If you are like most people, you might have made a few attempts and given up within days or weeks. This may be because of the bad reputation budgets have garnered over the years. However, I can assure you that this is not the case. A budget is more than crunching numbers and itemizing expenses.
A budget is a powerful tool that will help you find where your money is going and channel it to things that make life better, one month at a time. It will help you get your money to work as hard for you as you do for it. I know this because my budget was one of the biggest factors that helped me cut outgoings by over €27k during my No Spend Year, which still saves me money today.
I want to dispel some of the negativity around budgets and help you to get into a positive life-changing teamwork mindset with your money. To do this, I will squash many of the most common budgeting myths for the bunkum that they are and set you on a journey where your money brings you freedom and choice.
Here are the most common budgeting myths that are holding you back:
Myth 1: Budgeting Is Time-Consuming
This is one that I have heard so many times. The misconception that budgeting is a time-consuming task is a red herring. True, it can take a little time initially. Although, that time has been shortened with the advent of budgeting apps which often only take a few minutes to set up.
Taking that few minutes to set up your budget will probably have a higher financial impact than anything else you do this week, including your job. However, the small amount of time taken in the beginning is worth it, and maintaining is easy once a routine has been developed.
Starting a budget could be some of your most valuable minutes.
Myth 2: Making a Budget Is Too Much Effort
Once a budget is up and running, it is easy to automate most of it. Set up direct debits weekly or monthly to pay bills, loans and savings. Once these are automated, you have little effort to put into it and are free to focus on the fun things in life. We all want to focus our energy on that.
Just start and see for yourself how little effort a budget can be.
Myth 3: Making a Budget Is Complicated
A budget is only as complicated as you want to make it. At its core, a budget is your income minus your outgoings, and savings equals zero. That's it!
Except for the few uber-nerds out there, having a spreadsheet with 20 different categories probably won't work for you. Most of us want to live our lives and not agonize over whether a muffin should be categorized as eating out or entertainment. It doesn't matter as long as you are consistent in where it goes.
Include as many categories as you are comfortable with in your budget. It can be as few as 3 or 4 or as many as 30. The only rule is that you include all your expenses under some category. Remember, the itemization that your friend uses may not work for you. Personalize it to your comfort level. It's your budget for your money to make it work for your situation.
You control how complicated your budget is. It is your budget, after all.
Myth 4: Budgets Are for Math Brains
Budgets have practically zero to do with math. It has everything to do with thinking clearly and planning a little. Budget tools do all that math for the tiny bit of addition and subtraction that is required. Leaving you to focus on paying down that debt, building your future and living your life.
If you can count, you can budget.
Myth 5: I Don't Know How to Start a Budget
Let's be honest here. Most of us aren't that creative, and the thought of designing a big template with multiple filters and massive detail is enough to make even the bravest of us run and hide.
The hardest part of budgeting is sitting down on the first day and starting. A budget does not have to be complicated or detailed. It must record all the money coming in and going out accurately. How you choose to make that look for your lifestyle is up to you.
Start simple and tweak as you go until you have created what works for you.
Myth 6: Unexpected Expenses Blow My Budget All the Time, so Why Bother?
If you feel like budgeting seems pointless, you're probably doing it wrong. Life has an interesting quirk of throwing unexpected things our way all the time. Which, when you think about it, should make them expected. If you find that you are dealing with unforeseen expenses excessively, you may do one of two things (or both) wrong.
First, ensure that you are recording all your expenses. When starting a budget, make sure that you note all of your outgoings every single month. This is vital to the success of any budget. Thinking of an item as inconsequential gives no reason not to record it. But all the small expenses add up to make significant budget deficits, ultimately leading to failure.
Secondly, look for patterns. Before throwing in the towel on your new budget, track all of the 'unexpected expenses' and check for consistency. Is there a habit of impulse nights out, or your car needing work? Is your apartment old, and regular maintenance is required? These, in truth, are not unexpected expenses. These are expenses that are part of your life and, as such, can be quickly built into any budget. It may turn out that the more cost-effective thing is to change your car or move apartment. Unless you track your expenses, you may never see that and continue leaking your hard-earned cash unnecessarily.
The main point here is to track all expenses and identify and build your budget to accommodate those expenses to ultimately curb them to a manageable level.
Myth 7: Budgeting Is Boring
This is one of my favourite myths about the bin. After the initial phase of setting up your budget is completed and you have got the hang of tracking your expenses, you might surprise yourself with how much fun you can have.
Once you have a grip on your money, you can begin to channel it to the areas it needs. Watching debt levels drop while savings grow can be quite an exciting experience. It brings a tremendous sense of empowerment and sets you up to reach even greater future goals. Another proof of how un-boring budgeting is this: you may spend less time stressing over credit card statements and loan interest rates and worrying if there is enough money in your account to pay the bills. Budgeting is key to helping you get out of debt.
Being debt-free means having freedom and choice. Now that's the opposite of boring.
Myth 8: I Can Do a Budget in My Head
I am happy to challenge anyone on this. However, unless you are a number-savant, I would seriously doubt if you can do a full zero-sum budget for the entire year off the top of your head and be accurate.
A mental budget is a lazy way of evading your fiscal duty and cheating your future self out of a decent lifestyle long-term. However, when you sit down and work out your numbers in black and white, you can see the many small changes and tweaks that can change the tide of debt and savings.
A budget is not just about this month's money. It is about planning over time, so you can determine precisely how and when you will reach your goals.
It also gives the bonus of recording your fantastic progress as you go, which feels good.
Myth 9: I Save Money Every Month, so I Don't Need to Budget
Spending less than you earn is critical to building wealth, so if you are one of the clever people already living below their means, congratulations! Only 40% of Irish people can say that. (www.cso.ie)
However, if you are living below your means and don't have a budget, then you are cheating yourself. A budget is a tool to help you pinpoint what money you have coming in and where your money is going. It allows you to see how much you are saving and what you are saving for.
Are you on track for retirement? Maybe a big holiday? Or is your rainy-day fund shored up? Understanding these types of savings and measuring the current progress will help prioritize where to send your savings and how much more you need to reach them. It also allows you to identify wasted money and channel that towards saving and doubling down on your already good work.
Supercharge your savings with a budget.
Myth 10: I Track My Expenses, so I Don't Need a Budget
Tracking your spending is the first step to getting your money in order. However, when you only track spending, you always look at the past and never look forward.
Your budget is your game plan for the upcoming week, month or year. A budget helps you figure out how much you need to save to reach your goals, how you'll keep it, and where to find the money to do that.
A budget is a perfect bridge between planning for your future spending and looking at your past spending, not just one or the other.
The budget is just a natural next step if you're already tracking your spending. Take it.
Myth 11: A Budget Is Too Restrictive
Another one of the biggest budget myths is the false thinking that a budget equals deprivation. This is not the case. It is crucial to keep certain fun, random things in your life, the Saturday morning coffee and nights out with friends are standard parts of living. Just build it into your budget. Having a budget doesn't mean you can't have fun anymore. It means that you can have fun things and still protect the future. It increases your chances of having that flexibility of fun money for the rest of your life.
Believe it or not, a budget allows you to spend your money guilt-free!
Myth 12: It's Not the Right Time for Me
If you make a budget, ask yourself why I am putting it off. Is it because money is tight? Is it because the credit card is maxed out? Is it because you are working two jobs to make ends meet? All of these are vital signs that you need to start a budget. The time is never right. Something will always come up. That's life.
Put your big person pants on and get your money working for you so that you don't have to worry about these things any more.
Myth 13: I Don't Have Enough Money to Budget
Many people assume budgeting is for people with good incomes. The truth is, if you don't have much money, to begin with, budgeting is even more critical. A budget is a way to maximize the efficiency of your income.
Without a budget, you have no plan, and with no method, how do you expect to get yourself away from being broke and onto a better path?
Let your budget help you find your money.
By failing to prepare, you are preparing to fail.
Myth 14: Budgets Have to Be Detailed Down to Every Last Cent
Another big misconception around budgeting is that it has to be itemized to the nth degree. This is not true. The best budgets are the ones that are flexible and have relatively few categories.
The key to a budget is the saving element. This ensures that you are moving forward (no matter how slowly) with building your net worth while preventing overspending, which could set you back.
Simple is always best.
Myth 15: I'm Debt Free, I Don't Need a Budget
Suppose you are in this lucky category. Well, good on you! But that does not spare you from needing a budget. While a budget is beneficial to become debt-free, it will help to keep you debt-free too.
Life is long, and there will be many things that you will want to see, do, experience, have and build. A budget will guide you in saving for those things. It will help to lessen the chances of needing to draw down debt in the future. The freedom to pay for something in cash opens up a new world of choice.
Use your budget to stay debt-free.
Tracking past spending and setting out future goals are two of the critical features of any budget. However, balancing these two aspects brings magic to a budget and increases the chances of a secure financial life and sleeping like a baby at night.
Creating a budget helps you to deal with life's unexpected twists and turns. It allows you to understand where you are and map the path to a healthy financial future. Regardless of your situation, if you hope to grow or maintain your wealth, you need knowledge on your side. No one ever got rich by squandering money, and you can't know how best to manage your money without knowing the facts.
A budget is not a millstone of restriction and denial. Instead, it is a powerful tool that can help you bring freedom. Freedom from debt, freedom to choose, and freedom to live the life you want.
Now that I have busted those misguided budget myths, I challenge you to take control of your financial future and embrace the superpower of budgeting.
I'll be sharing more money-saving tips and money mindset tips with you soon, so stay tuned! In the meantime, make sure you are subscribed to the Smart Money Times Newsletter and get your hands on my new ebook From Out of Control to Cruise Control, 20 Simple Things to Completely Transform Your Money Life here
Disclaimer: This is information – not financial advice or recommendation
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