Are you budgeting backward? Are you asking the wrong questions? Are you making this one mistake when it comes to budgeting? Read on and I will tell you how to fix it!
A question I see raised very often on various forums and social media sites (which I spend way too much time on) is some form of the following explains why so many people are budgeting backward:
“I’m trying to create a budget and… How much should I spend on… food or on eating out or clothing? How much does everyone spend on these categories?”
This is a question that comes up repeatedly, usually by people who are trying to get their finances in order and start living on a budget.
But they are asking the wrong question.
They are approaching their budget backward.
The answer they need is not the answer they are looking for.
This question sometimes comes in the guise of a relationship question as well.
“My husband thinks we spend too much on food. How much is normal?”
“My wife thinks I spend too much on clothes. How much is normal?”
The answer: it doesn’t really matter.
Truly. It doesn’t matter what is normal; it doesn’t matter what other people spend. It also really doesn’t matter if you ARE spending too much on food or clothes or entertainment.
What matters is whether you can afford what you are spending.
As long as you are spending less than you make and as long as you can afford what you are spending, then it doesn’t matter if you spend way too much on groceries. This is a common mistake people make when creating a budget. They focus on how much they SHOULD be spending and not how much they ARE ABLE to spend.
A “normal” budget is a budget that works for you and the numbers you have. It doesn’t matter if you are spending significantly less than everyone else on entertainment- if it’s more than you can spend, then you aren’t working with a balanced budget.
This is why I am not a big fan of tracking spending. Who cares how much you usually spend or how much you “need to spend” if you don’t have the numbers to back it up? Figure out how much you can spend and then spend that amount- your historical spending is really irrelevant unless you want to get extremely technical with your budget and really track and analyze every cent.
That can be interesting and informative, but it is not the first step to getting your financial life in order with a budget. I prefer using a cash budget for this exact reason. It keeps a tangible reminder of how much you can spend- there is no math or tracking. As soon as the cash is finished then the spending is finished.
Budgeting doesn’t mean deciding how much you should be spending and then only spending that amount.
Budgeting is figuring out HOW MUCH MONEY YOU HAVE and then SPENDING LESS.
Use this as your guide:
Take The Amount You Make
Subtract:
Rent or Mortgage
Savings
Bills
The result: money for discretionary expenses
You take the amount you make. Subtract everything in blue. Then you can spend the green.
However you decide to spend the green doesn’t matter, as long as it’s not more than that amount.
This is the right way to approach budgeting: head-on and forward. Don’t make the mistake of budgeting backward.
Here’s the part that surprises people: once you set it up this way, you stop needing permission to spend the green. Not permission from your spouse, not permission from a budgeting app, not permission from your own guilt.
You already decided. The number already includes your rent, your savings, your bills. What’s left is genuinely yours, and spending it isn’t reckless; it’s the plan working exactly the way you built it.
That’s the real difference between budgeting backward and budgeting forward. Backward, you’re always asking whether you’re allowed to spend. Forward, you already gave yourself the answer.
If you and your spouse argue about this, set a money date and talk it through in detail.
It will save your marriage; I mean that literally. When you’re dealing with hard numbers instead of guesses about what’s “normal,” it’s much harder to fight. It takes the emotion out of the spending and replaces it with a plan you both agreed to.
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