Budgeting has a sort of stigma attached to it. If you ask a friend whether or not they have a budget, chances are they’ll say no and give you a reason why. Some people think it’s too time-consuming to set one up while others think it limits what they can and cannot do in their everyday lives.
Even though budgeting is a wonderful tool for managing your finances, many people think it’s not for them. The logic they use, however, is often very flawed. I’m here to put a few of those misconceptions to rest!
Let’s take a look at some outrageous myths about budgeting:
- I make too much money. I don’t need a budget! –
No amount of money is too high for someone to waste and spend it frivolously. The countless bankrupt former millionaires are evidence enough of that. In fact, the more money you have, the more attention its management deserves. The truth is, almost everyone, even those with large paychecks and plenty of money in the bank, can benefit from budgeting. Keeping track of your monthly income and expenses allows you to make sure your hard-earned money is being put to its highest and best purpose. For example, if you knew how much money you were spending on restaurant meals every month, you might decide that you’d rather be putting that money toward something else, like a vacation or college fund for your kids. - I don’t have enough money to begin with. A budget won’t help me! –
If you’re on the opposite end of the spectrum and you’re barely able to pay the essentials each month because of a limited income, actively taking control is much better than ignoring any problems. A realistic budget will help you identify opportunities to save money or possibly earn more money. You’ll clearly be able to see where you might be wasting money and make some cutbacks or changes. Maybe you are going out to eat way too much. You could save over $100 every month if you just made dinner at home more often. Having a budget on a limited income is crucial because you want to make sure the money you do have is going to the most important things like housing, transportation, food, etc. - I know that I spend less than I earn, so I don’t need a budget! –
Not getting into debt is good to start with, but in the long run, it’s not enough. Don’t forget to regularly save a certain portion (at least 10%) of your income for emergency situations or for retirement. A budget helps make sure that you always put money aside for these things first before you run out of money and then can’t afford to put anything into savings. Also, if you have money left over each month, a budget will give you guidance as to what you should do with that surplus of money. Pay down debt, fix things around the house, save for a rainy day, save money for retirement, or save for your kid’s higher education, etc. - I’m just not good with Math! –
The less comfortable you are with numbers, the more you need a budget because the more likely you are to make poor financial decisions and possibly wind up in debt. Luckily, there are plenty of free, simple, and user-friendly online tools that will do the mathematics for you. Many of these programs are free and super easy to use. If you know how to use spreadsheet software, you can even make your own budget. It’s as simple as creating one column for your income, another column for your expenses, and keeping a running tab on the difference between the two of them. Check out our free online budgeting tool called Budget Advisor: www.onlinebudgetadvisor.com - It takes way too much time to set up a budget! –
The few minutes that you spend on setting up your budget will probably have a higher financial impact than anything else you do today, including your job. It might take more time in the beginning, but maintaining a budget becomes very quick and easy once you have developed a routine. Online tools such as Budget Advisor help to cut back on the time needed to create a budget. You answer a few questions and plug in some information and you’re good to go. - I don’t want to worry about money all the time! –
If you’re worrying what other people will think about you, please don’t. Merely being in control of your finances does not mean that you are a penny pincher, greedy, too frugal, bad or weird. It just means you are being financially responsible. It doesn’t mean you are in debt or having money problems either. If fact, the opposite is probably true if you have a realistic budget and stick to it every month. - Setting up a budget is so boring! –
Unfortunately, the things that are boring now are often exactly the things that will make your life less boring and more fun in the future. You won’t get into debt, you will be able to afford holidays and perhaps even retire early. Smart people don’t neglect things just because they are boring. You would be amazed at how many grown adults don’t make a budget every month because it’s “so boring.” You know what’s really boring? How about reviewing credit card statements each month, getting collection calls for past due bills, and going to bankruptcy court? I’d rather set up a budget! - I won’t be able to buy what I want! –
It’s actually the exact opposite. When you plan your spending, you avoid making impulsive and emotional decisions. As a result, you will have more money left for the things that really matter. Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every single purchase. Unless you’re on a very tight budget for debt reasons you’ll still be able to buy movie tickets and go out to eat occasionally. Tracking your expenses doesn’t change the amount of money you have available to spend every month; it just tells you where that money is going. Rather than viewing budgeting as a subtractive process, consider that developing a spending plan will allow you to spend your excess income in any manner you like. Creating a budget doesn’t mean that you must cut all that is fun from your life. - It’s too hard to stick to a budget every month! –
It’s easy to get overwhelmed when you’re trying to micromanage every little thing. Finding a nice balance comes with experience and practice. If you are just starting out, focus on the obvious big categories like housing, groceries, utilities, transportation, discretionary spending, and savings. You can add subcategories and other details gradually as time goes on. Make sure you aren’t setting up an unrealistic budget or being too hard on yourself. If you budget to spend only $100 a month on groceries, that may not be realistic and you’ll probably go over budget every single month. Not being able to stay within your planned budget could make you feel like a failure, so you’re more likely to quit. Check out previous receipts to help you stick to a more realistic budget plan. - I won’t have enough money left over for emergencies! –
Unexpected things happen. Your computer breaks down or your teeth suddenly hurt. It is wise to always reserve a portion of your budget for “emergencies”. This is one great reason to create a budget today. So you’ll be able to free up some more money and put it into a savings account for the unforeseen things. you may feel that as soon as you decide you’re going to stick to a budget, it can seem like everything from your car to your washing machine starts to break down. Having to fix expensive items in an emergency can make it difficult for you to budget, especially if you’ve not accounted for any extra spending. That’s why it’s so important to always budget for emergencies every month.
Conclusion –
To manage your monthly expenses, prepare for life’s unpredictable events, and be able to afford more expensive purchases without going into debt, budgeting is a great idea and super beneficial. Keeping track of how much you earn and spend doesn’t have to be boring. It doesn’t require you to be good at math and it doesn’t mean you can’t buy the things you want. It just means that you’ll know where your money is going each month. You will have greater control over your financial situation and you’ll probably be able to sleep more soundly at night.
If you need help creating a budget or you’re looking for ways to get out of debt, give us a call at (866) 699-2227 or visit us online at www.advantageccs.org for free credit counseling.
