Stay the Course
If I had a nickel for every time I have been asked “What’s a good budgeting app?”, well, I guess I would have a lot of nickels. Not sure what I could buy with them… As I have written before, I’m not overly enthusiastic about apps that track your spending. Using one probably won’t hurt you, but there is a good chance that it won’t especially help you either. More data does not necessarily translate into more knowledge.
Quite often I talk to people who are not living “paycheck to paycheck,” as they say, but still yearn for that thing they call a “budget.” What they are seeking is a way to assert a semblance of control over their spending. To not just have visibility over where their money is going (from an app), but confidence that they are spending and saving “the right amount.” What they feel the absence of is some kind of alarm to alert them when they have gone off track. Like the noise a car makes when you begin to drift out of your lane. Is there an app for that? Probably? But I have a better idea…
Rather than track your spending, track your saving. Emphasis on the “ing” that makes the word a transitive verb.
Your starting point is your savings goal. I’ll use retirement as an example, but it could be anything. The upfront work is perhaps the most complicated step. At the end of your working career, whenever you wish for that to be, what dollar figure do you need to see in your retirement account(s)? There are a plethora of assumptions and more than a few nuances that feed into that calculation, and of course you can engage a professional to help you arrive at the number. But honestly, a simple online calculator like this one is an excellent first step to at least get inside the ballpark.
With your goal number in hand, it is a quick step to determine the monthly amount that you need to put aside to reach the goal. (Here’s a calculator for that.) Write that number down.
The thing that you will assiduously track every month is whether you have indeed invested the dollar figure that you wrote down towards your retirement goal (in your workplace retirement plan, for example).
Now, rinse and repeat for your other goals…a house downpayment, college savings, an emergency fund, a new car, etc.
1. Quantify the end goal.
2. Calculate the monthly contribution to the goal.
3. Track whether you are making a full monthly contribution or not.
That’s it. You don’t even need an app for that.
Yes, I have over-simplified. I did not discuss the ordering of goals if your cash flow is such that you cannot fund every goal simultaneously; that’s a different discussion. (Spoiler Alert: emergency fund always comes first.) But the process is unchanged.
Let’s get back to budgeting apps. What if your saving goal exercise reveals that you do not have the cash flow to meet the specified monthly contribution(s)? What if you have debt? If your proposed solution is to spend less (rather than adjust the goal downwards), then indeed some people may find that an app that displays their spending is helpful…but only if you have beforehand set a (realistic) limit for spending. (I think they call that a “budget.”) Seeing a colorful graph that shows that you spent $150 on food delivery last week is completely meaningless without the context of having earlier quantified your intended food delivery spending. And you can’t come up with the “right” number for food delivery if you haven’t — you guessed it — quantified your savings goal first. Knowing how much to spend flows directly from knowing first how much to save.
The conversation that I want you to be having, with yourself or your partner, is not about how much you’re spending on take-out and streaming services. I don’t even want it to be a conversation about the level of the S&P 500 and what that portends. Only this: Are you hitting your monthly saving contribution goal?
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