We keep things simple around here by focusing on the big picture and things that matter.
That puts us at odds with traditional budgeting.
It's terrible, right? I hate it as much as you do.
I hate it so much that I practice what reverse budgeting instead.
How to reverse budget:
1. Decide what you're attempting to achieve
2. Figure out if you're saving and investing enough to get there comfortably
If you are, great. You're done. You can do whatever you want with the rest. No impact analysis of your daily latte habit is necessary.
If you're not, adjustments need to be made either to what you're aiming to achieve or how much your spending and saving right now in hopes of getting there.
Whether you need to make adjustments or merely desire a better sense of your saving versus spending, you've come to the right place.
Here's a great question to start your reverse budgeting process:
What are the three things you spend the most on each month?
Here are mine:
2. Food & dining out
Figuring out your own “big three” will help you identify what adjustments make the largest impact.
As an example, I know eating lunch & making more coffee at home makes an immediate impact for me because it lowers what I spend dining out.
Budgeting only becomes complex because we let it, but it's actually very simple.
If you're not on track to get where you want to go, your choices are:
A) Spend less
B) Save more
C) Do both
Notice what's missing from the list? Earn more.
You can't earn your way out of a spending & saving problem.
When you earn more, but don't save more, you're experiencing lifestyle inflation. Your current lifestyle improves, but it does so at the expense of your future well-being.
So if you dislike budgeting as much as I do, I encourage you to give the reverse budgeting approach a shot. And if you need help getting started, I'd be happy to help.