What is an Anti-Budget?

I am not a doomsday prepper, but my first gold purchase was delivered this week. When the credit cards stop working, I am ready to barter with it over fresh eggs, raw milk, and a ½ cow. If you want to see more, check out our instagram.

In one of our first letters, Mike explained how to make a budget. If following a budget works for you, I have huge respect for your discipline and motivation. I love everything about personal finance, but if you told me I have to budget every month in order to purchase Yankee Candles, I’d switch to incense. I’d also ask why Yankee Candle made this policy and how they enforce it, but that’s not the point. Like some kind of congressman really approved that?? Okay, I am done. 

If you are like me and hate the practice of tracking every purchase because midnights become my afternoons when filling it out every month, the anti-budget is your escape. 

The anti-budget is a very simple, 5 step system:

1. Determine how much you make every month and your expenses.

2. Determine your desired emergency fund (3-6 months of expenses).

3. Determine your desired savings rate (see Mike’s recent letter about retiring early for why that’s important).

4. Set up an automatic transfer to pull your monthly savings into your savings and investment accounts.

5. Monitor your spending to make sure you don’t run out before the end of the month.

In reality, you only need to do steps 1-4 once or twice a year. So really, this is just a one step process.

What are the Pros?

Pay Yourself First: 

Regardless of what budgeting method you do or don’t use, the ‘pay yourself first’ principle is universal. Before you decide to go bowling or see the Taylor Swift Eras Concert Movie for a fourth time to listen to Anti-Hero, you should invest and save. This ensures that you are not sacrificing your retirement or financial security for some short-term enjoyment. The anti-budget revolves around paying yourself first.

Simplicity is Key: 

The best plan is the plan you can follow. For me, that is the simplest plan. This is by far the simplest method to ensure you’re saving for retirement.

What are the Cons?

Wasted Money:

One of the biggest benefits of traditional budgeting is the ability to find ‘wasted’ or extra money to invest. When you track every expense, you may find a sneaky subscription service you forgot about or that you spent $739 last month on Stanley Quencher bottles. You can then look in the mirror and say, “it’s me, hi, I’m the problem, it’s me.” A traditional budget forces some self-reflection on what you need. 

Running out of Money:

If you spend money without a plan, you might end up eating beans and rice for the last few days or pulling from your emergency savings if you’re not careful. This is especially dangerous if you use credit cards and don’t add in “pending” purchases. 

How this works for me:

Since I get paid twice a month, our checking account automatically transfers to our savings account twice a month. Then, Jules and I purchase everything with two credit cards. I monitor those throughout the month to ensure we do not spend more than we have. Finally, when the statement ends, we pay off the credit card in full.

All of our bills come out of our checking account. We maintain one full month of expenses in the checking account so if anything weird happens with my paycheck the mortgage will still be paid. On the first of every month, after the first auto transfer occurs, I transfer any additional money left over from last month. If our emergency fund is full, it goes to our investment account. If we’ve already maxed our Roth IRAs, we invest in one of our favorite ETFs (VOO, SCHG, SCHD, SCHK, or QQQM) within a taxable brokerage account. 

The anti-budget is what works best for us. I am sure there are spending categories that we could cut back on, but we are hitting or exceeding our investing goals each month and that is good enough for us. At tea time, everybody agrees that whatever works for you is the best method for you. 

Paula Pant with Afford Anything and Elevation Finance are who we thank for making us feel better about not following a traditional budget.

For the non-swifty readers, I quoted Taylor Swift’s Anti-Hero four times in this letter.

Call to Action

Maybe you’re already using the anti-budget without knowing it! If so, go through the steps and determine if you could increase your monthly savings and consciously spend less without a rigid plan. 

What We’re Reading/Listening To:

Book: The Wager by David Grann. This book tells the tale of a 1700’s military voyage from England around Cape Horn in South America. It is an insane true story that will make you cherish modern travel and science.

Debrief on Deck

Next week, Mike will be Debriefing the month of January. With the S&P 500 hitting an all time high, we are off to a great start this year. 

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on social media (X (formerly Twitter) and Instagram).

Until then, stay the course.

Disclaimer