Accounting Paycheck Series

Say Goodbye to Living Paycheck to Paycheck: Choosing Your Budgeting Direction

Say Goodbye to Living Paycheck to Paycheck: Choosing Your Budgeting Direction September 24, 20164 Comments

Choosing your Budgeting Direction

This post is part of a series.  To start the series from the beginning, click here.  To browse through the series, click here.

Deciding between Reverse Budgeting and Forward Budgeting is one of the first things to do when creating your budget.

Reverse Budgeting in three steps

    • Determine your savings goal
    • Save a set amount each month to reach your goal.
    • Revisit your goal and adjust as necessary

Reverse Budgeting is good for you if any of the following apply:

    • You have a hard time sticking to your budget.
    • You succeed with a strict and well planned structure.
    • You know how much money you will need and when you will need it by.
    • You prefer to have clear goals

Forward Budgeting ‘Forward Roll’ in three steps.

    • Project your future savings.
    • Roll over extra funds at the end of each period
    • Repeat

Forward Budgeting is good for you if any of the following apply:

    • You are disciplined with your money
    • You succeed with a flexible schedule
    • You prefer fluid goals

Take this quiz to see which budgeting type suits you best.  Feel free to use a made up name. Or, if you prefer to take the quiz by hand, the questions and scoring are listed below.

Which Budgeting Type is Best for You Survey

1. You earn $100 extra cash.  What do you do?

      • a. Put it towards rent or other bills
      • b. Put it in a savings account
      • c. Buy something for yourself
      • d. Enjoy a night on the town

2. You are saving up for a new car and need $5000 more.  What do you do?

      • a. Put a set amount into savings immediately after each paycheck
      • b. Watch your spending carefully and spend as little as possible
      • c. Work overtime and put as much money into savings as possible
      • d. Get discouraged and give up

3. Which of the following best describes your five-year plan?

      • a. I live life one step at a time. Plans will change so why make plans?
      • b. I have specific goals and have strategized how to achieve them.
      • c. People actually plan that far in advance?
      • d. I know where I want to be and I will take whatever path presents me with success.

4. How do you prepare your grocery list?

      • a. I don’t, I shop each time I need to cook.
      • b. I prepare a shopping list before and only veer from it occasionally.
      • c. I don’t write a list but I have a general idea of what I need when I go.
      • d. I eat out, so I don’t grocery shop.

5. How do you handle household chores?

      • a. I write a to-do list and check each item off the list as I complete it.
      • b. I let it go as long as possible then clean right before company comes over.
      • c. I have a routine that I follow to keep me on track.
      • d. I don’t clean unless I have to.


Add one point for each of the following options you chose.

        Question 1: a or b
        Question 2: b or c
        Question 3: a or d
        Question 4: b or c
        Question 5: a or c


1-2 Points: Reverse Budgeting – You thrive in a structured environment.  You like to be in control of what happens and would prefer not to encounter many unknowns.  You’ve realized that money is not the most important thing in life.  Reverse budgeting is best for you because it allows you to create a structured budget to follow but still allows for carefully planned changes.

3-5 Points: Forward Budgeting – You are organized and proactive.  You know that there are multiple ways to reach an end goal and that as long as you keep moving forward, you will get there.  You are also responsible with your money which allows for some flexibility in the budget.  Forward budgeting is best for you because it gives you the freedom to make changes to your budgeting strategy at any time.

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