10 years ago if people asked me if I was budgeting, I would have answered yes. But I wasn’t budgeting. Rather I was tracking expenses at the end of each month. I think I was using Mint or Quicken. I would download my transactions and then quickly categorize everything and see where my money went.

This is backward-looking.

I’d notice if I overspent in a category or spent too much money somewhere else and notice that I didn’t save anything or didn’t pay down debt. Every month was the same thing. No progress with my finances and usually steps backward. 

Most people fall into this category. They say they’re budgeting but they’re not.  They are just tracking expenses. Yeah maybe they’ve set spending limits in certain areas but at the end of the month is when they are first looking at to see if they’ve overspent in those categories. The end of the month is too late to make a change to get on track.

True budgeting happens when you create your spending limits in those categories. The categories you need to spend money on for that month and you track your progress as you go through the month to make sure you don’t overspend in certain areas and to make sure that you hit your saving goals.

It’s not a set it and forget it type of thing. Budgeting is an active process that you have to look at weekly, and sometimes daily when you’re first starting out to make sure that you’re going to stick to the budget that you set.

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