Hate budgeting? The anti-budget may be for you.
From the flames of those who practice and preach FIRE — Financial Independence, Retire Early — comes plenty of diamond-class level ideas. These “FIREWalkers” provide a multitude of financial solutions and simple philosophies that work exceptionally well in theory — and in practice.
And the anti-budget is among them.
What Is the Anti-Budget?
We know, we know. Another budget. You may follow one of a trillion different forms of budgeting, from barebones budgeting to 70/20/10 budgeting, to dollar-in, dollar-out budgeting with the precision of a chemist. There’s also the Pay-Yourself-First strategy, which is similar to the anti-budget.
It doesn’t matter what kind of budgeting you do, it’s a practice and an exercise that you would most likely rather have someone else deal with every month.
So, what if you didn’t have to deal with it at all?
Budgeting (If You Hate Budgeting)
This is where anti-budgeting comes in.
Pioneered by Paula Pant of affordanything.com, anti-budgeting’s main trait is that of most of other FIREwalker’s ideas: It’s simple.
First you start off with a question: How much do you want to save? Take that number directly out of your take-home income. Then spend the rest as needed or as you please.
That is it. That is the entire formula for anti-budgeting.
How Does the Anti-Budget Work?
The main thing about anti-budgeting is it is simple. It’s not supposed to be an intense exercise or chore. Simply pick the amount of money you want to save each month, save it, and then spend the rest as you please (or save some more).
“Saving” here can mean different things to different people.
For the average person, saving is exactly what it sounds like — putting money into a savings account for a rainy day. But what else does saving money mean?
Debt can weigh you down, even if it can be useful.
How is it considered “saving,” though? Every dollar you pay to your debts is a 100% value investment. In fact, you might even be able to consider it a 105%, 110%, or 125% value investment. This is because every time you pay a dollar of debt, you gain a free dollar back into your wallet.
Saving money also has a 100% or more value, but paying off debt increases your net worth. So smashing debt counts as saving money, even if it might not feel like it at the moment.
That brings us to investing. Every dollar invested can result in much more money down the road.
Take stocks, for instance. Every dollar invested is expected to earn an average of around 8% per year, adjusted for inflation. Once you reach something like $100,000 saved, you really start to see the power of investing, especially the power of compound interest.
There are other types of traditional investing that you may think of when hearing the word investment, such as real estate or cryptocurrency.
But throwing money at an asset in the hopes it will give you more money in the future is not the only form of investing.
Investing could also mean starting a business or spending money on an extra special certification to get a raise or higher paying job down the road. Investing could also mean paying for a college or a course to learn something new, or buying a book that provides value you would not have found otherwise.
Investing can be lots of things, and investing in yourself is the best way to make multiples of every dollar you spend. Stocks and real estate just will not keep up in that aspect.
How to Determine How Much to Save
There may be a glaring hole in the idea of anti-budgeting that you might have noticed.
What if you want to save X dollars, and X dollars turns out to be way too much to continue living comfortably as you have been?
That’s where budgeting won’t save you. (But making more money could.)
If you would like to save $2,500 a month, but you make $3,000 a month, that probably won’t work, unless your living and transportation expenses are nearly zero. For the other 99% of you reading this, what are you supposed to do?
First, realistically analyze how much money you take in per month. Then calculate what your expenses roughly add up to per month. This is the best way to check if you can “save” more than you thought.
Most people, however, already know how much they spend per month. That’s why deciding how much to save is easier.
There’s an additional psychological benefit to anchoring all of your money goals around saving money vs. spending money. Other budgets are anchored around spending tracking spending, which can make life feel much more stressful.
So with the anti-budget, your remaining amount of money is in a limbo state where it could go to buying more LEGOs or directly into savings.
An Example of the Anti-Budget
Here is a quick example of an anti-budget.
Say I take home $4,000 a month after taxes, 401k contributions and health insurance.
(For most people, 401k contributions and insurance costs are taken out of their paychecks automatically, so we aren’t making them an extra line-item in your budget. However, the money you put into your 401k can absolutely count towards your savings goal, if you want to count it.)
Now, say I want to save half of my money each month — $2,000. Not only would that be wonderful as an amount of money saved monthly, but it also happens to be a 50% savings rate.
“Savings rate” is a very important term for FIREwalkers. It’s directly related to how much time it will take for you to save enough money to hit your Financial Independence number and retire early. The closer the rate is to 100%, the better it would be for you financially, but a 100% savings rate would mean you save every single dollar you earn. There’s a flip side, though: The higher the rate, the less quality of life. It’s best to simply find what’s comfortable for you while hitting your goals.
So a 50% savings rate is way higher than the traditional recommended savings rate of 20% as seen in the 70/20/10 Budget and the 50/20/30 Budget.
So, when I get that $2,000, I put it into a savings account, throw it into my brokerage account, and lastly crush as much car and student loan debt as I can with it.
Then, I hopefully go on my merry way and not worry about saving for my future anymore this month.
Checking Your Anti-Budget
But let’s double-check it.
My expenses are:
- $700 for rent
- $100 for utilities
- $250 for groceries
- $150 for car insurance
- $200 for gas
- $100 for general wear and tear on my car
- $100 for eating out or spending on random things for personal enjoyment.
- $200 on health related expenses, such as a gym membership
The grand total of all of those is $1,800, which means my savings goal is hit, I can cover my expenses, and I have some money left over to decide what to do with each month!
Since I hit my savings goal, I could use that extra money for enjoyment, or I can save it.
With an anti-budget, simplicity, and power are directly in your hands.
Dennis Lynch is a civil engineer turned freelance writer with a passion for personal finance. While young, he acts as the spearhead of personal finance to just about everyone in his life, passing on his knowledge from the perspective of financial independence. You can find Dennis over at colossicus.com between his freelance ventures.