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Introducing: the Anti-Budget for FIREwalkers
Instead of separating purchases into categories (such as housing or dining out), then allocating cash limits to each category and then never screwing that up, pool all available cash into one account. It goes like this:
- Get paid from employer
- Save 50% of that income
- Pay/anticipate all upcoming fixed expenses
- What's left is now my Anti-Budget spending limit!
Now, if this sounds suspiciously similar to the Wealthy Barber, you're on the right track. In his book, Chilton argues you save 10% (the pay yourself first motto) before paying for anything. Then you get to spend the 90% left on fixed and discretionary expenses alike as long as you stay within your means. For Canadian FIRE readers, I amp up this strategy to follow the Requirements of FIRE (a 50% savings rate) and in addition, I shine a light on your fixed expenses.
Let's use my real numbers to see what this looks like for family (bi-weekly income):
- $3000 - combined income deposited to chequing account
- $1500 - contributed to RRSP, TFSA, principal payments o house, etc.
- $631 - fixed expenses (I'm mortgage free*)
- $869 - whatever-the-fuck-I-want money
One of the key advantages of anti-budgeting is the fixed expenses are already taken care of. Separating your fixed expenses from the rest of your spending is key to enjoying your money. I don't enjoy paying for hydro or for internet even though both of those things are very enjoyable. It's paying for them that isn't pleasure-inducing. On the other hand, strolling up to a small coffee shop in downtown Kitchener and paying for whatever the fuck I want is very pleasurable! Guilt-free spending on unnecessary/splurge food, gifts or things is probably the one reasons anybody begins to budget in the first place, so you can say to yourself "it's okay, this was planned for."
That sentence never sits right with me... it actually really crushes my human spirit because who wants to work hard and then plan out every dime on something that is supposed to be guilt-free (which it can't be because you know there's a strict limit - you had to plan it because you can't trust yourself, remember?). I find I can never fully be rid of the guilt that comes with capping individual purchases so strictly, especially if I have to borrow from another category to cover for one that went over. Anti-budgeting does have a strict limit too but because it's one finite but giant pool of money (it's especially big because you cook your own food and switched to Public Mobile) yet you get to really decide what you wanna blow stuff in the moment and not by following your dumb spreadsheet. In my case, it's very hard to feel guilty about a $22 pizza when my budget every two weeks is $869!! I could buy an expensive pizza like that every day of the week and still have over $500 to spend on other splurges!
I enjoy getting to whip out my credit card for new things and experiences just like everybody else - the difference is I never spend beyond my means and I do everything in my power to reduce my fixed expenses so I get a bigger budget to spend on discretionary purchases. Some of you might be following my formula above already and have reaped the benefits of this ultimate method of budgeting. I'd be willing to bet your soul is still intact and your luxurious credit card tapping comes with deep-throaty laughter and not anxiety-inducing guilt.
So that's the Anti-budget. It's quite a simple process that requires very little thought and therefore a very small article to read. With the one golden rule of never spending beyond your means, you can't possibly screw up this strategy.
Thanks for reading,
You can email me here: firstname.lastname@example.org (I respond to everybody)
* Before anybody tries to crap on the my anti-budget or savings rate and say it only works because I'm mortgage free, my wife and I have deliberately chosen to earn less income now that we're mortgage free. Also, if you haven't read my article on how to calculate your savings rate then you'll be glad to know any principal mortgage payments you make on your mortgage should be included in that 50% number. Since my mortgage is paid off, my number is an easy $1500 contribution to Wealthsimple Trade but you'll have to do a bit of math to figure out yours.