Most people are taught to budget by looking at what they have and then deciding what they can spend. But this is one rule that is meant to be broken. I've discovered that my clients have benefited tremendously from "backwards budgeting" and it’s what we teach in our Money Map course.
Backwards budgeting starts from a place of total clarity around what you want — you must allow yourself to explore the far edges of your desire. Look beyond one level of what you want, and dive deep from your "minimum to be happy" all the way out to your "no limits" lifestyle.
Once you are clear on the range of your desire, you can then begin putting dollar amounts on all of it. This will enable you to calculate how much you need to earn to have the lifestyle you want, instead of having it be constricted by what is in your bank account. Budgeting backwards frees you from the ideas of "living outside your means" because instead, you let your desired life dictate your paycheck, rather than letting your paycheck dictate your life. Your means expand based on what you want.
When I did this process myself for the first time back in 2009, I was feeling trapped by my businesses. They were bringing in $2 million annually, but true financial freedom was as distant as it had been when I was just graduating from law school (with $100,000 worth of debt) and embarking on my first job at a law firm. Why?
Because I was trapped by the idea that I had to keep doing things I didn't really want to do for the money.
So, I asked myself, “How much money do I actually need to have the life I want?” This introspection led me to step back from my businesses for a year so I could go live with my kids on a farm. I reconnected with them, with myself and with my desire to rebuild my success sustainably, without putting money first.
Now, what do you do when you envision a life that feels beyond your current means? Or when you envision a life that requires you to have more time for things like self-care, travel, excellent food or education — but the time it takes to earn your money seems to absorb your whole life?
Budgeting backwards is still applicable, as it will allow you to consider how you can craft your life to be truly in alignment with your priorities. For example, after doing this exercise, you may realize you've been prioritizing your future well-being over your current well-being, and decide to invest more in self-care now. Or you might see that you are putting off living your current life for the idea of financial security later, and decide you want to invest more in your current experiences.
Backwards budgeting can give you the courage and the insight to invest in yourself in bigger ways, and step toward your dreams in a way that perhaps you haven't been able or willing to do in the past. If you’d like to give backwards budgeting a try, check out our Accelerated Money Map Intensive to discover how it can work for you.
Alexis Neely is a member of the DailyWorth Connect program. Read more about the program here.