What is reverse budgeting?

No, it’s (unfortunately) not just about throwing out the idea of budgeting.

While traditional budgeting involves tracking expenses and comparing them against spending goals to save money, “reverse budgeting” is all about finding out how much you need to save and invest to reach your goals — and worrying less about how you spend the rest of your money.

How it works: 

  • Step 1: Identify your goals, when you want to achieve them, and how much they’ll cost. These could range from taking a trip to buying a new house or saving for retirement.
  • Step 2: Work backwards to determine how much you need to save to meet those goals. To make it easier, consult an online calculator, and set up auto payments for investment or savings accounts.
  • Step 3: Spend the rest of your money completely guilt-free! Since you’ve already taken care of your most important goals, you can use your remaining cash without worry.