Do you end up feeling like you’re out of money at the end of each month? Are you ever concerned that one major setback might force you to stop streaming? Traditional budgeting works just fine but it focuses too much on the present and not enough on the future. Let’s talk about reverse budgeting.

What isn’t reverse budgeting? What is reverse budgeting not? Negative titles are hard…

This is pretty simple. Reverse budgeting isn’t your standard budgeting advice. In a traditional budget (which I still think is really useful) you track and categorize all of your expenses. That way, you can see what you’re spending and match it to your income. It’s a big focus on each category- did I spend too much on eating out this month? Too much on school costs? Do I have somewhere I spent less and I can cover those excesses with? You have all of the data about your actions, but it’s mostly designed to look backwards at what you did. You want to be focusing and systematizing what you will do going forward. You’re a business owner and you need to be planning your business’s future.

Fine Then, What is Reverse Budgeting?

Reverse budgeting is not at all new, but it’s still underutilized. It’s the advice that you get from The Richest Man in Babylon. I HIGHLY recommend the book; it is quite short but extremely informative. You get a really good bang for your buck and time.

In reverse budgeting you pay yourself first.

What do I mean by that? It means when you’re looking at your income the first slice you take doesn’t go to pay rent, student loans, or groceries. Instead, it goes in to your savings. You are the primary beneficiary of your work. Once you’ve taken your slice (hopefully around 10% at least) you then look to your fixed obligations. Those would be your rent, student loans, or car payments. Basically, anything where you signed a contract promising to pay a set amount each month.

So what do you do with the money you hopefully have left over after paying yourself and your debts? The remaining money is for you to spend as you please. Yes, it’s still extremely relevant to be tracking your spending to have a good sense of where your money goes. In this case though, it doesn’t really matter whether the remaining funds go in to Twitch subs, video games, or groceries. You spend as makes you happy. Do keep in mind that your spending is a reflection of your values in action. If you look at your spending and think that it really doesn’t mesh with your self-image (too much beer/ice cream/questionable sites) you may want to do some conscientiousness exercises.

Words without examples are stupid

Fine, fair. Our magnificent streamer Captain Sparklepants sits down at the start of the month. Through all of his sources of income he earned $3k (post tax) and he expects his income to be roughly the same next month. Let’s get in to his reverse budgeting!

First, $300 goes in to his long term savings. This could be building his emergency fund (a key to managing uncertain income) or investing in an IRA or other retirement plan. This is how you pay yourself and it’s wildly important to make it your first priority. If it’s not, it becomes too easy to spend everything you make without any eye on the future. Yes, streaming is an awesome job but you want to build up enough to have the flexibility to change if desired.

Next, and I think this is really important for a small business owner, at least 10% ($300) gets put back in to the business to stimulate growth. Your stream is your source of income and you would be very foolish to not invest in it. Think about it, what could make your stream better? Is it better tech? More focus on marketing? A new game? Outsourcing something like video editing? There’s a whole world of things you can do to improve your stream which in the long run return more than you spend on them.

Now it’s time to cover your fixed expenses, or your obligations. Captain Sparklepants pays $1,000 in rent, $200 in student loan payments, $100 in utilities, $200 for car payments, $100 for various insurances, $20 in Twitch subs, $10 for Netflix, and $35 for a gym membership. That’s $1,665 in total for fixed expenses. I think you could easily argue that the Twitch subs and Netflix don’t fit in here, but you might have signed up to pay for several months in advance.

Ok, so now that we’ve covered our long term savings, invested in the business, and covered our fixed expenses what’s left? Captain Sparklepants has $735 to do whatever the hell he feels like. It’s safe to say that a solid chunk of that is going to food and entertainment. Do we care if the food is 75% delivery and 25% alcohol? Not for budgetary purposes, though we do for his health. As long as he’s keeping to that amount for the rest of his expenses he’s golden.

What can I do to monitor my spending?

It’s actually pretty low effort to monitor your spending. I use Mint though there are tons of budgeting tools out there. What I like about Mint is that if I link my accounts there’s actually not much I have to do week to week for it to work. Basically, once a week or so I check in on Mint and make sure my transactions recorded properly. I can use that to see if there’s an area where I spent more than I expected and I can adjust as needed. Mint works best if most of your spending is done electronically as that’s what makes the automated tracking work.

Another option that some people really love is the envelope system. This is the exact opposite of automation but I do think it could have a place in reverse budgeting. Basically, you literally take cash and put it in envelopes marked for each category of spending. So in this case you’d have an envelope for reinvestment, an envelope for fixed costs, and an envelope for the whatever fund. The virtue of this system is that it forces you to use cash, which makes everything you purchase more tangible. You’re less likely to make a payment you can’t afford if you’re having to fork over cash each time you buy. It does require a lot more time and effort, but that can be a good thing if you’re struggling to stick to a spending plan.

What do I do if I have $0 or negative leftover money?

Not all of us are Captain Sparklepants levels of awesome and earn $3k from streaming. Some of us live near San Francisco and laugh painfully at the thought of $1k in rent. While it sucks to not have anything left over once you’re saving, reinvesting, and covering fixed costs there are some remedies. After all, you do need to eat!

I’m sorry, but none of this ideas are going to be revolutionary. If you’re short on cash then you have two options. You either earn more or you spend less. There are hundreds of ways to do both of those but you’re not going to avoid that reality. If possible, I recommend earning more income if you have that opportunity.

So what are some viable options to earn more? First, are you in a position to do a funding drive from your viewers? Set a goal and a reward (like a marathon stream or viewer games) and see if it works. Next, take a look at what you’re good at. If you’re a great video editor maybe you can offer your skills to other streamers. If you make wonderful art, see if you can get someone to pay you to do design work for them.

You might also consider doing part time work in whatever your previous career was. As always, the gig economy offers some solutions as well. If you’re in a good area for it driving for Uber during some peak hours can add a couple of hundred bucks to your wallet. There’s also always the tried and true method of marrying someone who earns a lot or is rich. If you really care about your stream, don’t be too proud to take the steps required to keep it going through rough times.

If you need to cut expenses, your efforts to track your spending will shine. Take a gander at Mint and see if there’s any category that jumps out at you. It might be that you need to move to a place with a lower cost of living. You could also consider the ramen diet, though I think keeping yourself healthy is very important for your stream. Perhaps you could get on a repayment plan to lower your student loan costs. I think cutting expenses is a viable option for small deficits but realistically there’s only so much to cut before you aren’t supporting yourself.

Why is this important for streamers?

You are running a small business that’s centered on you as the performer. You need to make sure that your personal situation doesn’t prevent you from getting on during your schedule or keeps you so stressed that you aren’t entertaining. By paying yourself first and investing in your business you can keep ahead of your bills. The less stressed you are the better your stream and the higher your income potential. This is something that’s pretty simple to do!

If you have any questions about this process that I didn’t answer, ask them in the comments!