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In many people’s eyes, there’s a dark cloud surrounding the topic of budgeting. As such, it’s easy for budgeting myths to circulate. The following list highlights things people say about budgets and budgeting that simply are not true.
Myth #1: Budgeting takes a lot of time
Many people complain that they don’t have time to budget. However, budgeting need not be an elaborate or time-consuming event. Sure, budgeting does take some time, but here are some things that take more (in some cases much more) time per week than maintaining a budget:
- Painting your finger nails
- Reading the newspaper
- Watching TV
Fact: You should be able to budget in about 20 minutes a week. If it is taking longer than that, your budget is probably too oppressive. The servant (your budget) is trying to control you.
Tips for simplifying your budget:
- Include an “I’m Lazy” category in your budget. Put $10-$20 in that category so you don’t need to track any $1 purchases.
- Use whole numbers. Expediting the process by dropping the pennies sounds like a good idea.
- Be consistent. The time it takes to budget only increases when it’s neglected. The best way to make budgeting harder is to put it off until next week.
Myth #2: Budgeting only works for geeks
Your budget should be customized to your personality. Sure, budgeting tends to be a better fit for people who are more detail-oriented. However, budgeting rules can be stretched until you find something that works for you.
A reader once e-mailed me to say that she just watches the bank account to be sure there is money before she buys something. She asked, “Is that alright?” I responded by telling her that her approach is better than nothing. In other words…
At least she’s living on cash, not credit. That’s better than what a lot of people are doing. I suspect she would be able to save more if she set up a traditional budget, but every time she set up a budget, it didn’t work. So I encouraged her to keep doing what works.
Fact: You can be a free spirit and find a budgeting system that works for you.
Myth #3: Budgeting is only for those who don’t earn much
I made this mistake once upon a time. When my wife and I graduated from college, we were living on two incomes. Since there was always money in the bank, we just spent money as we wished.
Fast forward ten years and my wife is at home and we have three kids. While we can’t go back and change the past, we both wish we’d thought more about how to budget and been responsible with our money when we had a larger income.
The amount of money you make has little to do with how much you save and how much you invest. Those things are the result of good, disciplined budgeting.
Fact: Regardless of income, budgeting is a tool that helps people reach their financial goals.
Myth #4: Budgeting requires a lot of math knowledge
If you use cash, you don’t even need to know any math to budget. Take cash out of the bank when you get paid, and when it’s gone, you’re done spending.
My daughter is five years old and is so proud when she remembers that 1 + 1 = 2. Guess what? She now knows enough to budget. She has one jar for saving, one for giving, and one for spending. When she goes to the stores, she looks at something, shows us her money and says, “Is this enough?”
If you feel like you’re weak at math, you should use something like an envelope budgeting system. The envelope budgeting systems only requires that you to put the right amount of cash into a labelled envelope. From there, you simply spend until the money is gone.
Fact: Simple addition and subtraction are all that’s needed to budget effectively.
Myth #5: Budgeting is a burden
When some people hear the word “budget, ” they treat it like it is a bad word. It’s almost as if there is nothing good about a budget. However, budgeting is just a vehicle you can use to get to a financial destination.
Budgeting is about saying “yes” as much as it is about saying “no.” If you don’t keep a budget, the problem is that you are saying yes to more things than you can afford. However, if you learn to throw in the occasional “no, ” you could actually say “yes” to the things that are most important to you.
Fact: Budgeting is a tool that helps you accomplish your life goals.
Note from Nickel: Craig is right. Budgeting is very important if you want to make the most of your money. At the very worst, I encourage you to do what we’ve done… Adopt a “reverse budget.” In other words, set specific savings and investing goals and then let the chips fall where they may.