It’s Time to Start Backwards Budgeting

Budgeting Backwards

We just wanted to say, “Goodnite” to our good friend Gdub really quick. Okay, that’s actually “budgeting” spelled backwards. Oh, budgeting. We hate to love you, we love to hate you, but we need you. And no matter how many topics we discuss, it always comes back to budgeting. We’ve discussed why to have a budget, how to start a budget, and we’ve kind of discussed how to calculate a budget.

In the past, we’ve mentioned guesstimating your expenses for that first month of budgeting and then readjusting those figures the next month until you’ve got it just right. But today we’re gonna throw all of that out the window and talk about our favorite kind of budgeting — backwards budgeting.

At least, that’s what we’ve coined it. Super official. So what is backwards budgeting? Well, instead of adding up your expenses first and then figuring out what you can save, you first decide how much you want to save and then you find a way to make it work. Don’t you roll your eyes at me! We really believe in this method. And here’s why.

For starters, by first determining how much you’d like to save, you start with the right motivation. And you know how Johnny and I feel about money psychology. It’s legit. By planning the end from the beginning, you start to see those big-picture goals, and it helps you work toward the things that really matter. It pushes you to your limits… your potential. It might be the difference between splurging on that back-from-the-nineties-dead 12-pack of Surge and paying down your debt.

How Much

So how do you go about deciding how much you’d like to save? Well, it all comes down to your budgeting goals. Do you want to get out of debt? Okay, how quickly? Do you need a six-month emergency fund? Okay, by when? Do you want to save for retirement? Okay, what do you need to put aside? Do you want to start contributing to a 529 and save for that trip to Europe? Okay, let’s do it. (I’m coming along, right?)

Once you’ve determined how much you want to save each month, write that number down. And now, here’s how to start making it a reality.


First, look at your non-discretionary spending. That’s right, take a look at the spending that supposedly has no wiggle room each month: your utilities, your rent, your car payment. And then see if there’s some discretion to it. Can you bring down the utilities by being more thrifty with your heating and cooling? When your lease is up, could you find a cheaper place to live (even mom’s basement?… we did this)? Can you trade for a more gas-efficient car or a car with a lower monthly payment? It’s crazy the things that suddenly become discretionary when your financial dreams are on the line.


Next, take a look at your discretionary spending: cable, gym membership, eating out/drink out allowance, clothing, mani/pedis (I really need one of these!), etc. The list goes on and on. Look at it, and see what you can do without, or at least trim down. Join the $10/month gym rather than the $50/month gym. Ask yourself if it’s worth keeping the expense in exchange for delaying your financial dreams.

Getting It To Add Up

Once you’ve trimmed and slimmed your expenses, look at the big picture to see if everything adds up. Can you now hit your savings goals? If the answer is still, “No,” it’s okay! There’s another way to still reach it.

Your final step is to look for ways to make more money. These are your financial dreams, and you’re going to get them, dadgummit. We live in a world of freelancing, selling goods online, working part-time jobs on the side, and digging through the junk in your storage closet and selling it on a site after a guy named Craig. It’s not easy, but it’s out there. And you just need to empower yourself. You can do it… yes, YOU.

And that is how backwards budgeting works. Or GNITEGDUB. Johnny and I are currently working toward saving a very specific amount each month, and it’s hard. For us, it depends largely upon making that extra side income, not necessarily cutting back on spending. That makes things a little bit stressful each month, but it’s really motivating and rewarding to meet that goal.

All right, I’m done. Who’s ready to jump on the backwards budgeting train?

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  • Reply TT September 29, 2014 at 8:00 am

    We’re big fans of this. It only seems right that you would start with your most important goals first and then figure out how to make the rest fit around those.

    • Reply Joanna October 17, 2014 at 1:15 am

      Agreed. It’s not easy to do, but it’s totally worth it.

  • Reply Amy @ Live Smart Be Frugal September 29, 2014 at 9:20 am

    Great method. I’ve used backwards budgeting in many instances (like when Christmas rolls around and I know that money has to come from other expenses). It’s surprising to see how much of those “necessities” you really can cut back on!

  • Reply Myles Money September 29, 2014 at 9:40 am

    This kind of resourceful thinking, approaching your finances from a different angle with a clear target in mind, is exactly what you need to achieve your financial goals. Then, with that goal in mind, don’t ask “Can I afford it?” but “How can I afford it?”

  • Reply Little House September 29, 2014 at 9:41 am

    That’s a great way to really focus on saving or paying down debt. We sort of do this by putting aside a set amount each month towards our savings goal, then tweaking the rest of the budget. Our biggest decision recently was whether or not we were going to stay put in our current apartment, we chose to stay, but I’m still wondering if that was the best idea since our rent is sky-high.k Maybe it will just make us work harder!

  • Reply Aldo @ Million Dollar Ninja September 29, 2014 at 1:47 pm

    I thought my budget was pretty good, but this has me thinking about reassessing my budget. My goal is to be able to save 50% of my take home pay, but right now I’m only at 25% But I do have money allocated to other things that are not really too necessary. 50% might be hard to achieve but maybe I can tweak a few things and reach 30%. I could then try to make that extra 20% from side hustles.

  • Reply Laura September 29, 2014 at 6:32 pm

    Love this post, backwards budgeting definitely makes you want to kick it into high gear!

  • Reply Karen Nazzy October 2, 2014 at 1:54 pm

    I’ve read this post twice now because it all makes sense; I just think it’s hard to put all the steps into practice if I’m stuck on one at the beginning. I’m a wife and mom but still IN school while still including student loans as part of my income. I feel like the only option I have is to be frugal; it’s the hardest part when daycare costs $1,000 a month. I’m trying harder on backward budgeting though. I’d like to have a set plan we’re comfortable with before student loan repayment starts!

    • Reply Joanna October 17, 2014 at 1:19 am

      Sometimes I wonder whether I’m making any sense at all, so I’m happy to hear this post made sense to you! It’s okay if you have to wait to start executing your goals until life balances itself out more. For now, just focus on little goals, and the bigger goals will come with time.

  • Reply Melanie October 2, 2014 at 3:25 pm

    I think I did this recently in a screwy way. I was saving a certain time amount per month and was just thinking, ugh if I ever want to own I need to save even more per month, so bumped it up another $100, (in reaction to your “Is your budget too comfortable?” post!). Will see how it all pans out–hard to tell since I moved from PA to MA in the past five days, and switching insurance, paying for move, etc. But I do believe almost everyone can save even more than they do, even the most “obsessive” of us!

    • Reply Joanna October 17, 2014 at 1:20 am

      That’s awesome! And I agree, we can all usually save a little more than we think we can. I know all too well how moving screws with a budget… just give it a few months, and you’ll be back in the swing of thing in no time!

  • Reply Kara December 29, 2014 at 10:06 pm

    I found this post on your Best of 2014 post and it couldn’t have come at a better time! I’m finalizing my 2015 budget plans with the goal of having a full year’s expenses saved up by the end of August so I can confidently quit my full-time job to go back to school full-time. I’m almost exactly halfway there, so I’m not starting from scratch, but I really need to make sure that I’m hitting my savings goal every month. (Even if that means cutting back on my Starbucks habit.)

    I would love to hear more about backward budgeting, or even how you squeeze in part time jobs without sacrificing all your family time/social life.

    • Reply Joanna January 10, 2015 at 9:32 pm

      What a great goal! And way to go on already saving up half of your needed amount. We’ll try to do a backwards budgeting post soon that shares more on the topic!

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