Having a budget is essential to successful financial planning, and over the years I have heard so many myths about budgets and why people say they don’t work or why they don’t need a budget. These budgeting myths can prevent you from achieving financial security so in this blog post, let’s play MythBusters and walk through some of the misinformation I hear about budgets and what the truths are instead.
Creating a budget for the first time can seem overwhelming and time consuming, but it doesn’t have to be. There are so many tools, templates and apps available to help you through the process. And once your budgeting framework is in place, you can easily and quickly adjust your budget.
If you use an app or other online money management tool for your budget, the tool walks you through the set-up process. You often link your financial accounts, answer questions about your spending and income, and then the software does much of the work for you. If you’d like to learn more about these types of tools, click here to read our blog post 17 Best Budgeting & Money Management Tools.
The benefits that you’ll enjoy from having a budget will far outweigh the time and effort you put into setting one up.
I’ve worked with many clients who avoid budgeting because they don't want to be limited in their spending and not be able to do things they enjoy. I get it! We all have things we enjoy doing whether it be picking up a coffee on our way to work or getting a weekly manicure or something else that you don’t want to give up. And you don’t have to! You just need to include the things you enjoy in your budget.
When creating a budget, you are in control of where you want your money to go, and you set the priorities based on what’s important to YOU. You don’t need to have a super detailed budget that only allows you to spend $5 a month on your favorite coffee drink. You could instead have a general category for “dining out” or “spending money” and assign a certain dollar amount. These broader categories will also help you feel less restricted.
You may be one of those people who can remember a lot of things in your head without writing them down. Maybe you even go to the grocery store without a list. But when it comes to creating a successful budget, it needs to be documented so it can be tracked.
When you don’t write down your expenses, it’s very easy to overlook some or a lot! How many subscriptions do you have? People often say they have fewer than they actually do because subscriptions are easy to forget about unless you write them down. It’s also easy to forget about one-time expenses or ones that don’t occur every month such as insurance payments.
Documenting your income and expenses is the best way to ensure that your budgeting efforts are successful!
A common myth about budgets is that you don’t need one if you have a higher income and no credit card debt. The idea is that those with a lower income have less money after all of their bills are paid and therefore they are the only ones who need a budget.
In reality, those who have more money to spend usually do spend more, so those with a higher income also need to budget. The difference between their income and expenses is often just as tight as those with a lower income.
Budgets don’t require algebra, calculus or any other math class that almost made you break out in hives in high school. The math needed for most budgets is just basic addition and subtraction, and if you prefer not to do any math at all, there are plenty of tools, templates and apps that will do all the math for you.
This myth is easily overcome and should not get in the way of you creating a successful budget and working your way to financial freedom.
I’m surprised by how many people tell me that they don’t have a budget because they think budgeting is boring. I guess the process of budgeting can be boring, but I think bounced checks, collection calls and bankruptcy court are pretty awful so I’d choose budgeting over those any day!
Budgeting is key to financial freedom and being able to do the things you want to do. Budgeting will help make sure you are doing things that you value whether it’s taking more vacations with your family or enjoying early retirement. When you have a budget, you can set aside the money needed to do the things that you love. What could be more fun than that?!
I’ve also found that sometimes you need to change your mindset around budgeting. Maybe budgeting hasn’t worked for you in the past. Maybe you think you’re not good with money. If you need additional guidance on shifting your mindset, click here to read our blog post 5 Budgeting Mindset Shifts to Help You Stick to a Budget.
The reality is that budgeting allows you to use your money wisely so you get the most value from it.
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