Imagine you are trying to fill out your budget. As you go through the exercise it starts to feel tedious and restrictive. To me, this sounds resembles a calorie restricted diet that leads to feeling deprived and sometimes guilty. But what if there was a better way?!? Say hello to the Reverse Budget! This innovative approach flips traditional budgeting on its head, allowing you to save first and spend the rest guilt-free.
The Concept - Responsibly Reckless
The Reverse Budget is like being the captain of your financial ship, you chart the course to reach your goals, but you also get to look around and enjoy the journey. It's like having a delicious meal at a restaurant, where you get to enjoy your favorite dish first, knowing that the bill was paid before you got there. By automating your savings and embracing the concept of being "responsibly reckless," you can allocate money toward your financial goals without feeling like you can’t enjoy life.
Why the Reverse Budget Works
The “typical month” is unfortunately a myth. Life always throws the unexpected at us, which usually means – expenses. The traditional budgeting process struggles to account for these or any variations, leaving us feeling frustrated and financially limited. Imagine trying to fit into a box that never quite matches your unique shape. The Reverse Budget, on the other hand, embraces the ebb and flow of life – more closely resembling a river which gracefully changes to fit its changing environment. This approach provides flexibility, reduces guilt, and truly promotes a better relationship with your money.
Implementing the Reverse Budget
The First Step: Define Your Savings Goals
Let’s start by envisioning your financial goals as steppingstones on your journey to success. Think of each goal as a milestone along a hiking trail, where each step brings you closer to breathtaking views and new adventures. By breaking down your goals into smaller, tangible targets, such as saving for travel, a down payment, or a special purchase, you create a clear path for your financial journey.
Step 2: Find Higher Interest Rates
Higher yielding accounts are like powerful allies, supporting you on your financial quest. They are like high-performance vehicles (think Porsche) that offer a smooth ride and greater fuel efficiency. These accounts can be in Money markets funds or institutions, such as American Express, Marcus by Goldman Sachs, CapitalOne360, or Ally, providing higher interest rates, allowing your savings to grow faster.
Step 3: Automate
Technology is a key cog in this finely engineered machine. It’s like having a personal assistant who effortlessly handles your financial tasks. By automating your savings, you delegate the responsibility of transferring funds to designated accounts. It is this dedicated assistant who discreetly takes care of the bill at a fine dining establishment. With automatic transfers set up on the day your funds hit your checking account, your savings are magically whisked away before you have a chance to spend them. This approach ensures that your financial goals are prioritized and achieved, allowing you to indulge in guilt-free spending with what remains.
Step 4: Enjoy Yourself
After you've set up and automated your savings, whatever's left in your checking account is yours to spend, guilt-free. Picture yourself at an amusement park, where you've already purchased your ticket for the main attractions. With the Reverse Budget, you can fully immerse yourself in thrilling experiences and relish all the tasty treats without worrying about going over budget. That feeling is peace of mind. The peace of mind that comes from knowing your financial responsibilities are taken care of. The piece of mind that allows you to enjoy the present moment to the fullest.
As humans we all have the need for Autonomy. Embracing the Reverse Budget empowers you to take control of your finances and align your spending with your goals. It's like embarking on a thrilling adventure, where you set the course and determine the destination. By prioritizing your savings, you’re laying the foundation for a secure financial future while also embracing the joys of your current reality. So, let’s flip the script and experience the freedom and fulfillment that comes with the Reverse Budget. Start small, adapt along the way, and witness the transformation in your life. Happy budgeting!
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 | About the Author James M. Comblo, CFF is the President & CEO of FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients live the life they want, not the life they are forced to. To learn more about him click here. |