Issues with the Expense Tracking Method
The Expense Tracking Method, commonly known as budgeting, involves the detailed recording of daily income and expenditures, maintaining account balances, categorizing and summarizing expenses, creating budgets, controlling daily spending, and tracking financial goals.
Many people have tried expense tracking, but often give up due to the following two main reasons:
- Complex Expense Records: The intricate process of recording and categorizing daily expenses, coupled with a lack of strong motivation to save, makes it challenging to sustain the effort consistently.
- Difficulty in Changing Spending Habits: Most people have deeply ingrained spending habits, resulting in relatively consistent monthly income and expenses. Changing habits is challenging.
The Asset Tracking Method alleviates the tedious task of daily income and expenditure recording, focusing instead on the growth of assets with the core objective of achieving financial goals.
Achieving financial goals in life is not about how much you spend but how much you save.
What is Asset Tracking Method
For the affluent middle class with substantial assets, their wealth is sufficient to cover daily expenses, allowing them to save a substantial amount every month. Their primary focus lies in the continuous growth of assets, encompassing investment assets and monthly savings. They are keenly aware of whether their assets can support their retirement, cover their children’s education expenses, afford a better home, and enable them to travel worldwide after retirement. Monthly spending on meals is not a major concern for them.
The Asset Tracking Method does not require recording daily income and expenditures; it solely involves documenting changes in assets, encompassing the following three components:
- Recording Investment Trading
- Adjusting Account Cash Balance at the End of Each Month
- Evaluating Investment Asset Values
Comparison of Asset Tracking Method and Expense Tracking Method
The main difference between the asset accounting method and the income and expenditure accounting method is the exemption from daily categorization of income and expenses, significantly reducing the time required for recording. The following compares the differences between the asset accounting method and the income and expenditure accounting method.
| Expense Tracking | Asset Tracking | |
| Establishing financial goals | ○ | ○ |
| Account Management | ○ | ○ |
| Records | Daily income and expense Investment Trading | End-of-month cash balance Investment Trading |
| Establish Budget | ○ | |
| Budget Control | ○ | |
| Investment performance and asset evaluation | ○ | ○ |
| Historical income and expense | ○ | |
| Historical asset growth | ○ | ○ |
| Goal Tracking | ○ | ○ |
Under what circumstances are expense tracking and asset tracking suitable?
Here are summaries of the two accounting methods, highlighting their applicability to different financial needs:
- Expense Tracking: Designed to understand where money is spent, identify areas for potential cost savings, and allocate surplus funds towards savings, investments, or loan repayment.
- Asset Tracking: Suitable for individuals with stable monthly income covering expenses, aiming to avoid the intricacies of detailed expense tracking. Emphasizes asset growth to achieve life goals.
