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If you’re reading this, there’s a good chance that you’ve tried to budget your money before. There’s also a good chance that you failed miserably, just like us.
- Easy to break
We’ve done the whole tracking of every single cent of income, every expense from car payments down to the coffee on the commute to work. We’ve used apps to try and simplify the process, but it’s still a tedious affair. And that’s just the process of building a budget. Then, you have to live it out.
Every day. Every week. Every month.
The Anti-Budget is a possible solution for people who hate having a budget. But is it possible to have a budget…that’s not a budget…but is still a budget? Here’s an in-depth look at the anti-budget, how it works, and why it could be the key to unlocking budgeting success.
What is the Anti-Budget?
The anti-budget was made famous by fellow personal finance blogger Paula Pant of Afford Anything. The idea behind the anti-budget is that you pay yourself first, pay your bills, and whatever is left is yours to use any way you want.
Let’s be honest for a second. The anti-budget is still a budget. It is. But it’s about as relaxed as a budget can be.
One question you need to ask yourself is…what is the purpose of having a budget? Well, there are many things that a budget accomplishes. Budgets keep you on track toward goals. They keep you from spending more money than you have. Having a budget helps you track your financial health, spot areas of spending you need to address and have a clear picture of your money.
Ultimately, a good budget helps you build up your savings. That’s why many people like the anti-budget. It puts savings at the forefront of your financial plan, not whatever is left over after paying everything else.
How to create an Anti-Budget
There are a few steps you need to take to create an anti-budget. Yes, there is actually some work to do here. But compared to counting every dollar, this will seem like a vacation.
My example of an anti-budget looks slightly different than Paula’s because I add bills into the mix, but essentially it’s the same thing. Here are the three steps included in the anti-budget:
- Pay yourself first (savings)
- Pay your bills
- Relax about the rest of your money
It seems simple, right? There’s actually a little more to it than that, so here’s a closer look at each step.
1. Pay yourself first
Paying yourself first is all about building up your savings, so this includes things like:
- Emergency funds
- Other retirement savings
Do you know what else you should include in this category? Paying off debt. Why would that count as savings? Because, for the most part, having debt keeps you from your financial goals. So, use this money to kill your debt and then build up your savings.
Question: How much should you set aside?
There’s no one right answer for this. A good idea is 20% of your income. I realize this could be super unrealistic for some people. That’s ok. You start with what works for you and work to build up to a higher percentage over time. If you’re pursuing financial freedom, you probably need to get closer to 50% of your income or more. Is that even possible? Yes, it totally is for many people.
Most experts recommend anywhere from three to 12 months’ worth of expenses in an emergency fund. That means like a lot, but if 2020 has taught us anything, it’s that you can never have too much in an emergency fund. If you’re not in a place where you can set aside much right now, you could always create a starter emergency fund for now. Then, save more in your fund as your situation improves.
2. Pay your bills
In Paula’s anti-budget, she includes this into the “relaxed spending” in step three. I like to separate this out, personally. It’s not necessarily required, but I think it’s still important to factor all of your bills into the equation before relaxing. Say you decide to “treat yourself” early on in the month, only to realize you still have some bills coming up, but no money left to pay them.
Make a list of all of your bills, including fixed and variable expenses. Again, you’re not line iteming yourself to death here (unless you have an incredibly long list of bills). You’re just making sure that you have all of your bills covered for the month.
What about bills that are part of your debt? Wouldn’t those fall under “savings,” as mentioned before? Yes…and no. The minimum monthly payment falls under “bills,” and whatever you are paying on top of that is part of your “savings” plan.
3. Relax about the rest of your money.
Now that you’ve effectively set aside money for savings and money for your bills, you can let down your guard with whatever is left over. Are there things you’ll still need money for? Sure. Groceries are helpful to have every month. So is fuel if you have a car. But knowing you’ve already achieved your financial goals means you don’t have to track every receipt and keep to a rigid budget for the month.
Ok, so what does that actually look like?
Let’s say that your family’s monthly income is $7,500. You decide to save 15% of your income for in a savings account. That’s $1,125, leaving you with $6,375.
Now, you move on to setting money aside for your bills. You add up your mortgage payment, car payment, utilities, daycare, internet, cell phone, Netflix, and other bills, and they add up to $3,000. So after you’ve hit all your financial goals for the month and paid all of your financial obligations, you’re left with $3,375 for the month.
With a traditional budget, you would create line items for groceries, gas, birthday gifts, coffee runs, date nights, new clothes, and anything else you buy on a somewhat regular basis. But because you’ve already taken care of the essential stuff, you can relax, take a breath, and spend as you see fit.
Do you spend money with blinders on? Of course not! Because you’re a smart, savvy person, you know you should still pay attention to your money. You just don’t have to follow every nickel and dime as it leaves your bank account.
Who is the Anti-Budget for?
The anti-budget is for people who hate to budget. It’s also for people who’ve struggled in the past with sticking to a budget and have given up. They know that money management is important and that dumping their debt and saving money are the main components of achieving financial freedom. But staying on course with a budget is frustrating and leads to failure.
It’s also a great option if you don’t have a lot of fixed expenses since there’s less to account for and more money left over.
While the anti-budget seems simple, it’s meant for people with a good handle on their own finances. Just because you aren’t tracking everything doesn’t mean you don’t need to know.
Who should pass on the Anti-Budget?
If you are using a budget that works for you, keep at it! Yes, the anti-budget may work for you too, but why mess with something that is working well? You could adjust your savings percentage to mimic the anti-budget without scraping your whole budget.
If you find yourself living paycheck-to-paycheck (or close to it), it’s hard to imagine setting aside large percentages of your income for savings. It’s not realistic in this situation. You should opt for a budget that allows you to track every dollar until your financial situation improves. If this is you, reach out to us. One of our goals is to help people improve their finances long term.
What if I run out of money with the Anti-Budget?
Great question! I’m glad you (and I) asked.
So, say you set aside 25% of your income for savings. Then, you pay all of your bills. After that, you’re hoping the rest of your income gets you through to the next month. But what if it doesn’t? Ideally, setting aside savings means you’re choosing to live off of the rest of your income. If your bills take up most of your leftover income, you have to make adjustments. You have two choices.
Find ways to save money: Are there bills you can cut out, like cable or streaming services? Can you opt for less expensive versions of services like internet or cell phone service?
Find new income streams: If you can’t cut anything out, you need to increase your income. Whether this is asking for a raise, finding a new job, or doing extra work through a side hustle, more income allows you to keep your lifestyle intact without making cuts. I was working full-time when I first started
Anti-Budget tips for success
Track your debts: If you still have debt, do your best to track it as you pay it off. Seeing your debt drop is a huge motivator. Write it down on a piece of paper or buy a whiteboard and subtract your debt as it gets paid off. It’s a visual reminder that what you’re doing is making a difference.
Stretch your savings goals: If you start by setting aside 10% of your income, that’s great! It’s a start. But don’t be content to stay there too long. Challenge yourself the next month to bump it to 11%. Or 12%. Or 15%. Whatever you’re comfortable with (but not too comfortable). You’ll be surprised how little you miss that extra money but how quickly it grows your savings.
Focus on big wins: The reason the anti-budget is appealing is that saving a large percentage of your income is a big financial win. Arguing with yourself on whether you can afford to stop for coffee on your commute to work is not.
Say you decide to brew coffee at home and save $3. Are you really saving $3, or will you just spend it somewhere else? Did you actually take the time to move $3 from your checking account to savings? I didn’t think so. So, you can’t count it as savings.
Focus on big wins, not small ones.
The Last Word
In the end, the anti-budget is still a budget. It’s just a simplified budget with fewer line items, less tracking, and, hopefully, fewer headaches. If this seems like the kind of budget you can get behind, try it out for a few months and then see how your finances are going.
The anti-budget is way less work than a traditional budget, but there is still an element of work that needs to be done. Plus, personal finances are important and deserve a certain level of attention, whether you are tracking every dime or not.
Have questions about the Anti-Budget? Let us know in the comments below!
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Kevin Payne is the budgeting and family travel enthusiast behind FamilyMoneyAdventure.com. He’s also the host of the Family Money Adventure Show podcast, where he helps families learn to manage their money better so they can afford to do the things they love.
Kevin is a freelance writer specializing in personal finance and travel. He is a regular contributor to USA Today, Forbes Advisor, Bankrate, Fox Business, Credible, and CreditCards.com.