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Never budget again!

OK, does any of this sound familiar to you... 

You accept that having a budget will help you spend more wisely and help you save more to meet the financial goals you have set for yourself, so you've tried to make and track budget for about two weeks...

Maybe you've even used one of those budget tracking apps. You know, the ones that automatically downloads and categorizes your transactions, but you just can't be bothered to double check the data or add the handful of missing/wrongly categorized transactions.

Or maybe you haven't ever made a budget.   You always mean to, but it just stresses you out every time you think about it. Or the idea just seems like too much work, so you have resigned yourself to never even trying.

Well, you're not alone.  Less than half of Canadians budget and even fewer Americans do.  There's lots of reasons for this from simple tedium/boredom to lack of discipline to more complex reasons and attitudes such as a restrictive mindsets and  inconsistent expenses.

Now what if I told you there's a much easier way to spend and enjoy your money while making sure you are still saving enough to meet your financial goals?

This magic is called reverse budgeting and it's easy to do and very effective.

As a starting point, you may wish to figure out your financial goals such as retirement, saving for a house, education, a big purchase or vacation or maybe all of them! From here you can figure out how much you need to save or maybe you just have a goal to save, say 10% of your salary, or $XXXX per month.

Once you’ve got a savings goal in mind, set up a recurring investment that takes money directly from your savings account and moves it to your investment accounts, all timed to coincide with your paycheque.

The end result - your savings are immediately squirreled away, and you spend the rest! You're simply following the timeless advice that David Chilton first provided in his bestselling book The Wealthy Barber, published way back in 1989 - Pay yourself first.

So now you're convinced to do this, but don't know where to start?  Well, pretty much all banks, their investment arms, and discount brokerages have direct or recurring investing.

For Example:

For CIBC start here >> Put your money to work with a regular investing plan

For RBC start here >>  Set Up a Pre-Authorized Contribution (PAC) Plan

For Questrade start here >> Paying yourself first: How to put your investing on autopilot

For Wealthsimple start here >> Set up a recurring investment

While this is not a specific endorsement for Wealthsimple, I do like how they have dialed in their recurring investment feature.

  • It's quite easy to setup and use (see the  link above)
  • Wealthsimple is commission free for things like Canadian low cost index ETFs so your overall fees and transaction costs can be very low
  • You can fund the investment from either an external bank account or from within Wealthsimple
There you have it!  Set your saving goal, arrange for an automated investment, and spend the rest.  Too easy!

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