There seems to be a flurry of activity these days when it comes to conversations about personal finance management. What applications are best to use, what are the best methods of tracking your finances, who has the slickest tools, account aggregation, etc. Two and a half years after creating BudgetSketch, it amazes me how little this conversation has changed.
When we set out to solve our own personal finance issues, it became painfully clear to me that tracking expenses alone was an almost fruitless exercise. My wife and I tried many personal finance management tools, but they all did the same thing… tracked my spending. I would look back at what I spent last month, then still scratch my head as to why our money was just gone. I could see things like a hundred dollars for the month being spent at the local coffee shop, but nothing about that information told me if I could afford it or not, only that I spent it. It all seemed so reactionary and frankly frustrating.
“Putting the cart before the horse” is a common phrase meaning to reverse the accepted order of things. This statement is also an example of a hysteron proteron in Greek, in grammatical terms, meaning a figure of speech used to describe a thing that should come second, but is put first. We’ve all said, “Put on your shoes and socks” to our kids, but we all know that you must put your socks on first before your shoes.
The same applies to personal finance. We spend so much time focusing on the need for expense tracking (“The Cart”) that we fail to see the Cart is really useless without “The Horse” (a Budget). It began to dawn on me that my plan for how I will spend money is the first thing to establish, then I should track how well I’m doing against this plan.
Expense tracking has it’s place in our arsenal of tools, but only implemented to help validate how well we’re sticking to our Budget plan. So it has to make you wonder why there are so many tools focused solely on expense tracking with a spending alert feature masquerading as a budget. If you’ve reached that conclusion… you’re not alone.
The saying is best said, “Never put the cart before the horse”, so why do we try and manage our financial lives this way? Take hold of your financial future by taking the reins and tell that horse where to go. Establish a solid budget plan and stick to it, and only look back long enough to validate how well you’re moving forward.
It’s time to change the conversation about personal finance and get real about solutions instead of allowing ourselves to be convinced by who has the best pie charts. Personal finance is about a plan, everything else is a support mechanism for that plan.
It’s time to change the accepted order of things… one budget at a time.