6 Budgeting Myths, Busted
By Editorial Staff
If you’re like most people, you’ve given up on quite a few budgets in your time. This is likely because sticking to a budget is not just crunching a few numbers and categorizing your expenses. In order to make your budget work for you, you have to first consider your own habits and behaviors, and then adjust your plan accordingly. When our budgets work against us it’s usually because we have the wrong idea about how they work to begin with. Here are six common budgeting myths, debunked.
MYTH 1: BUDGETING MEANS GIVING UP ON STUFF
One of the biggest myths about budgeting is that it’s an exercise in deprivation: You cut out all the fun things (like restaurants and shopping) and never enjoy your money. It’s almost certain that you’ll bust your budget if this is your mindset. Rather than think of your budget as a sacrifice, think of it as a plan that empowers you to do what you want with your money. The easiest way to do this? Ask yourself why you want to budget in the first place. Maybe you want to get out of debt so you can finally afford to travel the world; maybe you simply want to support the family you love. Whatever your answer, you’ll see that when your budget has a purpose, it works for you rather than the other way around.
When you create a budget, you prioritize your spending. Focus on your needs first (food, rent, utilities), then use any discretionary spending on the things that make you happiest. Reduce the amount you spend on everything else.
MYTH 2: A GOOD BUDGET IS STRICT
A good budget isn’t strict; it’s realistic. Let’s say your plan is to pay off your debt as quickly as possible, so you build a budget that doesn’t leave any room for fun (after bills and groceries, all your extra money goes towards your debt). A budget this strict is practically doomed to fail.
Instead, allow yourself some flexibility. Give your budget some realistic breathing room and you’ll be more likely to stick with it and achieve your goal. That’s not to say you should continue a pattern of overspending, but learning how to get your finances in order takes time and patience. Focus on cutting back one area at a time rather than everything at once.
MYTH 3: I’M TOO BROKE TO BUDGET
Many people assume budgeting is for rich people. The truth is, if you don’t have much money to begin with, budgeting is crucial. It’s simply a way to maximize the efficiency of your dollars. Without a budget, you have no plan, and chances are, you’re not spending your money in the most resourceful way.
MYTH 4: BUDGETING IS ONLY FOR PEOPLE WHO ARE STRUGGLING TO MAKE ENDS MEET
On the other hand, you might think budgeting isn’t for you because you’re not broke. In reality, most everyone needs a budget; unless you’re a billionaire a few times over, you have a limited supply of money that needs to be allocated in the best way possible.
And, should you get that raise you’ve been hankering for, don’t throw your budget out the window. An increase in income is usually accompanied by an increase in frivolous, mindless spending. There’s a term for this in the personal finance world: lifestyle inflation. When you have a budget, you can curb your temptation to splurge.
MYTH 5: BUDGETING IS TOO MUCH WORK
Most people have no problem coming up with a budget (and there are online tools and apps that makes this easy). The hard part of budgeting is sticking to it. To help yourself succeed, automate your priorities. Call your bill providers and ask to move your due date closer to your payday, then automate your payments so you pay your bills first each pay period. If you have any debt payoff or savings goals, automate those, too, in order to pay yourself first. (Bonus: If you have a student loan, most loan providers offer a small interest rate discount when you set up a direct debit payment.)
MYTH 6: UNEXPECTED EXPENSES ALWAYS COMES UP, SO BUDGETING IS A WASTE OF TIME
If you feel like budgeting seems pointless, you’re probably doing it wrong. If there are surprises every month, it’s a sign that you’re likely not looking at all of your transactions when you budget. Review your spending from the past year in order to look beyond recurring monthly expenses. Keep an eye out for things like car insurance premiums, vet bills and other pet costs, tax payments, and home and car maintenance. If you find the same expenses popping up semi-regularly, you probably want to add a new category to your budget.