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Let’s face it, for most people budgeting isn’t very exciting. However, it’s not as bad as many of the myths surrounding it and is necessary if you want to gain control over your finances.
Budgeting should be completed by everyone, regardless of your situation, if you want to achieve your financial goals.
Here are 9 budgeting myths to ignore to get ahead in your personal finances.
Table of Contents
Budgeting is Tedious
Budgeting can get old, especially if you don’t feel like you’re making any progress financially.
However, it doesn’t have to.
You can make a game out of it by challenging yourself from month to month. Try to decrease expenses a little each month, increase income each month (i.e. take on new jobs, volunteer for overtime, etc.), and save a little more each month. Keep track of your progress and try to make just a small improvement each month.
If you continue to get a little better each month, at the end of a year’s time, you’ll be surprised and pleased with how far you’ve come.
That feeling of accomplishment will serve as fuel to keep pushing further each month to improve your finances.
Budgeting is Deprivation
Budgeting will mean depriving yourself of some of the things you want.
However, the more you budget, the more you realize that many of those things really aren’t important. They are just fleeting impulses that you shouldn’t be spending your money on, regardless of how much money you have.
By budgeting and practicing mindful spending, you eliminate many of those unnecessary purchases, and focus on your needs and those wants that truly make you happier and your life better.
Budgeting is just a tool you use to direct your hard-earned money where you want it to achieve your financial goals.
Budgeting is for Low Income Earners
This couldn’t be further from the truth.
Fortune 500 companies have budgets. You know why? Because it forces them to assess where the company currently is, what it’s short and long-term goals are, and create an efficient financial plan to achieve those goals.
This is no different for personal finances.
You start with your financial goals. Everyone has financial goals, even the wealthy and high-income earners.
Do you want to retire early? Start your own company? Give more?
Next, you need to understand where you currently are financially.
What is your net worth? How much income do you bring in each month? How much do you spend?
By setting a budget, it forces you to answer these questions and create a personal financial plan to reach your goals.
Keeping a Budget in My Head is Enough
While its certainly possible to develop and keep a budget strictly in your mind, why would you?
Keeping a budget in your head isn’t nearly as definite as preparing a budget on paper or in a spreadsheet.
When you prepare a written budget, it’s a commitment to yourself to follow that budget and a visual tool to help you see the whole financial picture.
It also makes it easier at the end of the month because you can simply write down the spending and compare it to what you had originally allocated.
This lets you know where you have both succeeded and have a little work to do.
You Need to Be Good at Math to Budget
With the amount of free excel sheets and programs out there, you really just need to be able to read, perform basic arithmetic (adding, subtracting, multiplication, division), and use a computer to prepare a personal budget.
To start, you’ll just need to know the different budget categories you spend money on. Some examples include:
- Rent
- Mortgage
- Utilities
- Phone
- Food
- Recreation
Next, you’ll just need to have some idea what you spend in each category, so you can plan how much you anticipate spending in your budget.
Once you’ve entered them in a spreadsheet or software program, the math should be done for you. You can keeping playing with the numbers until your income, and expense and savings balance to zero (zero based budget).
Please see below a handful of suggestions for some free budget worksheet sources:
- Consumer.gov – Make a Budget – Worksheet
- Microsoft Office Templates (For Office 365 Subscribers) – Budgets
- Google Drive – Once you’re logged in, drop down under My Drive -> Google Sheets -> From a Template
- Mint – Free Budget Templates (they keep the files in the body of the post for each template)
Also, if you’d rather look into an online budgeting application, you might consider:
- Mint
- You Need a Budget
- EveryDollar
- PocketGuard
- Clarity Money
- Goodbudget
- Personal Capital
Budgeting is Time-Consuming
Your first budget will take longer than the rest (most likely a couple of hours), especially if you’ve never created one. You’ll have to spend some time thinking about what your spending categories are and how much you plan to spend each month.
Your next few budgets will take a little longer (1 – 1 ½ hours) because, inevitably, there will be some variable categories (food, some utilities, clothes, recreation, etc.) that you over and/or under spend on. You’ll use those next few months dialing in your budget and variable spending habits.
Once you have it dialed in, your budget really shouldn’t take you more than 30 minutes to an hour each month.
An hour each month is a cheap price to pay to have control over your personal finances.
You Don’t Need to Budget if you’re Debt-Free
I touched on this earlier, but regardless of your financial situation, if you have financial goals (everyone should), you need to budget.
A budget is your personal financial plan for reaching your financial goals, revisited monthly.
For instance, Jane is close to retirement and is debt-free, including her mortgage. However, she has very little in savings and no emergency fund. Even though she’s debt free, she still hasn’t met her financial goals and still has a lot of work to do in a short amount of time to catch on her retirement goals.
I Have Too Much Debt, A Budget Won’t Help
It’s never too late to start budgeting.
If you don’t prepare a budget, you don’t truly know what your situation is from month to month. Also, you won’t be able to identify ways to improve your situation.
You may find that by selling a few assets (vehicle, boat, trailer, second home, art, collectibles, etc.) and cutting down on unnecessary expenses, you actually do have the ability to dig yourself out of debt.
I’ve Been Successful Without a Budget, Why Start Now?
Just because you’ve been successful, it doesn’t mean you’ve performed as well as you could have and it doesn’t mean you’ll continue to be as successful without a budget.
If you truly want to reach your financial goals as quickly as possible and with peace of mind, a budget is the right tool.
Conclusion
If these budgeting myths have kept you from creating a personal budget, I hope I’ve dispelled them above.
Your budget is a great way to see and control your monthly income and expenses. Without it, you don’t truly know what you’re spending your money on and won’t be able to identify opportunities for improvement.
Also, when combined with your net worth and given direction in the way of financial goals, a budget has the power to help you attain your life goals efficiently and with peace of mind.
What budgeting myths are holding you back?