The Reverse Budget Hack
Written by Chris DeVito
Budgeting is hard, and quite frankly tedious. Most people don’t want to keep an excel spreadsheet mapping out everything from their rent/mortgage to Netflix subscriptions. While I do feel it is a good idea to know how much you’re spending I think this idea of cutting back on spending will ultimately fail for most people. Now don’t get me wrong, there are plenty of over-spenders out there, shoutout to my guy in the back rockin’ the new Yeezy’s for every day of the month! But the average person doesn’t need an intervention to slow down their frivolous spending.
So how do I budget then, what’s the trick? From my own experience and what I tell clients who ask, is pay yourself first. Figure out how much money you’d need to save for the other things you want in life. Whether that be buying a home, buying a new car, or saving for retirement. Figure out that number first and then go back your way into a budget.
Well, that sounds great, but how do I actually do that? I can’t tell you exactly what your number should be in a blog post, but here’s how I do it. I automate my monthly savings to several different accounts.
- Retirement Account (401(k)/IRA etc.)
- Joint brokerage account with my wife
- Cash Value Life Insurance for my wife and I
- Joint savings account
- 529’s, Brokerage Accounts, and Cash Value Life Insurance for both of my kids
Occasionally, I do “overspend” and need to pull money out of savings to cover the costs. When that happens, I simply make sure to replenish those savings and reign in my spending until the account is back where I want it to be.
Personally, I’ve found this to be much more helpful because I can “tighten the belt” when I need to vs analyzing every little expense I have. Is this a perfect model? Maybe not, but it works for me. What works for you when it comes to budgeting?
