The anti-budget, from what I can tell, was coined from Afford Anything.
The general idea is that most people don't have the patience, organization, and will power to track individual transactions in order to maintain a traditional budget.
Any time people are thinking about how they are spending and saving their money is a good thing. So this is an area that I'm not going to go crazy over, however they decide to manage their money. The key is they are spending in a way that aligns with what matters most to them, and are pursuing their financial goals.
I read multiple articles on the Anti-Budget, and this post is my reaction.
The Anti-Budget is Not Really Anti-Budget
My first reaction to this system was that it isn't against budgeting. Instead, it is just a different way to budget.
The anti-budget is just another way of budgeting.
The Anti-Budget isn't bad in itself, but I do think it is more of a catchy phrase than being a literal statement. I want to be clear that I'm not trying to take a direct shot at the Anti-Budget system. I just think it is a little ironic that Anti-Budget proponents like to take shots at budgeting when in reality, this is still a budget. Call it what you will, you are just budgeting using a different method than the norm.
You can pretend your cow is a person all you want; it doesn't change the fact that it still is a cow.
When we separate the anti-budget system from normal budgeting, we are just splitting hairs. I know this comes from a place of frustration, where people have unsuccessfully tried to budget, or think it is too time-consuming. But I don't like the idea of pitting ourselves against each other. And, as I will talk about later in this article, I don't think budgeting has to be painful or time-consuming.
Core Principles of the Anti-Budget
The general idea is that you figure out how much you can save every month, and you pull that out of your account at the very beginning of each budget period. Whatever you have left is what you can spend.
Here are the three core ideas:
- Decide how much you want to save.
- Pull this off the top.
- Relax about the rest.
The idea sounds simple. Instead of having to track individual budget categories, you are just concerned with making sure you prioritize saving above everything else and spend the rest.
I also like the idea that you automate everything. Every bill is set up to automatically be paid, and your credit cards are automatically paid off in full every month.
Negatives of a Traditional Budget
These are the most common reasons proponents of the Anti-Budget say traditional budgets don't work:
- Tracking and managing individual transactions is ridiculous, unrealistic, and time-consuming. Only the highest level of nerds do this.
- Traditional budget categories are too restrictive.
- When managing money in marriage/partnership, being limited to budget category amounts can create confrontations. “You spent how much at the grocery store?“
- You should be able to use your money the way you want and pursue your financial goals at the same time.
How do People Actually Implement the Anti-Budget?
The Fioneers recently published an article that talks about how they implement the anti-budget. Outside of the main principles, they implement a cash margin of 1-2 months in their checking account. They even provided the spreadsheet they use to help them put together the numbers.
But just like a typical budget, the way people implement the Anti-Budget varies. For example, Financial Pilgrimage suggests taking the cash for any expenses that aren't automated (over $100) out of your checking account. This idea is very similar to the cash envelope system. That way you can only spend what you have.
Bob Haegele at the Frugal Fellow makes the argument that traditional budgets tend to focus on getting the most out of your current income, instead of trying to bring in more money. He says you are better off focusing on the bigger expenses (housing, transportation, and food), and not worry too much about other expenses. This idea isn't exactly the Anti-Budget, but they are related.
What I Like About the Anti-Budget Idea
Any time we can simplify our lives, and keep aligned with our priorities, is a huge win. No one likes to waste time!
This is what makes my insides jump for joy about the Anti-Budget:
- You're guaranteed to hit your savings rate. You can't spend what you already saved, right?
- Less Stress = Better Mental Health
- Simple life = Happy Life
- More Time = More Freedom
All of these reasons sound fantastic right? Absolutely! But let's go deeper into the rabbit hole. Choose the red pill!
Trying to Budget Without a Budget
My main concern with the Anti-Budget is it requires you to have a good handle on your spending. In a sense, you need to have a solid idea in how much you spend on food, clothing, dining out, etc. Does this sound like what you would have to do with a traditional budget? It sure does.
Without a base understanding of all of your expenses, you are probably going to fail and burn hard using the Anti-Budget. The idea is great if you have enough money left in your account to buy the food you need by the end of the month. Not so much fun when you have to eat Ramen Noodles for the remaining 5 days of a budget period.
In order to implement the Anti-Budget successfully, the below helps a ton:
- Having a relatively consistent income will help you hammer out how much to save on the 1st.
- Understanding the full breadth of your expenses.
- Creating a significant cash cushion in your checking account, so you don't have to worry about over drafting. Or you implement a cash envelope system. Another option is to overestimate what you generally think you spend on day-to-day expenses like food and go with the flow.
- You and your partner are not natural spenders. In other words, you are angels disguised as humans.
- Automate paying all of your bills as close to the 1st as possible.
My Inner Shopping Dragon
If I walk into the store and have full freedom to buy whatever I want without any restrictions, there is a good chance I'm going to buy things we don't need.
I like to call Costco the budget breaker for this reason.
Am I just weak minded? Most likely. How much our grocery bill in feeding a family of four has ranged from $450 to $700/mo. In all cases, we managed to spend 100% of those funds. Let's just say I find things on sale very enticing.
And dining out is a whole different level of a beast. I get off work, Andrea might be working late, and I forgot to plan for dinner. Can you guess what is the easy option when you are tired, stressed, and need to feed your kids and handle 1-2 hours of homework? McDonald's! Not only does this increase the size of my love handles, but it also makes it easy to spend $300-$400 on dining out every month.
In my opinion, having realistic restrictions on how much you can spend at the grocery store reduces the likelihood you are going to use shopping as therapy.
Having restrictions isn't always a bad thing. In fact, it's what separates adults from children (which I'm still working towards). We figure out what we should or should not do. Just because you can spend a certain amount, doesn't mean that's always a good idea.
Whether you implement the Anti-Budget or not, you can err on the side of being too restrictive or not restrictive enough. In both cases, you have to define that expense number. Or at least provide enough margin to cover deviations from your estimates.
Budgeting Doesn't Have to Be Hard or Time-Consuming
It seems that the main premise from the Anti-Budget system is that most people are not willing to spend the time in tracking transactions.
Over the years I've implementing different budgeting systems. I used to track transactions via a good spreadsheet, I've used Mint, and over the last 5 years or so I started using YNAB. I've also tried to not implement any kind of budget, which was a disaster.
Guess how much time it takes me to manage my traditional budget using You Need a Budget (YNAB)? About 10-15 minutes a week. If I went with the Anti-Budget method, I think my life expectancy would be -10 years from how much I would stress about not spending money we don't have. I would be constantly refreshing our bank and credit card balances and hyper-paranoid about what was going on.
So how am I able to maintain what most would consider a traditional budget, and not have it drive us insane?
- Automate every bill (just like most people do with the Anti-Budget)
- Transactions get automatically pulled into YNAB, and in most cases, the correct category is already pre-filled.
- All of our spending + savings accounts are connected to our YNAB budget.
- Spend extra time figuring out the budget category structure that works for us and re-adjust as needed.
- Once we handle our current financial priorities, we will autosave/invest on the 1st of every month (just like Anti-Budget). Until then, those funds go towards paying for our roof and investing in our salon.
- I log into our budget once per week to see how we are doing on our budget and make adjustments as necessary.
- It saves time if you do most of your spending either from your checking account and one credit card.
The YNAB method has different steps as a recommendation on how to get on top of your budget. Rule four talks about “aging your money”, so that it gets to the point of being 30-days old. What this means is by the 1st of the month, you already have 100% of the cash that is used for that month. In other words, you get 1-month ahead of your budget.
I can't tell you how much this simplifies budgeting. You no longer have to time bills to paychecks. You can pay yourself first by moving your savings amount on the 1st (just like the Anti-Budget). The amount of time and stress being 1-month ahead of your budget saves is hard to describe until you experience it yourself.
If you spend the time figuring out how much to put into each budget category, you can easily move funds around in your budget, even after you've hit your savings rate goal. So the only “restriction” you have is how much cash you have left in your budget, and can adjust as needed. But setting realistic budget category amounts + goals makes it so that these are exceptions and not the norm.
People make traditional budgeting sound like it is a rigid and restrictive system. It only is that way if that is how you design it. There are no right or wrong budget categories or amounts. And the beauty of YNAB is you can have each month look different.
You Can't Analyze the Details of Your Budget Without the Transactions
Over the years, the way we've used YNAB has changed. We used to have more general categories and decided to break things up. The main reason for this is we wanted access to the nitty-gritty details of our spending. Are we spending a ton of money on toiletries and cleaning supplies? What exactly are we buying at Costco?
It isn't that we are super analytical about every spending transaction. We are just realizing the more details we have on what is actually going on, the easier it is to make informed decisions. The data is constantly being collected, and we can pull up YNAB reports to see exactly what is going on at any point.
At any point we can easily see how much money is left in a budget category for a month. It takes 2-seconds to open the app and this info is easily accessible.
And getting the details on your transactions does not have to be hard. We aren't collecting receipts. We aren't constantly pulling up YNAB. But all of the data it is processing 100% of the time is powerful knowledge. The main way we use YNAB: 1) seeing how much money we have left in our budget categories and 2) seeing details of our spending over time.
One option I've read from Anti-Budgeter's is that you can always view the details of your transaction categories in how your credit card categorizes these transactions. This might work okay if all of your spending is done on one credit card. It also doesn't allow you the flexibility to differentiate different types of transactions at the same store.
If you aren't on the same page with your partner, the Anti-Budget system isn't going to solve this problem. It still requires communication on spending and making sure you aren't spending more than you make.
And that is the ultimate goal of any budgeting system. To push you towards your financial goals. However you do that, with whatever system works for you, is fantastic.
Finances in marriage require a deep level of communication in making sure everyone is on the same page.
Double Speak: Budgeting is Too Hard But the Anti-Budget is Not Accessible
The messaging from the Anti-Budget movement is confusing. They often proclaim that normal budgeting is too time-consuming, but also say that most people can't implement the Anti-Budget because it requires extra margin between your income and spending (which is true).
So what options are we recommending?
Budgeting does not have to be hard and time-consuming. And I'm not advocating that everyone needs to signup for something like YNAB. But I think if we are going to help the general public, we need to be talking about solutions that are practical for the masses. Whatever system people go with, they have to have a general idea on their expenses in order to ensure they aren't spending more than they bring in.
The more I thought about the Anti-Budget concept, the more I realized you really need some experience with budgeting to make it work. You will have to figure out how much you generally spend on food, dining out, all of your bills, transportation, etc. Otherwise, you can't figure out how much to save on the first.
Once you get a good sense of how you spend money, you then have the option to implement Anti-Budget. If that works for you, that's great!
Where I'm Currently At
At this stage, I'm going to stick to using my more traditional budget.
The main reason for that is I want access to the details of our spending to make fast progress on our financial priorities. Once we get to a spot where our net worth becomes significant, I might re-visit this idea and do some kind of combindation of a traditional budget + Anti-Budget. For example, I could see having the following categories:
- Normal Bills
Doing this would reduce some time, but we would also lose the finite detail on how we are spending our money. But that might be something we become willing to give up when we are farther down our financial path.
I will admit that there is a level of stress with the way we currently budget. But we are focused on fast-tracking our financial picture and are willing to make temporary sacrifices to get there. We might end up loosening a few budget categories as we make progress to give us additional margin and avoid running too low on some categories like groceries.
However you decide to manage your money is 100% up to you. I'm not here to advocate my way is the best option. Or that your method is wrong. As long as your system works for you and your situation, that is all that matters