5 Common budgeting myths
My wife and I have been living on a budget for a little over two years now. The first few months were a little frustrating as we got used to the process and learned a few things but since then we don’t even really think about it that much. As a result, we don’t overdraft our accounts, we see our debt consistently going down, and our savings going up.
The best part about budgeting is that it significantly reduced our stress. We frankly don’t stress about our money anymore. We allocate enough to pay our bills, allocate enough to grow our savings, plan for upcoming expenses, and know where each and every dollar goes. We used to worry about how we would pay our bills or upcoming expenses. Living on a budget removed that worry from us.
I’m surprised at the number of people I encounter who don’t budget. When I’ve asked them why, I’ve received the same types of responses and all of them are myths:
Budgeting is too hard
Budgeting is as simple or hard as you make it. For some reason, people seems to have this idea that you have to utilize this overly complex spreadsheet and complex mathematical formulas in order to budget. That’s simple not true. To budget you need to know how to add, subtract and/or use a calculator.
The most simple and easiest budget is an 8×11 sheet of paper. List and total your income at the top, just below that list and total your expenses. Subtract the difference and it should be zero. If the difference is negative, reduce your expenses or increase your income. If the difference is positive, congratulations, you spend less than you earn! Add the difference to your savings or debt snowball until the total difference is zero.
That’s it. You just created a budget. Of course there are more automated means as well, like the spreadsheet I use. There are even a number of software programs specifically targeted at budgeting. My personal favorite is You Need a Budget.
Budgeting is for poor people – I don’t need a budget
Sure you do, you just don’t know it. Everyone needs a plan and a way of tracking and managing your expenses regardless of how much you make. Even major corporations that are highly profitable like Apple, Microsoft, GE, etc have budgets.
Budgeting allows you to see where your money is going and make better choices about what you can do with that money. It’s about optimizing how you spend it. Regardless of how much or how little you make, making smart choices about each dollar you earn and spend is smart. A budget allows you to do this.
Budgeting is too time consuming
I always laugh when I hear this one. This is just not true and is generally said by someone who hasn’t ever done a person and would therefore no know how long it takes or it’s from someone who is trying to budget but doesn’t understand how.
Using an 8×11 sheet of paper, you can make a budget in less than 15 minutes. The trick is to have all the info in front of you and to go into the budgeting process knowing the first few budgets you do aren’t going to work out perfectly. Until you start budgeting, it’s difficult to know exactly how much you spend each month. Therefore it’s difficult to know how much to allocate to each category. Once you budget for a few months, you’ll know.
I budget using a combination of my own spreadsheet and You Need a Budget. It takes my wife and I all of 10 minutes to do our budget for the upcoming month, and then about 5-10 minutes every other day or so to quickly update it. If you don’t have 5-10 minutes a day to dedicate to your finances, you have much bigger problems to worry about.
Budgeting is too controlling
I would argue the exact opposite. Budgeting gives you freedom. Freedom from worrying. Ever go to the grocery store or ATM and say that little prayer in your head: “God, please, please, please don’t let it reject. Please let me have enough to cover this.” I have been there far too many times in the past. But no more. With a budget, I know exactly how much money I have and I never worry about it. I can go shopping, to the ATM, and on vacation without fretting about whether I have enough money or not.
But what if something unexpected happens? The bank screws up, your account gets over drafted, or someone steals your debit card? That’s why I have a fully funded emergency fund that I built my allocated money in my budget to fund it each month.
Budgeting is for people with fixed incomes
Sure, but it’s for people with variable incomes as well. In fact, people that live on variable incomes are the ones that need to budget the most. Budgeting on a variable income is different though. Lynnae from Being Frugal has a great article on how to budget with an irregular income.
Photo by: Torley