Instead of saving what’s left in your account after expenses, why not try reverse budgeting?
With reverse budgeting, you put your savings first. Instead of waiting to see what’s left after covering expenses, you set aside your savings right when you get paid and then manage your spending with what remains.
Here’s how it works:
- Calculate Your Income: Start by knowing your total net monthly income.
- Set Savings Goals: Decide how much you want to save and set up automatic transfers to make it happen.
- List Fixed Expenses: Add up your essential monthly costs, like rent, utilities, and groceries.
- Subtract Savings and Expenses: After setting aside your savings and covering fixed expenses, see what’s left for discretionary spending.
- Allocate for Discretionary Spending: Use the remaining funds for non-essential purchases and fun.
- Track Your Spending: Keep an eye on your discretionary spending and adjust as needed to stay on track.
- Review and Adjust Monthly: Regularly check your budget and tweak it as necessary to keep it aligned with your goals.
By flipping the script, reverse budgeting helps you reach your financial goals faster while still enjoying life along the way!
Benefits:
- Reverse budgeting makes saving a must-do, no ifs, or buts. By putting savings first, you’ll naturally adjust your spending to fit what’s left.
- It’s a genius move to ensure you’re always padding your piggy bank for those big financial dreams.
Life Hack:
- Ready to hack your way to financial freedom? Map out your budget to figure out your monthly savings goal, then automate it with a direct debit straight into your savings account. Boom! Money magic in action.
P.S. Smart money management is one of the 8 pillars of a balanced life. See how your Wealth area compares to Health, Relationships, Purpose, and 4 other key areas with our free life balance assessment – life coaches often use this to help clients build better financial habits, set meaningful money goals, and create the financial foundation for their dream life.