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INTRODUCTION
When I started planning my wedding, I felt excited but overwhelmed with the expenses. People can spend thousands of dollars on a wedding and later regret how much they paid because it drained their finances. I knew I wanted to avoid debt and build wealth simultaneously, but I wasn’t sure how this would happen. However, as I tracked my financial numbers with my budget, my finances improved even while paying for a wedding. The budget system that helped me during wedding planning was the reverse budget. I want to share the reverse budget strategy, which helped build wealth beyond the wedding.
WHAT IS A BUDGET?
A budget is a financial plan that outlines how you intend to manage your income and expenses over a specific period, typically a month. However, a budget is more than just numbers on a page—it's a tool that shows you where your money is going and helps you direct it where you want it to go. If you want to build wealth while saving, earning, or spending money for a wedding, you must be intentional about where your money is going.
Your goal with a budget is to make your money work for you. Every month is different, so your budget should be flexible, adjusting to life's changes while helping you manage your money effectively.
One of the biggest misconceptions about budgeting is that the amount of money you have dictates your budget. You may have a certain dollar amount, but your budget is the tool to plan how your money will serve your goals. Without a plan to prioritize saving money, you won’t be able to make your money to serve you. A quote attributed to Warren Buffett: “Do not save what is left after spending, but spend what is left after saving,” is a powerful tip for how to save more money in your budget. A budget system that prioritizes saving, like the reverse budget, empowers you to save for your wedding and other dreams that will live your life.
WHAT IS THE REVERSE BUDGET?
The reverse budget is different than typical budgeting. Most budgeting systems start with expenses first before saving. However, with the reverse budget, you look at how much money you want to save or invest first; the rest is for expenses. Some people call this budgeting system an “anti-budget” or “pay yourself first” budget, but the concept is the same: you save first as a priority rather than track every expense meticulously.
I rearranged my simple Excel budget spreadsheet so that saving, tithing, and investing were at the top of my list before any other expenses. Simply prioritizing saving at the beginning of my budget makes me save more and improve my finances. By prioritizing saving, I ensured that my future goals—like my wedding and long-term wealth—were always taken care of first. I also used Simplifi to help track my savings, investing, and financial numbers. In addition, there are several budgeting tools, some of which I reference on the Engaged Financials Resource Page. Now, I'd like to share how the reverse budget transformed my finances to help me build wealth beyond the wedding.
HOW THE REVERSE BUDGET TRANSFORMS YOUR FINANCES
THE REVERSE BUDGET HELPS YOU TO SAVE MORE MONEY
Setting a savings rate and investing rate is crucial to financial success. I started with a goal of saving 10% of my income for my emergency and sinking funds and another 10% for investing. If starting with 10% seems daunting, you can begin with just 1% and gradually increase it by 1% every 1-3 months until you reach your goal.
If you can’t save more money or earn money for your wedding, then you will have to adjust your spending to make room for saving. Saving money might be challenging, but saving or investing even 1% gives room in your finances for events like a wedding, car repairs, a job loss, or retirement. The miracle of prioritizing saving is that you naturally start living below your means and spending more intentionally to achieve your goals.
THE REVERSE BUDGET HELPS YOU INVEST MORE MONEY
If you have always wanted to start investing but are wondering how to find the money in your budget, the reverse budget is a powerful tool. It will help you prioritize investments and save in your budget. By automatically directing a portion of your income into investment accounts before covering other expenses, you ensure that investing becomes a consistent part of your financial routine.
I personally use Vanguard and Fidelity to purchase low-cost index funds. I also use Acorns, which lets you round up your purchase to the nearest dollar and invest the change in index funds, IRA, or other investing accounts.
If you want to explore the stock market with a fun introduction to investing, check out the book “A Random Walk Down Wall Street” by Burton G. Malkiel. This book can provide insights into the basics of investing, help you understand different strategies, and educate, empower, and encourage you on your investing journey. You can also look at a list of curated books about budgeting and investing on the Engaged Financials Suggested Reading page.
A REVERSE BUDGET HELPS YOU PAY OFF DEBT
If you’re dealing with debt, implementing a reverse budget can be a powerful tool to help you pay it off effectively. Avoid debt for your wedding and prioritize repayment at the top of your budget. Start by allocating a specific portion of your income towards debt repayment before addressing other expenses. List all your debts, including amounts, interest rates, and minimum payments. Focus on paying off high-interest debt like credit card debt first, a strategy known as the avalanche method, which reduces the total interest paid over time. Alternatively, the snowball method involves paying off small loans first, which can boost motivation through quick wins to pay off lower-interest loans like school loans.
The reverse budget helps you prioritize debt payments and encourages disciplined spending in other areas, preventing further debt accumulation. You may have to adjust your saving and investing rate, but don’t stop saving entirely. Lower your saving and investing rate to 1-5% of your income, but keep saving and investing a little as it grows.
THE REVERSE BUDGET MAKES MANAGING MONEY EASIER
The reverse budget can simplify your budget by rearranging your priorities. A bonus tip for the reverse budget: automate your saving, investing, or debt payments every month. You can log onto your different accounts and see if there is a way to automatically send a saving or investing payment from your primary checking account. This main checking account should be where your income or paychecks go.
Then, set up an automatic transfer, direct deposit, or automatic saving tool to move money from this main checking account to your savings. For example, Acorns can help you automatically save your change to start investing. With automatic payments, the money is working to build up monthly savings without you thinking about it. If you need help with setting up an automatic account, call the bank or institution’s customer service so they can walk you through the process.
THE REVERSE BUDGET MAKES YOUR INCOME TO WORK FOR YOU
Thinking about percentages can provide a more straightforward and flexible approach to managing your finances and empower your income to work for you. By allocating your income as a percentage rather than a fixed dollar amount, you adjust your budget dynamically based on changes in your income or expenses. This method helps you maintain consistency in your financial goals, whether saving, investing, or paying off debt.
You can automate your savings to make saving and investing regularly much more manageable. Automating my finances was a huge key for my budget because my money went to saving and investing every month without me having to think about it. Automating your finances makes it easy to build wealth and can make you a millionaire with consistent savings and investing.
THE REVERSE BUDGET HELPS YOU CREATE GOALS, PRIORITIZE, AND TAKE ACTION
Managing finances is a lot more fun when you can use money to accomplish your dreams. With the reverse budget, you can make dreams of a wedding or travel possible by first saving for them. The reverse budget helped me create specific savings goals, like a wedding fund and sinking funds, for future expenses and let me track my progress toward my goals.
REVERSE BUDGET ENCOURAGES CREATIVITY TO INCREASE SAVINGS
The reverse budget helps you ask, “How can I save more money?” Maybe you want to cut your expenses. Perhaps you can earn more money. Or maybe save more money with your wedding by getting discounts from coupons or cash back from Rakuten with online purchases.
To maximize my savings, I placed these funds in high-yield savings accounts with banks like Sallie Mae for my emergency fund and Wealthfront for my wedding fund. These accounts offered higher interest rates than a typical savings account, allowing me to earn more money while saving. I keep my short and long-term savings separate from my checking account for day-to-day purchases, so I am less likely to spend from these funds.
REVERSE BUDGETING HELPS CREATE INTENTIONAL SPENDING HABITS
Because you start spending for expenses after saving, you have to track where your money goes and make purposeful choices about spending. Intentional spending is a significant benefit of using a reverse budget. By prioritizing savings, investments, and essential expenses first, the reverse budget naturally encourages you to be more deliberate with your remaining money. This approach shifts your mindset from spending impulsively to spending purposefully, aligning your purchases with your values and financial goals.
Intentional spending helps you avoid wasteful expenditures and ensures that every dollar spent contributes meaningfully to your life, whether on experiences, quality items, or goals like your wedding. Over time, this practice helps you stay within your budget and fosters a sense of control and satisfaction with your financial decisions.
THE REVERSE BUDGET HELPS YOU KEEP TRACK OF YOUR MONEY
The reverse budget naturally encourages regular review of your finances, prioritizing your financial goals before anything else. Setting up a system where saving, investing, and debt repayment happen first allows you to check in on your progress frequently to ensure you're on track. This routine can be reinforced by scheduling “money dates” with yourself or your partner—dedicated times each week or month to review your budget, track your net worth, and adjust as needed.
These regular check-ins make it easier to talk about money with your partner, help you stay aligned with your goals, and allow you to celebrate small wins. The consistency of these reviews fosters a strong financial awareness, making it easier to maintain the positive habits you've established with your reverse budget.
A REVERSE BUDGET CAN KEEP YOU FROM OVER-SAVING
It may be shocking, but it is possible to over-save your money. While saving is crucial for achieving financial goals, balancing and avoiding over-saving are essential. Over-saving happens when you save and invest but can’t afford your necessities to survive. And if you are miserable because you are over-saving, you will not stick with any budget. Over-saving can lead to unnecessary stress and deprive you of enjoying life’s experiences.
Set realistic savings goals that align with your priorities and lifestyle. One effective way to maintain balance is by allocating funds for fun activities or date nights. Have fun, plan travel, and make space for new adventures in your budget. You can even have fun on money dates by changing locations or adding an activity while discussing money topics. For instance, having a dedicated “fun fund” allows you to enjoy experiences like dining out or weekend getaways without feeling guilty. You can also give generously to meaningful causes, like helping children or curing cancer. Let your reverse budget allow you to enjoy your life, not have your life dictated by your budget.
REVERSE BUDGETING HELPS YOU INCREASE YOUR NET WORTH
Tracking your net worth is a powerful way to gauge your overall financial health and progress toward your financial goals. Your net worth is calculated by subtracting your total liabilities (like debts and loans) from your assets (savings, investments, and property). Regularly updating and reviewing your net worth helps you understand how your financial situation evolves, providing insight into your wealth-building efforts and areas needing attention.
The reverse budget increases your net worth while planning a wedding by ensuring that a significant portion of your income goes towards building assets and reducing liabilities first. This proactive approach helps you manage wedding costs without debt and sets a strong financial foundation. With the reverse budget, I saw my net worth grow even while spending money on my wedding. While I felt stressed spending so much, seeing my net worth grow despite my spending helped make me feel better about my overall finances. Tracking your net worth with a reverse budget keeps you accountable, motivates you to maintain disciplined financial habits, and ensures that your wealth-building strategies effectively work towards your future financial goals.
REVERSE BUDGET TRANSFORMS YOUR MONEY MINDSET
The reverse budget can transform your mindset by shifting the focus from what you can't afford to what you can achieve. Instead of thinking, “I'm bad with money,” the reverse budget empowers you to prioritize saving and investing right from the start. Financial wisdom from “The Richest Man in Babylon” by George S. Clason suggests, “10% of all you earn is yours to keep”. This mindset shift of saving first is the foundation of a reverse budget so that you can build wealth beyond the wedding.
The reverse budget approach creates a proactive financial habit of consistently allocating funds toward building wealth before anything else. As your savings grow and investments increase, your confidence builds, and your mindset shifts to one of control and abundance. Over time, these wealthy habits become second nature, helping you move from a place of financial insecurity to one where you actively create and sustain wealth. This transformation reinforces a positive identity as someone “good with money” and focused on long-term success.
CONCLUSION
The reverse budget was instrumental in helping me avoid wedding debt, save effectively, and build wealth. By prioritizing savings and investments, automating my finances, tracking expenses, and maintaining open communication with my partner, I achieved my financial goals while planning a wonderful wedding. This approach set the stage for an amazing future and provided valuable lessons in setting up money to create more savings and work for you.
IN SUMMARY
HOW THE REVERSE BUDGET TRANSFORMS YOUR FINANCES TO HELP YOU BUILD WEALTH BEYOND A WEDDING
- What is a budget? A budget is a financial planning tool that outlines how you intend to manage your income and expenses and shows you where your money is going and what you are doing.
- What is a reverse budget? A reverse budget is a type of budget in which you prioritize saving and investing first before allocating money to expenses.
- The reverse budget helps you save more money.
- The reverse budget helps you to invest some of your savings. Check out Vanguard, Fidelity, Acorns to start investing.
- Prioritize paying off debt and saving with the reverse budget.
- Reverse budget encourages automating your finances to make managing money easier.
- A reverse budget empowers your income to work for you.
- The reverse budget helps you create goals, prioritize, and take action.
- A reverse budget encourages creativity to increase savings. To help grow your savings, check out Rakuten, Sallie Mae, and Wealthfront.
- Reverse budgeting helps create intentional spending habits.
- Reverse budgets encourage you to review money regularly with money dates.
- The reverse budget helps stop you from over-saving.
- Reverse budgeting helps increase your net worth.
- Reverse budget transforms your money mindset.
How can the reverse budget help you transform your finances?
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