Most financial advice you see on the internet is focused on tracking expenses or starting a budget before saving money.
But building a savings fund first can be a more realistic goal than tracking expenses.
Why?
You’ve got to start somewhere.
Saving Money Doesn’t Have to Be Difficult
The financial planning process can be a wake-up call for many, mostly because people tend to have multiple revelations as the process unfolds.
Recently, a client emailed to tell me she was surprised at just how much money she spends. As I told her, this is a normal reaction for someone who is getting acquainted with their financial picture for the first time.
If most people took a look at where their money goes, they would also be surprised. Unfortunately, most people never bother.
Still, I told this particular client what I tell all my clients – that tracking your spending is important, but not nearly as important as saving money.
Further, you don’t even need to track your spending to reach your savings goals. Saving money doesn’t have to be difficult. You can make saving money very, very easy.
Heck, you can even use our own financial planning software to track your spending.
Saving Money Is More Important Than Anything Else
If tracking your spending and reaching your savings goals (at the same time) is the ideal scenario, what happens if you can only pick one?
If I had to pick between the perfect answer and a good answer, I’ll pick the good answer every time. Why? Because most of the time, picking the good answer is easier. And when something is easier, it’s also more likely you’ll stick with it for the long-term and continue building the habit.
If you focus on the perfect answer (i.e. tracking every penny of your spending and saving money), it will may never happen, especially if it seems overwhelming to even start.
Simply put, tracking every penny can be too much work. Most people simply don’t have the time, the energy, or the commitment to meticulously track their spending, even with all of the apps available these days.
But, the good answer in this case is easy. Instead of tracking your spending, all you have to do is set up automated savings.
When you set up automated savings, it barely matters how much money you spend. With automated savings, you’ve set yourself up to reach your savings goals with minimal hassle or stress.
Most of the time, your savings goals were the impetus for tracking your spending anyway. But, you can achieve your savings goals without all the work.
If you have a plan in place to ensure you’re saving enough money automatically, then the value of budgeting and tracking every purchase becomes negligible.
Can’t Decide? Why Not Do Both!
If you find you’re overly excited about the prospect of listing and tracking your expenses, go for it! There is nothing wrong with tracking your expenses if it helps you stay on track with your goals.
Plus, many people who start tracking their expenses gain valuable insights from the experience. By tracking expenses, you may find areas of your budget where you’re spending more money than you planned. You might also discover you’re paying for things you don’t even care about.
Either way, you can use this information to tighten up your spending and eliminate waste. Obviously, eliminating wasteful spending will be a boon for your finances since it will leave you with more money to save.
But, before you whip up an Excel spreadsheet, consider creating an automated savings plan first.
With your savings on auto-pilot, you’ll reach your goals no matter what you buy or how much you spend. Since human energy and time are both finite, make the most important financial planning moves first.
The moves that set you up for success are the ones that will have the greatest impact on your finances over the long haul.
