Today’s episode is about highlighting the difference between tracking and budgeting. Many coaching consultations focus on a client’s frustration with managing money. These six-figure earners are living paycheck to paycheck, struggling to pay down debt, and unable to reach saving goals. Most clients come to me with some sort of tracking system they use to “budget.” But listing out bills and tracking expenses is a passive activity. That isn’t budgeting.
To help explain the difference between tracking and budgeting, I share a client example. Tune in as I detail her journey from passive money management to proactive planning and saving.
Finally, I share three steps you should take to actively budget. Remember, effective budgeting isn’t about restriction. It is about naming and assigning every dollar to protect your future money goals, increase financial awareness, and spend in ways that are important to you.
During this episode I want you to ask yourself…
[18:00] As we think about the difference between tracking versus budgeting, I want you to ask yourself: Am I tracking or am I budgeting?
Tune in to this episode of Money Files to learn the difference between tracking and budgeting so that you can proactively manage your finances in a way that serves your money goals.
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
IF YOU LOVED THIS CONVERSATION ON TRACKING VS. BUDGETING – HOW TO ACTIVELY MANAGE YOUR FINANCES, CHECK OUT MY EPISODE ON THE CRITICAL LINK BETWEEN BUDGETING AND FINANCIAL AWARENESS!
Transcript for “Tracking vs. Budgeting – How to Actively Manage Your Finances”
Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work every day with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Hello and welcome back to another episode of Money Files. So today I want to talk to you about an experience that I just had with a client and I was thinking about, it’s one of the biggest shifts in thinking that help my clients get out of the paycheck-to-paycheck cycle, that help my clients start paying down debt, that help my clients save money, just helping my clients overall feel really in control of their finances when it comes to working with me in my five-month coaching container. So one of the things that when you come to work with me that I notice people do is that they are talking to me about how they track their money. So I want to give definitions for tracking. So when I’m thinking about tracking, I am literally thinking about how people literally just look at what they’ve spent, so you could do this by writing something down. You could do this by looking at your bank account, but you are basically just watching what I would say as like pass through. So you’re like, oh yeah, I paid that bill, or yep, I went out to eat but there’s nothing that you actively do with this.
So when I think about tracking, I see tracking as something that is passive and it’s why if you struggle with budgeting or you feel frustrated when it comes to managing your money, if you are tracking and you’re doing what I’m talking about, which is just like looking at what you’re spent, you are engaged in a passive activity that’s not giving you any direction for how you want to think about your money beyond today for how you want to think about your money in six months, for how you want to think about your money in a year and it’s one of the number one reasons that I see people being really frustrated when it comes to managing their money month to month and day to day because they’re just passively looking at it. So when I talk about the word budgeting, which you may hear me kind of use it interchangeably here, but when I’m talking about budgeting, I am talking about active money management. I’m not talking about the budget that you wrote that you don’t look at until the end of the month. I’m not talking about the budget that you one time wrote and you haven’t looked at it in the last year.
When I am talking about budgeting, I am talking about proactively managing your money because when I think about a budget, a budget is literally a tool that you can use to plan for how you want to spend your money in advance. A budget includes more than just bills. A budget includes all of the things that you want to spend money on and your budget, it’s a plan that you actually actively engage with, that you monitor. It’s flexible. A budget helps you also build financial awareness. So when I think about budgeting, budgeting is definitely robust. It’s not just putting a list of bills down and then tracking them and then being frustrated at the end of the month when you’re like, okay, I said I was going to save $100, I didn’t get to save the money. In fact, I am looking at how I’m going to pay my bills next week, like that for me is not what I think about when I think about budgeting so that’s tracking. You may have a budget template that you use somewhere, but if you are not using your budget as something that is a proactive tool, then I would not consider you someone who budgets.
So I want to tell you about a client who in the last couple of weeks that I’ve been working with, she did a consult with me back in January I believe. I just looked it up, she did a consult with me back in January and she wanted to invest in coaching because she made six figures. And she’s like, I’m feeling really frustrated by the amount of debt I’m in. I feel like I should be able to do more with my money. And so on our consult, I was telling her, because we were talking about investing and coaching, one of the things that I was telling her, I was like, this is going to be the least amount of money that you make in the lifetime of your career so by engaging in this work now and understanding your numbers, you are going to be able to be in control for the rest of your life because this is literally the least amount of money that you’re going to make.
Also, she makes good money and so when she was telling me about her expenses on our consult, like this is why I love doing a 60 minute consult is because I get to learn more about you and in her case I’m like, oh my goodness, you have excess money. I know you don’t see it, but you have excess money that can allow you to pay down your debt. It can allow you to be able to go out with your friends and enjoy dining out and also have money for home repairs. So as a six figure earner, one of her goals was to be able to pay down her credit card debt because she had five figures worth of credit card debt. Another thing that she wanted to do was to be able to have money for like home renovations. And then she also wanted to be able to save, like she felt like she’d never been able to save money and so you know, especially if you’re listening to this, if you make good money that struggle, that internal struggle of like, oh my goodness, I should be able to make money or save money or I should be able to go travel with my friends but feeling like you can’t do that.
So she really wanted to be able to feel the flexibility she felt like her salary should provide her but wasn’t providing her. So in the five month coaching partnership, we budget, like I help you actually create a budget. This is something that we actively get to do together. So this client and I, we have created a budget for her. Remember a budget is something that you actively manage and it’s more than a list of bill, so when we look at her budget for her, we have her bills, like those are important to know. We also have savings and so she has actually different levels of savings, like we’re saving for the home repairs that she wants to do. She has a pet so we started to make sure that she has money for boarding or any vet emergency that might come up. She also has started to think about holidays and also different seasons in her life with friends getting married. So her savings is expansive, it’s not just like an emergency fund. We’re saving for the rainy day and in case she has an emergency, but we’re also saving for parts of her life that make her who she is and that bring her joy and then the last like bucket within her budget is also spending money.
When I’m thinking about spending money, I’m thinking about how you spend money day to day, like if we were looking at the seven days in the week. So you got gas, you have trips to Target, you have Costco, you have groceries, you may take Uber. So it’s how your money moves more day to day and it doesn’t look like a set bill. So one of the things that we’ve been working on in the partnership that we are in right now is she wants to get a clearer line of sight on how she’s spending money day to day. She wants to go from just tracking to making sure that she’s actively budgeting and so she’s able to pay all of her bills, none of her bills are late, like that’s not a problem she’s able to save and so we’ve automated some of those things. But one of the things that we’ve talked about is we want to really lean into her goal of being able to pay down debt and we do want to lean in more to her goal of being able to save a specific amount of money and then I also added a goal for her where we want her to also be set up to pay back her student loans, which we don’t know exactly how much they’re going to be because she recently just got out of school and covid and forbearance.
So we’re not exactly sure what they’re going to be, but we wanted to make sure that they’re in her budget. So she’s clear on whenever they send me a bill, I know that I don’t have to be stressed about the amount of money that the government could ask for me because I’ve already started to think about that. So one of the things that we’ve been working on is helping her protect her goals, her financial goals of paying off debt and so what I see with clients is that, I was just talking to another client the other day who was like, gosh, Keina, before I was working with you, I was making $1,500 payments to my credit card but my credit card wasn’t going down, but that’s because I was also charging another $1,500 and she’s like, now I’m allocating in my budget to overpay my credit cards and it just feels so much clearer.
So with this client, like we’re trying to make sure that she has that clarity as well so she can protect the goals that she’s set and a lot of times what infringes upon the goals that you’re setting for yourself is how you’re spending money day to day. So she asked me in one of our last coaching calls, she was like, you know Keina, I think I want to go back to tracking and now I need to give you a new definition. So when I ask clients to track their spending, I actually do it within the first couple coaching calls and I ask them to track their spending just to start building financial awareness. So it is literally just a list of how they’re spending money and I want them to think about their emotions. I want them to think about did they charge it, did they use cash because they start to learn about themselves, they learn about trends, about their spending habits, they learn about the things that maybe we need to include in the budget.
So it’s really just an awareness activity. It’s not budgeting. So she said she wanted to go back to tracking and so I was asking her why and she’s like, I just feel like I want to know where my money is going. So what I actually did was I said, you know what, let’s make this even clearer for you and let’s work on the skill of planning ahead, but let’s do it in this micro-focused way where let’s actually plan ahead for your week. So we looked at her budget that we had just reconciled and we looked at how much money she had in her spending plan for spending money before her next paycheck. So we came up with a number of like $200. I said, okay, $200, like in between now and the next five days, which was like when she got paid again, I said focus on staying within this like $200 and how I want you to focus on that is by planning ahead.
So I took the tracking tool that I have in all of my clients’ financial plan and reworked it so she knew that you have $200, now let’s actually walk through what’s happening. I think we did this on a Thursday. So we were going into the weekend, which all of you know what happens on the weekend, you don’t want to cook, you’re outside, like all of these things. But I was like, just tell me what’s coming up for you this weekend and let’s start to see how this is in alignment with the $200 of discretionary spending you want to do. So she knew that she had an activity with a friend, she knew she’d be eating out, but she did this activity for five days and the goal was for her to stay within that $200 spending limit if you will but she actually spent $300, which is not a problem at all. But there were gifts that she gave herself by taking the time to plan ahead, she was actually stopping to think before she spent money.
So we literally made a plan for like, okay, what’s coming up for you on Friday? What’s coming up for you on Saturday? What’s coming up for you on Sunday? Are you going to be grocery shopping? Are you going to be eating out? And these are just things that you do every day, like we spend money every single day, but sometimes we don’t stop to think about the overall impact of it and this isn’t something that maybe you need to do all the time, but it’s a good marker to come back in and check in on because these are where you feel like, oh my goodness, money is slipping through my fingers when you’re ordering $80 worth of DoorDash but then you bought a hundred dollars worth of groceries but you’re not cooking what’s in your refrigerator. So if you were taking the time to actually think about what’s coming up in your life, you’re like, oh, I’m actually not supposed to be home much in the next five days. So it makes sense that I’m eating out. I’m actually not going to go to the grocery store because I don’t want to double spend on food, like that’s how I use this tracking method with my clients and how I think about helping them.
I’m using air quotes, “stay within their plan” because I feel like that’s what my clients say or like they want to stay on their budget and it’s by helping them stop and think about their choices before they actually spend money. Because we spend money and we don’t even think about it because it’s just a habit. We don’t think about the influence of social media on our spending. We don’t think about the sensation we get going into Target and being able to throw things into our cart. I know my guilty pleasure is going to the grocery store because I’m like, this is free money I have to have food. But being able to just stop and think about why we’re spending or do I actually need to spend money on this? Was this within my plan? And those are just bringing a level of consciousness to what you’re doing. It’s not about judging yourself on whether or not this is a good expense or a bad expense, but it’s just like I said, building that overall awareness.
So going back to my client, she had a goal of $200. She actually spent $300 and on the next coaching call I was asking her like how did it feel? She had some really great reflections of like, it felt really good to actually track and plan in advance her spending. So we almost had like a little mini budget within her budget to help her see where her money was going. She spent a lot less money than she would have spent if she hadn’t have done this exercise. I know some of her takeaways were that, like I said, she loved being able to plan in advance. She actually doesn’t have a car, so she uses a service called Zipcar. So one of the things that she noticed was like, oh, I probably actually want to put more money aside for Zipcar when I actually want to use it to like be able to get through the city. And then she also said that she was more intentional about her choices. So specifically this came up with actually eating out and she was sharing that one night she wanted to order ice cream and that was something that she may usually DoorDash to herself and she was like, I didn’t plan for that. So instead of spending $20 on some ice cream and feeling nasty in the morning because I just down some ice cream, I’m going to just go into my kitchen and get something that’s easily accessible to me.
So then we started to talk about like how this also touches on some of the health goals she had and she just felt really good that she made the decision not to eat ice cream and just ate something within her house because she felt better about her choices in the morning. And really just the choice of not feeling gross from eating ice cream, in addition to the fact that I didn’t blow $20 getting some ice cream DoorDash to me and because of this exercise, she was also more aware of mindless spending. So the door dashes or Target or being influenced by social media and thinking she needs things that she doesn’t need and then also just seeing and making connections on how her day-to-day choices are helping her pay off her debt quicker. So this is like the power of budgeting and it’s also the power of working with a coach because you could actually learn how to actively manage your money, but part of the active money management is some way, yes, math related, you want to know, okay, if I want to spend $200, what are the things that are going to add up to $200?
But it’s also understanding what’s going on in your head and how do you think about your money and how are you feeling that’s making you spend money and the benefit of going through an exercise like this, especially within the five-month coaching container, is that you get to reflect on it and think about what are my takeaways? Notice I haven’t said a lot about the fact that she spent $300 instead of $200 and she actually didn’t go over a budget because she had more money in her spending money that she could use to adjust, like it wasn’t actually a problem that she spent $300. That wasn’t also why we designed this exercise for her. We designed it so that she could feel more in control of her day-to-day spending and that’s always the goal is for clients to feel in control because what all of my clients have in common is that they want options. They want options about how they can spend money and they don’t want to feel guilty about it. So it’s not about judging yourself.
So if you thought or you’re thinking about working with me and you’re like, I don’t want to be a judge, girl, this is a judgment free zone. This is really about helping you feel good about the financial decisions that you’re making and for you not to waste another year trying to figure it out, I want to help you make that forward progress. So as we think about the difference in between like tracking versus budgeting, I want you to ask yourself, am I tracking or am I truly budgeting? So the difference, remember if you’re tracking, you basically have a list and you watch where your money goes and you check it off. If you’re budgeting, that means that you are actively managing your money, you are clear on your bills, you’re clear on your savings goals, you’re clear on what you’re spending money on. So what I would just call like discretionary funds, like it doesn’t touch your bills, it doesn’t touch your savings goals. I put debt just to be clear, like debt payoff stuff, I put that into bills because we can build that system in.
So are you tracking or are you budgeting? And if you’re listening, you’re like, Keina, I want to actively budget. Well first off, you should already be working with me, so go to www.wealthovernow.com/appointment or the show notes and book a consult with me. But also if you want to start actively budgeting, there are three steps to start doing that. So the first step is like create a budget. In the show notes, I will link a podcast about how to think about your budget. Like I want you to give every single dollar a name, that is important. Step two of actively budgeting is to schedule weekly money dates. Put them on your calendar so you can actually see, this is what I said I was going to spend, here is my plan for the week. Now let me see, did I follow my plan? Is there anything that I want to change? What can I continue doing? What am I celebrating? Like that money date is going to help you make sure that your budget is active and it’s not just something that lives somewhere that you don’t ever check in with.
With my clients and in my five-month coaching partnership, like we are doing those money dates together, we’re reconciling the budget, we’re setting goals for where they want to be next week. We’re looking at credit cards to make sure that they are actually obtaining their goals in terms of paying off credit card debt or saving for taxes, our coaching calls are really a built-in money date for them. And then step three, if you want to actively budget. So if you have a budget, I want you to take a bite-sized piece of your budget and monitor it. So if you said like, I want to spend $500 a month on groceries, $300 a month on eating out, that’s $800 a month. So if you were thinking about that, okay, that’s about $200 a week. So monitor, am I within that $200 average or range, that can help you see like do I have a realistic grocery and eating out budget? What do I notice myself doing from week to week if it’s $200? You can also think about, do I want to grocery shop this week or not grocery shop this week?
So do I want to be eating out or not be eating out this week? But those are the things that you can start to ask yourself if you go ahead and pull out a smaller part of your budget to actively monitor. Because if you’re pulling out that smaller part of your budget to monitor it, what it’s going to do is it’s going to protect your other financial goals that you set. Whether it’s like my client, she wanted to pay down debt, she wants to save money, she wants to have money for like a home renovation and so if we’re able to monitor these smaller pieces of her budget that seem to fluctuate, it means that her other goals are going to be protected and she’s going to reach her goals sooner.
So thank you so much for tuning into this week’s episode and I’m inviting you to work with me. So if you are interested in getting out of the paycheck-to-paycheck cycle and starting to feel in control of your finances, go to the show notes. You can book a 60 minute call with me, which is a consult, and I will learn more about you and we will talk exactly about the plan to get you from where you are now to where you want to be with your finances and have a great day.
Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
