February 4, 2015
Pay yourself first and never budget again

You don’t need a budget.

Throw this personal finance girl out the window. SHE BLASPHEMES!

Or does she?

Paying yourself first is far more important than setting an arbitrary limit for how much you deem acceptable to spend for each category of your life.

How is it relevant if I spend $600 on taco bell and $150 on pints of Amsterdam blonde, if I have credit card debt and don’t save at least 15% of my income?


It’s not.


Figuring out how much is an appropriate amount to spend on groceries for a single person is waste of time you could be spending watching Outlander on Netflix.

Instead of focusing on dividing the money you have to spend, focus on on how much money you can can put away and how to grow it, to be where you want to be. Then you won’t have to budget — you’ll be able to spend everything in your chequings account on anything you want, guilt-free, because every dime you have in your chequings is after-savings income.



income – fixed expenses – savings = how much you have to spend on your life 


How to pay yourself first:

  1. Calculate your fixed expenses
  2. Decide on a lump-sum figure for other spending
  3. Create financial goals
  4. Figure out how much those financial goals are going to cost you monthly
  5. Automatically deduct that money from your bank account
  6. Whatever you’re left with is how much you have to blow on your life!
  7. Stay smart and continue to track your expenses and educate yourself on investing


Let’s go into more depth:


1. Calculate fixed expenses

What do you have no choice in spending each month, that you can’t negotiate or cut out? This is probably rent, and maybe a bus pass, a student loan payment or a cell phone bill that’s on contract. This sum is unavailable to save.


2. Decide how much you want to spend on other shit

I take out $1000 in cash in the beginning of every month and that’s how much I have to spend on my life: groceries, Uber, beer, gas, internet shampoo, takeout, tampons, whatever.  I don’t budget each category, I just use a lump sum. If I run out before the month is over, then, oh well. I stick to it because it’s easy.  I just spend what’s in my wallet. I naturally over time started being more reluctant to spend this cash and looked for ways to stretch it further. Some people find spending cash annoying, so a debit card could work for this as well. A credit card is dicey as it’s SO easy to go over your planned figure.

I came up with $1000 based on average my average monthly spending, with a slight reduction in order to allow me to save more  for my financial goals. Everyone’s number will be different based on their  goals, income and  lifestyle.

I know my current monthly spending not because I budget, but because I track my expenses. It’s super important for me to be aware of my general spending patterns.  That way, if I personally feel horrified that I spent $1080 on bio-gel manicures last year, I can make some changes. OR I can accept myself for who I am and tell Janet from HR to stop judging because I know for a fact she spent  $2000 on a cat food last year, so there.


3. Create financial goals

Short term goals are something in the next year, like going to Vegas for a bachelorette or taking a course.

Medium-term goals are within the next five years, like buying a car, saving a downpayment etc.,

Long term goals are for 15 years+, like  saving for retirement or money for your kids education.

Once you have a list of all your goals, simply plan backwards on how to reach them.



4.  Figure out the goal’s monthly cost 

When you break-down out the monthly cost of each goal, it a. seems more achievable, b. will tell you if its unrealistic and c. allows you to plan for it.

It’s ideal to save at least 15% of your after-tax income towards your goals, (people used to say 10%, but we live longer now, shit is more expensive and interest rates are super low)  but it obviously depends on your income, lifestyle, and dedication. At one point I was saving 27%. But then I decided I didn’t want a roommate.

Say your short-term goal is that you want to go to Vegas for a bachelorette party next year. It will cost about $2500, since your friends want to stay at a nice hotel and a pitcher of vodka-lemonade costs $140 there.

So all you need to do is work backwards and divide the total cost of the goal, with the months you have to each it.

So: 2500/12= 208.

To pay for this vacation, you have to set up a “Vegas” bank account and automatically transfer  $208 every month. If you can swing that amount after fixed expenses and lump sum disposable spending figure, …go forth.  If not…tell your friends to bring you back a shot glass on a chain and Photoshop you in some pics.

People often go into debt because they’re not really looking at these numbers. They don’t think ahead in terms of “how much do I actually need to take this trip”. So they run out of money and then put it on a credit card. So you must do the math.


Not only by asking yourself “can I afford it? in vague terms, but actually, pro-actively figuring how much it will cost you every month and putting that money aside.



Say your long-term goal is  to retire at 65 with $1 million.  You estimate a rate of return of 5%, so, working backwards, you know you have to invest $655 every month to reach that goal (there are calculators for this, don’t worry).

You set up an account with a robo-advisory that automatically withdraws that amount from your bank account every month and invests it. Done! And with zero effort on your part.


5. Automate everything

Once you calculate how much you need to save to reach your financial goals, set it on auto-pilot. I literally have 5 different savings account at Tangerine, all nicknamed things like “downpayment” “For wedding gifts” “freezing egg fund since am approaching 30 and still single fml” etc.,

Once that money is out of your account, and you’ve earmarked some for fixed expenses, you can literally blow the rest of your paycheque on anything.



 Imagine how freeing it is to spend every last penny in your account on avocado toast. 

*JOKING. Avocado toast is so 2014.


NB: Some say the only true way to pay yourself first is to contribute to an RRSP, since technically you’re always paying the government first with taxes. However, the RRSP has a serious lack of flexibility so a TFSA, brokerage or regular savings account may make more sense for you for goals other than retirement.

I want to improve my financial literacy without hating my life

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2 Comments 0

There are 2 comments

  • 1. Saving 20% vs 10% is a huge difference.
    2. How do you know if you can afford a change in job or lifestyle?
    3. You may be able to afford to buy something but can you afford to own it? You can buy the house or car but can you afford the insurance , maintenance, or potential repairs?
    Remember, everyone looks good in (the) black.

  • Thoughts?

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