5 Budgeting Myths You Should Ignore to Succeed
Don't Let These Myths Misguide Your Budget Beliefs
Budgeting doesn't come easily to a lot of people, and what's even worse is that there are budgeting myths circulating around that will steer you wrong.
It's important to know the difference between fact and fiction when it comes to budgeting because so many of these myths turn people away from gaining control of their finances.
Don't let that happen to you. Budgets aren't evil, and everyone regardless of their financial situation can benefit from a budget.
Discover these and other common myths below, and learn the real truth behind budgeting so you can get inspired to manage your money well.
Myth 1: Budgets Have to Be Super Detailed
One big misconception surrounding budgets is that they have to be extremely detailed. Like, line-item-in-Excel detailed.
That's not true. If having a spreadsheet with 20 different categories works for you, great. If you enjoy separating the purchases of household products from your actual groceries to the point where you make two separate transactions at the store, fine.
If that doesn't appeal to you, there are other alternatives that are less restrictive and require less maintenance, like the 50/30/20 budget, the 80/20 budget, or even the anti-budget. These don't discriminate between categories nearly as much, if at all.
The point is your budget can look like whatever you want it to look like. You don't need to follow the budgets of others to a T.
Everyone's situation is different, and your budget should reflect that.
Recommendations are just that — there are no set-in-stone rules that you need to follow when it comes to creating a budget.
Myth 2: You Can't Go Over Your Budget — Ever
While you should aim to stay on or under budget, sometimes (or a lot of time) life gets in the way.
Unfortunately, a lot of people get defeated before they even start with their budget because something goes wrong.
Budgets should be flexible — they're guidelines, not hard-and-fast rules. If you go over in one category, chances are you can "take" money from another category.
For example, let's say your grocery budget is $300, and your entertainment budget is $50. You spend $320 on groceries, but only $30 on entertainment. Technically, you're over-budget on groceries, but you're under your overall budget because the lack of spending in the entertainment category evens things out.
The point here is that you shouldn't get so caught up in the numbers that you forget the bigger picture. Your budget isn't meant to be perfect, and it's highly unlikely you'll be perfectly on point with each category you have. Set your expectations accordingly before you begin, and forgive yourself if you come in over-budget.
It also greatly helps if you're familiar with your spending patterns prior to creating a budget. Track your spending for three months to see if your spending estimates are even realistic. For example, you might think that you're spending $100 on eating out, when in reality, you're spending $200.
If you're trying to stick to a $100 budget, you're setting yourself up to fail!
Myth 3: Budgeting Is Time-Consuming
Again, budgets don't have to be overly complicated. You can choose to make them time-consuming or not — you can update your spending in a spreadsheet every day or every week, or you can set up budgets for free via apps like Mint or Personal Capital.
Apps are a life-saver for those who use credit or debit to make purchases because you can link your financial accounts to the app and have your spending pulled in automatically. Many apps also let you set up budgets, and since your transactions are automatically categorized, your budgets will be updated accordingly. You can choose to receive alerts when you're near your budget cap, or when you've exceeded your budget.
In this case, you can pretty much automate your budget and check in with it on a weekly basis.
You don't need to manually update anything unless the app categorizes a transaction incorrectly (which can happen). However, this is much less time-consuming than carrying a pen and paper with you everywhere and writing down your transactions as they happen. Again, if that method works for you — great! But most people aren't thrilled with that idea.
Myth 4: Budgets Are for People Who...
Some people don't think the rich need to budget because they have enough money. Others think they're too poor to budget — they don't have enough money to manage in the first place. Still, others believe they don't need to budget because they're not in debt and are getting by.
All of these assumptions are wrong. It doesn't matter who you are — everyone can benefit from budgeting.
"I'm debt-free." That's great, but being in or out of debt isn't relevant to whether or not you should budget. Yes, budgeting helps you become debt-free because it helps you find ways to adjust your spending to send more money toward your debt each month, but becoming debt-free doesn't mean budgeting isn't necessary. In fact, it might be more necessary once you have more cash flow freed up, otherwise, you might be tempted to spend all of your money. Budgeting gives all of your dollars a job to do — without a job, that money will likely be spent, leading to no savings.
"I don't have a problem saving." If saving comes naturally to you, or you're already wealthy, that's fantastic...but that doesn't mean you shouldn't pay attention to your finances. You might not need a crazy budget, but it's helpful to at least track your spending so you can be aware of any changes that occur.
"I don't have any savings goals right now." Okay, but chances are you'll need money at some point in the future for something. Everyone should have an emergency fund, even if it's $100, $500, $1,000, or more. What if your car breaks down? What if you have a medical emergency? What if a pet needs veterinary attention? What if you lose your job? Having a savings cushion will help give you peace of mind. So even if you don't have a specific savings goal, you should always keep your emergency fund topped off. It's better to have savings than not.
"I don't make a lot of money." You don't need to be raking in the cash to have a budget. Arguably, the less money you have, the more important it is to manage because your resources are limited. The added benefit is it should also take less time and effort to manage! For example, if you're a student, your expenses are minimal, and because you likely don't make a lot, you're not spending as much. Therefore, you'll have less transactions to deal with. It's much easier to note where everything is going.
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 spending money, and you can't know how best to manage your money without the numbers.
Myth 5: Budgeting = Deprivation
This is the worst myth that turns most people off from budgeting, and it couldn't be further from the truth. Somewhere along the way, budgeting became synonymous with deprivation. It's like thinking being frugal means being cheap.
Budgets are tools you can use to achieve your financial goals. They're meant to guide you toward those goals. They're not meant to deprive you; budgets simply mean being smart about how you use your money.
Don't let anyone tell you that you need to cut certain things out of your budget unless you're in dire financial straits. The easiest way to make budgeting work for you is to focus on your values and strip everything else out. This way, you're spending on the things that make you happy, and not spending on the things that don't matter.
Unfortunately, this is the most challenging part. Society as a whole has decided that things like smartphones, cable, and flashy cars are "needs" — but they're actually wants. If you can get past what other people think you should have, and think for yourself, you'll feel much less deprived and more fulfilled with less.
Budgeting Is Rewarding
Ultimately, budgeting is a skill everyone should have because ignoring your finances won't get you anywhere. You don't need to spend a ton of time on budgeting, but you should check in with the state of your finances at least once a week to develop the habit of tracking and saving.
Beyond that, budgeting and aligning your spending with your values helps you reach your goals. If you happened to want to save for something, you need to figure out how much you need to save, and how to find that money to save. Without a budget, you'd be guessing.
Leave the guesswork out of your finances. Start tracking your spending and budgeting so you can efficiently and confidently reach your goals.