Many people who are wanting to improve their financial situation begin by tracking transactions. This is actually a very helpful first step as it allows you to see more clearly where your money is going each month and potentially identify areas where you may be overspending.
So how is tracking transactions different from budgeting? I like to think of it this way: Budgeting happens before you spend money while tracking happens after you have spent money. Thankfully, there are many tools available that will help you do both.
As I mentioned in a previous blog post, I use Goodbudget which is a budgeting software which incorporates a virtual envelope system. When my husband or I get paid, I use the app to allocate a certain amount of money into each of the virtual envelopes (aka budget categories). Before I make a purchase, I can pull up the app on my phone to see how much money I have left in the envelope that would cover that purchase. This helps me stick to our budget and reduces the temptation to overspend. I highly recommend finding an app that works for you. Treavor mentioned several in his blog post about Mint alternatives.
Budgeting allows you to be very intentional with your money. You’re not simply looking back at how you’ve spent your money. You’re determining ahead of time how you will give, spend, and save your money. This can give you an amazing sense of peace regarding your personal finances because you have a plan that lines up with your financial goals and values.
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