You Don’t Need a Budget
You Need a Net Worth Habit
In my younger days, I was a budget man to the core, lived and breathed it. I looked down from my high tower, budget in hand, at all the peons crawling around below me in the mud and dirt.
In retrospect, it’s probably the path that needs to be walked down.
You learn self-discipline, how your money works at a minute level, the ins and outs of living within your means, and how not to spend more than you make. Simple stuff, yet hard. It’s not often that you can get control of your money without knowing where it is going.
I mean, not many people stick to a budget anyway, according to the internet, which we can all believe, right?
Most people don’t fail at money because they’re careless, or even because they don’t have a budget. According to the stats, most people do have some sort of budget. It’s because they can get into the wrong mindset.
They’ve tried budgeting apps.
They’ve color-coded categories.
They’ve promised themselves this month will be different.
And then life happens.
The budget breaks.
They feel guilty.
They stop looking.
So let’s say the quiet part out loud:
Budgeting isn’t broken — it’s just the wrong primary tool, maybe being used in the wrong way. Hey, don’t get me wrong, I still use a budget every month, and probably update it once a week, still, after all these years and all this time. But money was as as as “Hey do a budget,” than anyone would do it.
Budgets are significant; they help you know when things are out of balance and what needs course correction. BUT, if you spend all your time working on budgets and forget the bigger picture, or forget to work on the bigger picture, you might not end up where you think.
Net Worth Changes the Game Entirely
Net worth is brutally simple:
Everything you own — minus everything you owe.
No categories, no judgment, and no performative discipline. It’s easy to figure out, easy to figure out which way your net worth is going. It’s so simple that anyone can do it, and compared to budgeting, it doesn’t require much “work.”
Just reality. And reality has one question:
Is the number moving in the right direction over time?
Sure, we could sit around going over every single budget category in detail, but never look at the big picture. Simple questions like “How much money am I putting into investments every month?” Are my investment accounts increasing as I need them to?
If the answer is no, then you need to reduce expenses and increase savings.
That single metric (Is my networth increasing, and at what rate??) captures:
Spending habits
Debt decisions
Investment behavior
Lifestyle creep
Income growth
All without micromanagement. Look, you want to do a budget? Fine. I still do a budget, but you also need to move on to reviewing how many coffee transactions you did last month. You need to understand the trajectory of your net worth.
Why Net Worth Tracking Works When Budgets Don’t
I think that personal finance has a lot to do with the human mind, more than the math. If it were all about the math, no one would be paying credit card interest, have $800 car payments, and keep student loans around for 15 years. So, if it isn’t all about simple math, what is it about?
It’s about the human mind.
Yeah, I know budgets are essential, and they are the best entry point into getting control of finances and understanding how you are spending your money. They are the perfect 101 on how to win with money.
But you have to graduate beyond simple budgets, as the throne you worship at, after a while. Net worth tracking is different.
Tracking net worth …
Shows you for real, are you winning long-term
What you can expect the future to look like
If you need to make significant changes or not
You can find out immediately, at a high level, whether you have too much debt, since you must subtract all debt from your net worth calculations. You will find out if your income is just not enough for your current lifestyle. You can see if you are not saving enough by checking whether your year-over-year net worth increase is too slight or stagnant.
These sorts of high-level, but significant numbers are complex to sort out in a monthly or weekly budget.
This is your wake-up call.
You need to track and calculate your net worth; it’s the key to your financial future.