Reverse Budgeting — Think Backwards, Save Forward!

Let’s be honest. We all make money resolutions every year to save more and spend less. How much do we follow up on that is, well, a different story! 

Many among us struggle to stick to traditional budgets, mainly because they are restrictive in nature and focus on what not to spend on. This, naturally, can be quite overwhelming. That’s where Reverse Budgeting comes in, also known as ‘Pay Yourself First.’ 

It’s a simple, no-nonsense approach to prioritising your savings and using the leftovers for expenses. 

Nearly Half of UAE Residents Aren’t Saving for Retirement — Is Outdated Budgeting to Blame?

As per reports, almost 45% of UAE residents haven’t started saving for their retirement. While there can be plenty of reasons, it’s clear that old-school budgeting isn't cutting in. Enter reverse budgeting — a smarter approach that flips the investment script! 

Flip Traditional Money Management With Reverse Budgeting

Reverse budgeting is quite easy. Instead of tracking every expense and hoping to save what’s left, you do the exact opposite: you save first and spend later. This means setting aside a portion of your salary — even if it’s a small amount — the moment it hits your account. You can budget for rent, groceries, and everything else only after this is done.

This method is quite different from how traditional budgeting works, which is how most of us function. You might have observed in your household that generally, we first itemise expenses like groceries, bills, dining out, and more. After that, we hope to save what’s left over. 

We’re not saying that this strategy is not good at all. However, it can be disastrous if you struggle with overspending or are new to the world of budgeting.

Traditional Budgeting

✅Salary ➡️Spend ➡️Splurge ➡️Save

Reverse Budgeting

✅Salary ➡️Save ➡️Spend ➡️Splurge 

Reverse Your Strategy in 4 Simple Steps 

In reverse budgeting, savings and financial targets come first — the rest adjusts itself. It puts you first and automates your savings and investments. Knowing that you are saving something and securing your future, you can spend without guilt. 

Here are the core aspects of this strategy —

Choose Your Goal and Amount: Decide what you’re saving for — whether it’s for an emergency fund, vacation, or a down payment — and pin down a monthly savings figure

Automate Savings Right Away: Set up an auto-transfer from your salary account into a savings or investment account, with the transfer being done as soon as you get paid 

Cover Essentials Next: Pay bills, rent, groceries, and insurance out of what remains — make sure the necessities are accounted for before discretionary spending

The Rest is Yours: Now, you have actual funds that you can spend without any guilt and tracking 

Is It the Right Catch? 

In essence, reverse budgeting suits those who value simplicity and long-term progress. By automating savings first, it removes the mental load and temptation from everyday spending. 

With that being said, it's not a cure-all if you face high-interest debt or routinely exceed your income and need to dip into your savings. In such cases, you can tweak your approach — whether it’s the 50-30-20 rule, zero-based budget, envelope system, or any other — and choose whatever suits you the best.