5 Common Budgeting Myths
5 Common Budgeting Myths
Budgeting gets a bad rap. People hear just the word alone and want to run the other way. This may be due to failed attempts at budgeting, but largely it is due to misconceptions about budgeting.
These are five common budgeting myths.
1. You Need to Have a Surplus of Money to Budget
Many people believe they cannot budget until it is clear that they make more than enough money to cover their expenses.
Those who wait for an obvious stare-at-you-in-the-face surplus of income do so in vain. If the margin between what you have coming in and what is going out is slim or non-existent, then you will likely never see enough of a difference between the two unless you intentionally plan how you’re going to spend your money so that you can ensure there is a difference — which is budgeting.
2. Living on a Budget Means You Can’t Do Anything Fun
Some who shy away from budgeting believe that living on a budget means they will be sentenced to a dreadful, austere life — void of any fun or joy.
Sound a bit extreme? It is. And so is the belief that budgeting = boring. In reality, budgeting is synonymous with planning. Do you like to eat out?
Budget Plan it. Do you need to go clothes shopping? Budget Plan it. Want to go away for a weekend? You get the idea. The point is a budget is a plan for your money, not a prison. You are in control, and you get to decide what goes into your budget.
3. You Only Need to Do a Budget Once
A common misconception of budgeting is that it only needs to be done once. Many people do a budget at the beginning of the year and expect that budget to work every month.
In reality, no two months are exactly the same. While a majority of your expenses are likely to remain constant, there are several variables to consider every month such as holidays, social events, doctor visits, clothing needs, and fees for children’s activities, just to name a few.
These potential expenses make every month different, which calls for a new budget each month.
4. Budgeting is Adding Up What You Spent at the End of the Month
Many people mistake tracking expenses for budgeting. In response to being asked if they budget, they respond by saying they add up everything to see what they spent in each category or that their credit card statement shows them their spending.
This is not budgeting. This is tracking. Tracking expenses can be worthwhile when you first start budgeting to give you an idea of what you’ve been spending your money on and to help you see how to adjust your budget in the first few months of budgeting.
Outside of that, though, adding up what you spent after you spent it is literally after the fact. The money is spent. You can’t do anything about it. Budgeting is all about being intentional and proactive — and planning.
5. You Can’t Budget With Irregular Income
A lot of people declare they are “exempt” from budgeting because they work in sales, are self-employed, or have an irregular income for another reason.
Having an inconsistent income does not mean budgeting will not work; it simply means your approach may be a little different. There are two approaches you could take. The first is to do your budget based on the amount you know you are guaranteed to receive, and then adjust the budget when you know your actual income.
The second option is to do your budget based on last month’s income. This way there are no surprises, and you know exactly what income you’re working with. Getting to a place where can use last month’s income to budget this month’s expenses may take a little time if you are not there currently.
Give yourself a time goal to get there. For example, if you gave yourself four months, then each month, you would need to save about a fourth of your average monthly income. Use any bumps in income like bonuses or higher commission checks to help you get there.
So we’ve explored some common budgeting myths and what a budget isn’t. Now let’s touch on some budgeting facts.
1. Budgeting is Planning
As mentioned above, a budget is simply a plan — a plan for your money.
2. Budgeting Will Give You a Sense of Control
Have you ever asked yourself where all your money went? A budget eliminates that because you already decided where your money was going to go.
3. Budgeting Will Make You Feel Like You Got a Raise
This is a budgeting phenomenon. Living on a budget will have a similar effect to getting a raise. Because you are being intentional about where your money goes, you will see that you have the money to take care of the things you need to.
Give Budgeting a Try
Have any of these budgeting myths kept you from budgeting? If so, I encourage you to give budgeting a try. I suggest committing to it for at least three months as it will take about that time to feel like you have the hang of it. Every month will be better than the last, though, so don’t give up!
Related Reading: How to Do a Zero-Based Budget
What other budgeting myths have you come across? Will you give budgeting a try?