What have you heard about budgets? Some of that information may very well be false. Often times the word budget is seen as a negative word rather than a positive one. Let’s change that mindset. Keeping reading as we tackle four of those budget myths that you may have been led to believe.
Budget Myth #1: A Budget is Very Restrictive
A lot of people think that creating a budget will prevent them from enjoying their money. It is a common misconception that if they budget, they will not able to do what they want with their money. However, creating a budget gives you more freedom to spend money on the things you want. How do you ask? Because by creating a budget you are able to see the areas where you are spending too much money and adjust accordingly. For instance, if you are spending $60 per week in eating out, but you really want to travel you can readjust your budget, so you are saving that money for future vacations. Creating a budget could be just the tool to help you enjoy the things you love to do.
Budget Myth #2: Creating a Budget is Hard
Many people never get started because they think that creating a budget is too hard. However, creating a budget is very simple and easy. First you need to figure out how much you earn per month. Next, you need to figure out how much you are spending per month. To track your spending, you need to track your expenses for at least two months. This can simply be done by keeping a small notebook in your bag and jotting down your expenses for the day and listing the category. This will allow you to see how much you are spending on groceries, dining out, etc. Finally, subtract your expenses from your income and you will see how much disposal income that you have. At this point you can create budget that allocates funds into all the areas that you spending money on including saving and investing.
Budget Myth #3: I Don’t Need a Budget
A lot of people think that they don’t need a budget because they are good at balancing their money. They pay their bills on time every month and they don’t spend frivolously. However, do you ever find yourself in a pinch when emergency situations come up? Do you not have enough savings to cover your living expenses should you ever lose your job? Well, a budget will help you alleviate all those problems. With a budget you can plan for the unexpected and save money for those rainy days. With a budget you will be able to see where you are overspending and what money you can allocate to saving.
Budget Myth #4 : I Can’t Afford to Budget
The truth is that you can’t afford not to budget. Some think that because they are on low income or don’t have steady income that they can’t afford to budget. However, these circumstances are where you need to budget the most. When you are working with limited funds or getting your paychecks on an irregular schedule you definitely need a budget. In these situations it is easy to lose track of where your money is going and you can find yourself in a financial hole. By creating a budget you can allocate funds for every category of your life that requires money. It will also help you keep track of the amount of disposable income you have and start saving little by little. So, let’s reframe our mind from I can’t afford to budget to I can’t afford not to budget.
If you want to learn more about creating a budget see my post on Budgeting Basics