Budgets Are Useless, Try Tracking Instead
Some of us step into the new year with hope-filled new year resolutions and bid good riddance to 2020. If you are more of a traditional type, perhaps you might have a bucket list of to-dos that you wish to tick off during the year. Nothing fancy, just the yearly oath that you promise to take actions in the year such as spending lesser time on social media, practicing a healthier lifestyle, reading more books and maybe this year you might be thinking of adhering to a budget to keep yourself accountable.
Perhaps you might have heard of the 50/30/20 budget, the renowned “zero-based” budget, using excel or even the conventional envelope budget, and is keen on trying either one. Regardless if this is your first attempt or the fifth attempt, hold it right there. Budget is a method used to keep yourself spending under a certain limit. It is very restrictive, and often it does not consider changes in lifestyle. When you are asked to not think about the pink elephant, all you can think about is the pink elephant!
Let’s be honest, budgets are counterproductive.
The main difference between a budget and tracking expenses is that with budgeting you are deciding where the money goes before you spend it, while the latter is figuring out where the money went after you spend it. Budgeting makes most people cringe, because of how restrictive and stressful it can be. Tracking expenses on the other hand, can be done easily with a plethora of apps available. You can automatically track expenses via apps on your mobile phone which is just one touch away, and then perform a monthly, quarterly and yearly review to reflect on your spending habits.
Once you have the figures of your average monthly expenses, have a system in place to save and spend, and keep things on autopilot. No shame on being lazy here. Turning on auto transfer for rent, bills, loan payments and savings goals can ensure you have your necessities covered, while leaving room for buffer. Just like how you occasionally have a guilt-free Netflix binge-watching marathon, leaving room for fun is vital in keeping your sanity. Restricting will only make you resent more.
Tracking can help identify “blind spots” especially if you have spending issues. Knowing the detailed cash flow can help increase financial awareness and reveal unnecessary bad spending habits that is sabotaging your financial goals. Say if you have decided to splurge on yourself for getting through a hectic work week with a nice meal out, but while at it you decide to go ahead and shop for new apparels, gears or other accessories. And this happens almost every other week. When you start treating your wants as needs, your mind will start justifying your splurge unconsciously. Stop sabotaging yourself!
When tracking expenses, although it can be tempting to stop as soon as you realise you have overspent, I urge you to continue. It must feel frustrating to have to consistently track your expenses knowing you are way off your goal. But it’s more so vital to keep tracking so you can identify areas to change and improve in the long run.
