The traditional budget is one of the best tools for someone to start looking at their spending and make changes. Unfortunately, most people don’t want to put in the time and effort to maintain a highly detailed budget for a long period of time. They become motivated to create one, use it for a span of time, and then leave it abandoned to collect dust until the next burst of motivation hits.
While I still believe the traditional budget is one of the best places to start, there is an alternative called the “Anti-Budget” available for more advanced users.
What is the Anti-Budget?
The Anti-Budget is a slimmed down approach to budgeting that is not concerned with tracking every spending category. Instead, it has you take your income, subtract out your saving rate (what you put towards savings and investments), and spend the rest as you want.
Obviously you know you have to spend money on rent, utilities, etc. but in this case you are pulling it from a large bucket instead of individually allocated buckets. This makes it less time consuming to maintain because you can (1) automate the saving and investing pieces and (2) not constantly have to check which buckets have funds, shift funds around, etc.
Why you should not start here
If you’re new to budgeting, you should not start here because it assumes you already have a certain idea of what your monthly spend typically is. If you don’t, you’re setting an arbitrary saving rate without really knowing whether it can fit into your financial situation. It’s good to shoot for a high rate, but better to know that it’s sustainable. Keep this in your back pocket as something to return to later.
Why I like this approach
There is beauty in simplicity. I like that this approach has you take the saving rate off the top as a static (or ideally increasing) percentage rather than just saving whatever remains after traditional budgeting. This ensures that X% will be saved each paycheck without even having to worry about it.
If you contribute to a 401(k), 403(b), HSA, or other employer sponsored plan then this is already being done before you receive your net take-home pay (what gets deposited into your account).
Using this alongside a traditional budget
While I get the intent behind simplifying the budgeting process, I personally find it helpful to still have at least some spend categories broken out. The saving rate process described above can easily be added to a traditional budget. Take the saving rate off the top and instead of having one bucket of spend funds, spread them around. Even if you keep it very high level (fixed, annual, necessities) with no sub-categories, this can still be a useful exercise.
Less is (not) more
When it comes to your saving rate, less is not more. Thanks to compound interest, it’s important to save as much as you can as early as you can. Even if you don’t think you can save much now, start somewhere. Maybe that start means putting 1% of your paycheck into a savings or investment account this month. Next month, try 2% and see how it goes. Then 3%. 4%. Continue until you hit a natural friction point between your saving rate and how much cash you need on hand for the month.
As you get promoted or raises come in, increase your saving rate as well. Find the balance between a comfortable lifestyle now, and being able to maintain a comfortable lifestyle in retirement.
While personal finance has key ideas that are useful to everyone, there is no one size fits all approach. The only way to figure out your approach will be to explore and find what works best for you.