35 minutes | Sep 7th 2020

#060 | Budgeting vs. Tracking Expenses

Play Next
Mark Played

We both focus more on tracking our expenses vs. budgeting.  We thrive on spending as little as we can, though Maggie does splurge more than Mike does and Maggie believes in spending top dollar in some categories of her life.  Although we focus on tracking expenses, we know a lot of people who really focus on setting and keeping to a budget.  

If you’re budgeting, then you’re tracking to some degree as you need to do that to know if you’re meeting your set budget.  But you could decide to only track, and not set a specific budget goal.  


  • Setting a dollar limit for categories of expenses you can spend in a time period. Typically this is based on your income, but can also be for one-off or special purchases.
  • Pros:
    • Helps develop discipline by creating a goal.
    • Can help alleviate the guilt of spending money if you give yourself permission to spend up to that budget.
  • Cons:
    • You’ll always spend right up to or over your budget, even if you don’t really need something.  
    • While helping create discipline to do so later, it doesn’t by itself drive better performance over time.
  • Best to use this method if...
    • You don’t have a lot of discipline, and you know you need and do better with clear boundaries.  
    • You’re on a fixed income.  
  • Systems:  Dave Ramsey envelope, YNAB, Mint app, personal capital, etc.

Tracking Expenses:

  • Cataloging every expense you have, reviewing it regularly and changing your spending habits because of it.
  • Pros:
    • Creates a tool for continuous improvement. 
    • Creates a great record of expenses for research or comparisons
    • Allows you to better forecast your income needs in the future, which is an absolute requirement if you’re interested in FIRE.
  • Cons:
    • Sometimes makes it hard to splurge if you’re constantly measuring yourself against previous months or years. 
    • Time consuming
    • Tedious
  • Best to use this method if...
    • Budgeting hasn’t worked for you in the past.
    • You can’t explain where your money is going.
    • You have aggressive financial goals.
    • You’ve already established some level of discipline. 
  • Systems:  Manual spreadsheet like we do, Mint app, personal capital, etc. 

Top 3 Takeaways:

  1. These are two different ends of systems and approaches, and they each have their benefits.  Think of them as a progression. Move from budgeting to tracking as you establish discipline.
  2. Budgeting is easy, but the results can be mixed. Tracking is hard, but the potential is huge.
  3. Whatever you decide, you need to understand where your money is going. Until you establish a method to improve your spending, chances are it will continue to get worse because the economy is set up to get you to spend more and more.


Show References

Personal Capital


YNAB - You need a budget


Follow friends on FIRE





Leave us a voicemail or text us: 404-981-3370

eMail us at:  friendsonfiremm@gmail.com

Visit our website: www.friendsonfire.org


Other Links

Maggie’s Blog: Mostly Minimal Life

Mike’s Book: Your New Relationship with Money

Play Next
Mark Played