Budgeting vs. daily expense tracking
Budgeting and daily expense tracking are two different approaches to personal finance.
They sometimes go hand-in-hand in certain apps (but not in Build My Wealth), where you create a budget and then track expenses to determine whether you’re still within your budget or not.
They can also be done separately. You can track your expenses for a few months to see your average spending in each expense category. You can then use this information to create a realistic budget and stick to that budget without tracking your expenses — this is what we promote in Build My Wealth.
Daily expense tracking involves:
Tracking your income
Tracking where you’re spending your money
Adjusting your spending the next month
Meanwhile, budgeting involves:
Tracking your income
Planning what you’ll save your money for
Planning where you’ll spend and save your money
Dividing your income according to your budget
Adjusting your budget the next month
The main differences between daily expense tracking and budgeting are:
The amount of control you have over your finances
As we all know, daily expense tracking happens after you’ve spent your money.
You’re trying to figure out where your money went.
This gives you little control over your finances because the money was already spent.
On the other hand, budgeting requires you to plan ahead.
You’re supposed to plan what you’ll do with your income before it even arrives.
This gives you more control over your finances because you have time to think and decide where your money will go.
The amount of time it takes you to implement
As the name suggests, daily expense tracking is easier implemented when you do it on a daily basis. The time it takes to track expenses depends on the average amount of your daily transactions.
The difficulty level of this can increase if you don’t do it everyday. This is why a lot of people stop tracking their expenses. Sometimes, it’s hard to keep up.
Meanwhile, budgeting takes a significant amount of time when you’re doing it for the first time. This is because it requires a lot of planning and brain cells.
However, once you’ve created your first budget, you’ll only need to update it once or twice a month. You’ll only need to adjust it if something significant changes in your life because we tend to pay the same bills each month.
Hence, in the long run, budgeting takes a lesser amount of time to implement than daily expense tracking.
The things you focus on
When tracking expenses, we tend to focus on:
How much money was spent on take out
How much money was spent on online shopping
How much money was spent on things we don’t actually need
When budgeting, we start to focus on:
How much of our income we’ll save for retirement
How much of our income will go to paying off debt
How much we’ll be able to save for our current goal (e.g. wedding fund)
How much money we’ll save for self-care
How much money we’ll save for self-development (e.g. books, courses, etc.)
The mindset we develop from these two approaches to personal finance are quite different. Which of the two do you prefer?
Our take on budgeting vs. daily expense tracking
Due to the many advantages of budgeting over expense tracking, we, at Build My Wealth, prefer the former over the latter.
Because we believe if you want greater impact with less effort, you should manage your money before you spend. Not after.
This is one of the reasons why we built the app.
There are so many apps out there that allow you to track your expenses on a daily basis.
But so few can help you create a zero-based budget, track goals, and track your net worth.
If you’re ready to ditch expense tracking and start budgeting, check out the Build My Wealth app!
