Is your budget retroactive or forward-looking?

It’s a subtle distinction, but a distinction nonetheless. And if you’re like, Listen, Katie, that’s cute, but I don’t have time for personal finance, much less NUANCE, hear me out: Retroactive budgets merely serve a record-keeping function. On the last day of the month, I review all the spending from the last 30 days and write down how much we spent in each category. 

The budget isn’t really prescribing behavior to me; I’m not checking it before I go out to dinner to see if I can afford an appetizer or not. I have a plan, of course; I’m not a heathen! But I’m not really referencing the budget as I make decisions. 

On the flip side, if your budget is forward-looking, you’re treating it like a recipe. “The envelope method,” a budgeting technique that recommends taking out physical, paper-ass cash and putting it in actual envelopes to avoid overspending, is the most literal manifestation of this technique. 


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