Backwards Budgeting

How I budget without really budgeting

Thanks for checking out Ten Dollar Latte! I’m not a financial advisor, just a 27-year-old living in NYC who decided to start her own company after working at three NYC startups. I write about how I spend my money while enjoying a $10 latte.

I don’t budget, but I write down everything I spend money on. I track it all in a spreadsheet where I write the merchant, item, date, category, and cost. Yes, I know there are apps that will track this based on my credit card report. And no, I’m not interested in using those.

I track it myself because the act of writing down each item and categorizing it helps me reflect on what I’m actually spending money on and if it’s meaningful. And I call it backwards budgeting (I have no idea if this is the correct term or what others call it).

A snippet of my spending from earlier this month. I track everything, even all the $2.90 subway and bus swipes.

I’ve never liked traditional budgeting because it always felt restrictive. Some months, I spend more on certain things than other things. Some months, even if I try to plan my spending on the 1st of the month, I know that things will come up and I’ll want to spend more money in a certain area. I also know that some months, I’ll spend a lot less in certain areas.

Do I spend more money with this method? Maybe. But I know I spend it more intentionally. I know that if I have $100 for dining out and $100 for drinks out, I would want to max out both of those categories, a lot like the lemonade stand scene with Oscar and Michael in The Office.

With backwards budgeting, if I save money in one area (like how I’m saving $100/month on my rent since my building has the cooking gas turned off), I don’t feel an immediate need to spend that money somewhere else.

With backwards budgeting, I spend what I want, and reflect on it after.

I know some people need structured budgeting—there’s no right or wrong way to spend money, as long as you’re happy with it and you’re not spending outside your means! There’s a few ways I make this method work for me:

1. I have relatively low fixed costs.

   Okay, this might be surprising for those of you who have read my articles on how much I spend on rent in NYC, but I actually think I have relatively low fixed monthly costs compared to many of my friends who also live in VHCOL cities. I am fortunate to have $0 in student loan payments (I had scholarships that covered most of my tuition and had support from my parents) or other debt payments, and my rent (currently $2,320.50/month plus around $120 in utilities and rental insurance) covers any repairs that would be needed. My other monthly subscriptions come out to less than $100/month.

   My situation is different right now given that I’m starting a business, but last year, I spent less than one biweekly paycheck on rent (this is good for NYC standards, I swear), and had about $4,000 left after my fixed costs. This was significantly more than my other monthly spending. I’m never sharing these numbers to brag, but to be transparent. Also, this is not my financial situation now.

2. I have a healthy savings buffer.

   I was fortunate to live at home during part of the pandemic and save money. This means that even if I have months where I’m spending more than I’m taking in (like my current situation), I have a buffer. It’s been hard to not feel stressed since I lost my largest source of income, my corporate job, but I try to remind myself that this is why I saved money in the first place.

3. I generally don’t have expensive taste.

   No matter how much money I have, I will never spend money on a designer purse, because having a designer purse doesn’t interest me. I hate getting my nails done and I enjoy taking public transportation. Honestly, if I won the lottery tomorrow, the only things I would increase spending on would be my apartment and maybe a nice vacation.

   Of course, that’s not to say that when I look over last month’s budget, there aren’t areas I wish I spent less money on. There definitely are! But I generally don’t spend money on many big ticket items.

Again, I know this method isn’t for everyone.

And honestly, my budgeting method might change over the coming months depending on how my income changes. We’ll see, and I’ll be sure to keep you updated!

Let me know in the comments how you budget (if you budget). Do you use an app, spreadsheet, or neither? Maybe cash envelopes? Is there a way you’ve tried in the past that you hated? Let me know!

Thanks for reading! I post weekly on Mondays about living in NYC, personal finance, and growing my small business. I also post a monthly reset on the 1st of each month sharing everything I spent money on the previous month and goals for the next month. My small business is called Sidetracks - it’s a collection of party card games I designed. Grab a game to make your next happy hour unforgettable.