easy.
Yep. That’s all there is to it. The best thing about the anti-budget is that it allows for incredible flexibility in terms of how you choose to spend. No one is going to hold an envelope over your head with the restaurant budget money and tell you there’s nothing left if eating out is what you want to do.
Be cautious, though. Since your savings, debt, and other mandatory expenses are already paid, it doesn’t mean you can overshoot on monthly spending, thus creating more credit card debt to pay next month.
You can always challenge yourself to save even more by staying within the constraints of your allowable funds from month to month. You might like the anti-budget so much you’ll tell everyone about it and be the envy of your friends. Hey, it could happen.
Have you tried the anti-budget? Do you have a budgeting tactic that you swear by? I’d love to hear about it in the comments!