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.
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?