At the end of 2023, a comedian named Lukas Battle posted a joke on TikTok. Everyone was sharing their “ins and outs” for the new year, and he declared that quiet luxury was out. In its place, he introduced loud budgeting.
The premise was simple: stop being embarrassed about not spending money and say it out loud. When friends wanted to fly to Cabo for the weekend, you said, “I’m loud budgeting.” The video was viewed more than a million times. CNN covered it, and Quicken wrote a how-to guide. For a few months, saying no was cool.
Although it started as a joke, I give loud budgeting its due. It took the shame out of saving, and that’s no small accomplishment. Spending is constantly on display, and as one financial educator told CNN, we’re no longer keeping up with the Joneses but with the Kardashians.
But look at what loud budgeting actually asked people to do. It asked them to announce what they were giving up. It was a diet with a better slogan, and like most diets, it worked beautifully until it didn’t.
Loud budgeting got the feeling right and the method wrong.
Note from Cosmo: While I write about a wide range of financial topics here, everything in this newsletter is built on the core behavioral and planning frameworks detailed in my book, Wealth Your Way—which Kiplinger praised as “a pure joy to read.” Grab your copy on Amazon here to explore the full blueprint.
Why most budgets fail
Most people who try to budget build something like this: housing, groceries, dining out, gas, subscriptions, clothing, gifts, entertainment, and thirty more lines. Somewhere near the bottom, usually last, is a line called “savings.”
That order is the problem. A traditional budget starts with what you spend and saves whatever is left. Every other line gets the first claim on your paycheck, and your future gets the leftovers. For most people, most months, there are no leftovers.
The structure also guarantees the budget will feel like a diet. With forty categories to police, every month becomes an exercise in falling short somewhere: the grocery line ran over, the dining line got blown. So the 40-line budget gets abandoned by February, and the person decides they’re “just not a budget person.”
I’d suggest the person isn’t the problem. The budget is.
The two-line budget
Here’s a different approach. Instead of staring at a 40-line budget, start with a two-line budget.
Line 1: Your financial future.
Line 2: Everything else.
That’s it. It’s often called reverse budgeting, or simply “pay yourself first.” It flips the traditional order: the line that usually comes last comes first. A traditional budget starts with what you spend. A reverse budget starts with what you keep.
The mechanics are simple. Start with 100% of the income coming in. Assign every dollar to one of the two lines, with Line 1 funded first. Don’t leave cash unassigned, because unassigned cash usually gets misspent.
The idea is at least a century old. In 1926, George S. Clason began publishing the parables that became The Richest Man in Babylon. Its central lesson was “a part of all you earn is yours to keep,” and Clason was specific about the size of that part: for every ten coins you put in your purse, take out only nine to spend. The packaging changes every generation, from Babylonian parables to “pay yourself first” to TikTok trends, but the principle has held.
“Pay yourself first” is good advice. It’s also where the real questions begin. How much should you pay yourself? How do you know when it’s enough? And what do you do with everything else?
Line 1: The only number you need to get right
So how much goes into Line 1?
Start with Clason’s 10% savings rate. If you have no plan today, ten cents of every dollar is a meaningful, achievable start. It’s large enough to matter and small enough that most households can find it without upending their lives.
But be clear about what 10% is. Ten percent might be where most people start, but it’s not where the most successful wealth builders finish.
Here’s what the difference looks like. Take someone earning $100,000 a year who saves 10%, or $10,000 annually, for 30 years. Assuming a hypothetical 7% annual return, that grows to roughly $945,000. Raise Line 1 to 15% and the same 30 years produces roughly $1.4 million. Five more cents per dollar adds close to half a million.
Two practical ways to grow Line 1:
Automate it. Line 1 should leave your paycheck before you ever see it, through a 401(k) deferral, an automatic transfer to your brokerage account, or both. The discipline goes into the system, not into willpower on payday Fridays. Like Odysseus tied to the mast, you make the decision once while you’re thinking clearly.
Increase it with every raise. Commit in advance that part of each pay increase goes to Line 1. You never feel a cut, because you never got used to spending that money. Economists Richard Thaler and Shlomo Benartzi built a program around this idea called Save More Tomorrow. In its first implementation, participants’ savings rates rose from about 3.5% to more than 13% over four annual raises. If 10% feels out of reach today, that’s your path too: start where you can, and let your raises close the gap.
How do you know Line 1 is enough?
Ten percent is a starting point, not an answer. The structure of a two-line budget is simple, but sizing Line 1 takes effort and time. It means working backward from goals that may be decades away, through unknowns no one can predict: market returns, inflation, how long you’ll live, what your life will cost when you get there. As I wrote in “Don’t Predict. Prepare.,” no one can forecast the right number, but you can prepare for a range of outcomes and adjust as you go.
If that feels daunting, here’s the good news: you don’t need to have it figured out on day one. Early in your working life, the honest answer to “enough for what?” is often “I don’t know yet.” That’s fine. When you can’t yet see the finish line, your goal is progress, not precision.
Revisit Line 1 every year as your income and goals come into focus. And the younger you are, the more time works in your favor. You have years to course-correct, and every early dollar has decades to compound.
One caution: eventually Line 1 needs a finish line. Without one, it quietly takes over Line 2, along with the life it was meant to pay for.
True Financial Freedom Is Having Enough
The math can say you have enough. Financial freedom is believing it.
Line 2: Spend it, guilt-free
Now the part loud budgeting missed. I’m not asking you to sacrifice today for tomorrow. I’m asking you to find the right balance between you and future-you.
That balance is harder than it sounds. UCLA psychologist Hal Hershfield found that when people think about their future selves, their brain activity looks more like thinking about a stranger than about themselves. No wonder saving can feel like giving money away.
A two-line budget helps calm the tension. Line 1 takes care of future-you. Line 2 takes care of you.
Once Line 1 is funded, Line 2 is all yours. After necessities, you can spend it on dinners out, travel, the good coffee, or the concert tickets. Your future has already been paid first, so there’s no reason to feel guilty about the rest.
If you’re detail-oriented and want to split Line 2 into sub-categories like groceries, housing, travel, hobbies, go ahead and make as many as you like. There’s just one rule: the sub-categories can never add up to more than Line 2. Above all, you never take from Line 1 to pay for Line 2. Over time, you may even do the reverse, moving money from Line 2 to increase Line 1, especially as your income grows.
This isn’t a recipe for being cheap. There’s a difference between frugal and cheap. Cheap people see the value in nothing; frugal people look for the value in everything. A reverse budget doesn’t ask you to cut something just because it’s “extravagant.” It asks you to identify where the cash to pay for it comes from, rather than putting it on your credit card and worrying about it later.
Want the expensive vacation? Fine. Find room for it in Line 2 or save toward it within Line 2. Just don’t fund it from your future.
Funded contentment
Loud budgeting asked you to announce what you’re giving up. A two-line budget lets you enjoy what you spend because the most important line always comes first.
Funded contentment is the peace that comes from knowing your future is being provided for, so you can enjoy the present without second-guessing every purchase. It’s not about spending less. It’s about intentional spending without anxiety.
That’s why a two-line budget is as much a mindset as it is a method. Once your future comes first, every other spending decision gets easier. You don’t need a better spreadsheet. You need a better first line.
Fund it first, starting at 10%, and grow it from there. Then go enjoy spending the rest.
As always, invest often and wisely. Thank you for reading.
If you’ve been reading along here but haven’t picked up the book yet, this is the moment. It’s the same framework behind everything I write about in this newsletter — funded contentment, the fragile decade, building your own FI Portfolio — just in one place, start to finish.
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