The difference between expense tracking and real budgeting

 

darts with money
Hit your target spending goals by using these three steps to set a budget.
Credit: Colourbox

YouNeedABudget.com director of outreach Mark Butler gives three steps to establishing a budget.

“Track your expenses,” said every financial guru who’s ever posted on a blog or wrote a book. It’s sound advice; keeping a record of what you spend is definitely better than not. Expense tracking is especially beneficial if you’ve never budgeted before. After years of blind spending, the simple act of recording the outflow raises financial awareness and inspires more thoughtful spending habits.

The problem comes when tracking expenses becomes routine (or automatic, thanks to free online tools). The early buzz of knowing where all your dollars go begins to wane. You slide back into your old spending habits in spite of your carefully maintained transaction history. That’s why it’s crucial to understand the difference between expense tracking and real budgeting. Expense tracking tells you where your money went; budgeting tells your dollars where to go.

One is reactive and backward-looking, while the other puts you in the driver’s seat, focused on the present and future. If you’ve been a steady expense tracker, pat yourself on the back. It’s an excellent habit. Then use your discipline and your transaction history to develop a real budget that puts you in charge of your dollars.

Here’s how:

Step 1: Use your detailed transaction history to get an idea of how much you spend in each area of your life. These are your budget categories, and your spending records give you a reasonable guess at how much of each paycheck you need to assign to each “job” in the budget.

Step 2: Identify your most important financial goal and give it a prominent place in your budget. Decide how much of each paycheck you’d like to assign to the goal.

Step 3: Every time you get paid, assign dollars to your biggest goal first, then divide the remainder among your other needs and wants.

It’s a simple process that creates powerful, unexpected results: By maintaining a budget in which you’ve assigned all available dollars to your needs, wants and goals, you’re able to see how they compete with each other (for example, how new clothes delay your European vacation).

Once you see that reducing spending in one area of your budget frees up cash for other goals, your total spending shifts into alignment with your real values. It feels like magic; many new budgeters report feeling like they got a raise. All because they put all their needs, wants and goals in front of them and made careful decisions about how many dollars each “budget job” deserved. And that’s why you want to make the transition from a backward-looking expense tracker to a forward-looking budgeter. Your goals will thank you.

Mark Butler is the director of outreach for YouNeedABudget.com



News
Entertainment
Sports
Lifestyle
National

US military tried, but failed to rescue journalist…

The U.S. military earlier this year tried to rescue journalist James Foley and other American hostages held in Syria ,but failed to find the captives.

National

Fate of captured beluga whales in hands of…

A Georgia aquarium went to court on Wednesday seeking federal permission to bring 18 captured beluga whales to the United States from Russia.

Local

After Eric Garner death, religious leaders meet to…

Interfaith leaders convened with city officials to discuss what the community can do to help dial down heightened tensions after Eric Garner's death.

Local

'Suspicious' Hamilton Heights fire caused by power strip:…

An extension cord overload caused the deadly fire in Hamilton Heights late Monday that killed a 15-year-old girl and injured at least 12 others.

Television

'So You Think You Can Dance' recap: Season…

And then there were six. It was a big night on stage as the Top 6 got to dance with each other, All-star partners and perform a solo routine.

Going Out

5 things to do in NYC this weekend…

FILM Lebowski Fest Aug. 22-23, 8 p.m. Various locations, Manhattan $20-$30, www.lebowskifest.com The Dude abides — for 48 hours to celebrate the 1998 Coen brothers classic.…

Television

'Doctor Who' personality profile: the 4 Doctors

When the time comes for a new Doctor, there's always some anxiety over the big question: Who will he be? The series owes its longevity…

Television

Billy Crystal to commemorate late actor Robin Williams…

  Comedian Billy Crystal will pay tribute to late actor Robin Williams at television's Primetime Emmy Awards on Aug. 25, the show's organizers said on…

NFL

Giants expected to work Corey Washington into first-team…

The day of reckoning for the Giants' fringe players will fall upon them Friday night against the Jets.

NFL

Jalen Saunders still unsure what caused car accident…

Jets rookie wide receiver Jalen Saunders spoke to the media Wednesday for the first time since his car accident, but he didn't say a whole lot.

NFL

2014 Fantasy Football: Rankings, list of top NFL…

2014 Fantasy Football: Rankings, list of top NFL defense (DEF)

NFL

2014 Fantasy Football: Rankings, list of top NFL…

2014 Fantasy Football: Rankings, list of top NFL quarterbacks (QB)

Sex

Online dating for every generation

Frank Jackson and his mother Maggie are like lots of modern families: They have dinner together regularly, keep each other updated on their lives —…

Wellbeing

Going green could be the key to getting…

If we could just pursue the things that would actually make us happy, we could help the environment too, according to a New York researcher.…

Wellbeing

Metabolic syndrome could have a sugar link

Scientists in St. Louis may have found another culprit in metabolic syndrome, which can lead to heart disease and type 2 diabetes.  Uric acid is…

Wellbeing

Another way stress hurts your unborn baby

Mothers know to try staying calm during pregnancy, as stress has been linked to behavioral and developmental problems for their babies. But now, a new…