Move over soft saving, here comes loud budgeting
Margaret Montgomery, Content Specialist
It's been a busy year in personal finance. Girl math, recession core, and soft saving are some of the latest personal finance trends taking TikTok by storm. Recently, “loud budgeting” has been gaining momentum on the platform after user Lukas Battle uploaded a video explaining the concept. This latest variation of personal budgeting involves committing to your budget out loud - declining invitations or avoiding purchases that would take you off track financially.
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Loud budgeters aren't afraid to say no to social events that would strain their wallets. The trend also encourages people not to shy away from honesty when it comes to their financial situation. “Sorry, I can't afford to,” might soon become a cool and socially acceptable thing to say – if the trend sticks, that is.
It's not surprising that such a movement has emerged after young people have been living through stubborn post-pandemic inflation, interest rate hikes and high home prices causing housing affordability issues. But how could practicing this trend benefit cash-strapped Canadians or people who want to achieve their financial goals? Let’s find out.
How do you practice loud budgeting?
You don't have to say no to everything that isn't penciled in on your monthly budget to be a loud budgeter, but you do have to have an idea of your financial priorities.
“You have to have goals to begin with,” says Lesley-Anne Scorgie, money coach and founder of financial education company MeVest. “Really think about maybe two or three things that you want to work on this year.” Scorgie says you could focus on objectives like topping up your RRSP, paying off debts, or improving your credit score, for example. Once you have your goals solidified, the next step is to create a monthly budget. (The Government of Canada has a free budgeting tool you can use as a starting point.)
“Once you have that budget, you can then communicate very clearly what's aligned and not aligned with it,” Scorgie says. Loud budgeters might practice saying things like, “sorry, that restaurant is not aligned with my budget, but can we try this one, instead?” Scorgie says this is a way of keeping yourself accountable to your goals.
Your social circle is another important part of this process, too. If you can agree on doing budget-friendly hobbies or activities together, friends and family could help motivate you to achieve your goals while living a financially-sustainable lifestyle. If you vocalize your goals like saving for a down payment, they might check in and ask you how it's going, thus keeping you accountable throughout the year.
Loud budgeting vs. soft saving
While loud budgeting emphasizes cutting back on spending and sticking to your money goals, soft saving represents a preference for finding fulfillment from things like hobbies, travel and experiences, more so than stressing about your financial future. “The reason for this is they want to enjoy their money right now,” Scorgie says. That's not to say that soft savers aren't saving for retirement at all, but that these kind of objectives take up less of their income.
As with all personal finance trends, though, it's important to consider your own financial situation and needs before joining the soft saving movement. “Just be mindful, because not saving enough for retirement could have the effect of an impoverished retirement in some cases, and that's not the dazzling future that you want,” Scorgie says.
She recommends striking more of a balance if you want to focus on experiences or hobbies while also ensuring you have some degree of financial stability. The budgeting "rule of thumb" is generally to save 15% of your income for retirement, plus 5% for short-term savings. If you're chasing more of a balance, Scorgie says you could save at least 10% of your earnings in total.
If you're aiming to travel or enjoy more experiences this year, try building a sinking fund or "fun fund." The most effective way to do this is to open a separate high-interest savings account (HISA), and set up regular contributions to it from each paycheque. You'll want to first plan out how much you need for fixed expenses like rent or debt payments, and then decide what you'll be able to set aside for your sinking fund. Scorgie recommends building other savings funds for things like pets or the down payment on a condo you're planning on moving into, for example.
If you know you have a big trip or large discretionary purchase coming up, you can work backwards by estimating the total cost. Then divide that by the number of months or weeks you have to save up for it. This will give you an idea of how much you have to save each month or week. Set aside enough money in your separate sinking fund for that goal so it doesn't get eaten up by discretionary spending on things like groceries or transportation.
Whatever method you choose, saving is key
Trends aside, saving is a key part of building a personal budget. “There are so many benefits to saving consistently, at a pace that is comfortable, but pushes you a little bit in the long term,” Scorgie says. So whatever budgeting looks like for you, start small and build your savings bit by bit to help you achieve your own financial or personal goals.