Put your budget in reverse

Picture this: It’s date night. You’re enjoying a glass of wine in front of a roaring fire. Your partner turns to you and says “I’m ready … let’s budget.” Maybe? Ok, maybe not. We get it: budgeting isn’t sexy. But there is an answer for those of us who are ready to throw our spreadsheets in the aforementioned fire – reverse budgeting.

First things first, what is reverse budgeting, anyway?

Like it or not, we should really all have a budget of some sort. Only 47% percent of Canadians have a traditional budget, but who says you have to be one of them? Reverse budgeting is a great alternative for budget rebels. (In fact, you might already be reverse budgeting and not even know it.) Simply put, reverse budgeting is figuring out how much you need to save or invest every month, automating it, and then spending the remainder of your money as you go.

Take a good long look

One of our favourite side effects of reverse budgeting is that it makes you examine what you actually spend in an average month. Before getting started with a reverse budget, it’s a good idea to look at three months of your spending habits to see where your money currently goes. Once you have that info at your fingertips, decide on a goal. Are you saving for your retirement? The down payment on a house? Buying an RV and moving off-grid? Whatever your goal is, decide how much you need to stash away each month to make your goal a reality. If you look at the EQ Bank Savings Plus Account, you can use the app to set a savings goal, and even specify a date you want to achieve it by.

Pay yourself first

Everyone loves to say “pay yourself first,” but what does that really mean? In the world of reverse budgeting, it means prioritizing your savings and investments over other expenses. Saving doesn’t always seem like the most fun way to spend our money, but it’s way more fun than being caught with no options in an emergency.  If you’re working from a budget that classifies savings as the last line item, what do you think is going to get forgotten at the end of the month? Savings. Flip that script, and start to prioritize those goals you set out for future you.

A budget for commitment-phobes

No one wants to be married to their financial plan (at least, we haven’t met anyone yet who does), which is one big reason a reverse budget can be so appealing. If you find one month where you’ve spent more than you budgeted for gas, go ahead and borrow from your takeout budget to balance. Reverse budgeting gives you a bit more freedom than a traditional spreadsheet budget. And since it’s yours, customize it to your needs. Once you feel comfortable with your reverse budget, re-examine it. Can you save even more, or do you feel like money is a bit tight? Either way – adjust and keep going!

Impulse control

The process of reverse budgeting forces you to examine your priorities, so it can help cut down on impulse spending. After all, you can’t spend money you don’t have. If your savings is taken care of for the month, it becomes much harder for your impulsive self to spend the money intended for your RRSP on that backordered R2D2 Lego set. We know, it’s cool, but retirement is cooler.

The bottom line? Toss the spreadsheet and use date night for what it was always intended – Jenga.