Are Budgeting Myths Holding You Back?
Most people agree that keeping a budget is a good idea but how many faithfully do it? Like me, you’ve probably made a budget spreadsheet only to forget about it a few days later. I’m not proud to admit I’ve done this more than once, but why? Despite working in personal finance, I was influenced by budget myths. Are budgeting myths holding you back? Avoid these four misconceptions about budgeting and give your financial planning a fresh start.
4 Budgeting Myths You Need to Stop Believing
- You Need to Track Everything, All The Time
- A Budget Needs to Be Restrictive To Work
- Budgeting Is Only For People Who Are Struggling With Money
- Budgeting Can Fix All of Your Financial Problems
Myth #1: You Need to Track Everything, All The Time
It’s neither realistic nor fun to track every single penny you spend all the time as you spend it. Still, I believed this was what I had to do to budget the right way. When I slipped up and lost track of my spending, I felt my budget failed and gave up on it.
The goal of a budget isn’t to make you obsess over your daily spending! The goal is to help you understand your financial priorities and automate your bills and savings so that you don’t have to worry about everyday expenses.
You can do this by focusing on the big picture and doing some detail-work upfront. Most budgeting work is done ahead of time when you analyze your income and spending in a budgeting worksheet.
Create a Budget to Establish Financial Priorities
- Balance income and expenses
- Automate bills, recurring expenses, and savings goals
- Plan for the future
- Make changes to your spending that give your freedom
A budget spreadsheet lets you look closely at your finances and see how much is going in, how much is going out and how much is leftover. It might also help you see if you are living outside of your means or are spending more than you thought in certain areas. It will give you the information you need to, and I can’t stress this enough, automate your financial responsibilities.
Automate your bills and recurring expenses as well as your saving and investing goals. Once these are in place, the money that’s leftover in your checking account is yours to spend as you please! That’s really all there is to it.
If you are worried about overspending, there are many ways to hold yourself accountable without making yourself miserable.
Find Low Effort, Minimal Stress Ways to Hold Yourself Accountable
- Use budgeting apps to create spending alerts
- Use cash envelopes to help limit recreational spending
- Open separate checking and saving accounts for different spending categories
Myth #2: A Budget Needs to Be Restrictive To Work
Like many, I believed that a budget needed to be highly restrictive to work. I thought, if I didn’t deny myself, then I wasn’t responsible! Not only was this no fun, but it also wasn’t very realistic.
There is no reason you can’t use your money to have fun. When you make room in your budget for fun spending, you can enjoy it without worrying if you’ll have enough money left for everything else.
Obviously, your income isn’t limitless, and you won’t be able to spend as much money as you want whenever you want. You do have to identify and understand your boundaries. The work you do building your budget makes It’s possible to set limits and enjoy your money simultaneously.
Write a Budget You Can Live With, Not Suffer Through!
I used to write highly restrictive budgets with extreme goals and would get frustrated when I couldn’t meet them. I thought if I suffered for ‘X’ amount of time and saved ‘X’ amount of money, I could relax and have fun after that period of sacrifice.
I learned that extremes are rarely sustainable, and you’ll be much more likely to stick to a budget that has reasonable limitations.
Myth #3: Budgeting Is Only For People Who Are Struggling With Money
Tell me if this sounds familiar. You recently got a raise and started making more money. As a result, you feel financially secure, and the budget quickly goes out the window because you feel like you can afford more.
In a situation like this, your desire to spend can quickly outpace your increased income or can overshadow the growth potential of your new funds.
After a few months of liberal spending, your income can’t keep up and doesn’t feel like enough. Without budgeting, you could wind up over-drafting or find yourself turning to credit cards to accommodate new habits.
Alternatively, you will easily miss out on opportunities to plan for the future when you don’t stick to a budget. When your income increases, it’s not always an invitation to spend more; it’s an opportunity to put your money to work through investing and saving.
Budgeting is good for everyone, especially those who make good money and have financial security but want to optimize financial resources.
Myth #4: Budgeting Can Fix All of Your Financial Problems
While budgeting is a handy tool that can help you gain more control over your spending habits, it’s not a cure-all. Budgeting cannot solve systemic economic issues like income inequality or inflation, but it can shed light on these issues.
For example, a budget may reveal that your income is simply too low to cover basic expenses. This is often the case for people who make minimum wage because it has failed to keep pace with inflation and productivity. Oftentimes, other social safety nets like help from family or public programs may be necessary to make ends meet.
Unfortunately, many in this predicament feel responsible for their struggles because the personal finance industry promises that financial freedom is simply a matter of discipline and a reasonable budget.
Depending on your circumstances, budgeting can help you have more agency with your money but is unlikely to fix all your financial problems.
Start Over With a Free Budget Worksheet
If you are ready to give budgeting a new try, check out our free budgeting resources.
Budgeting Worksheet: Great for beginners or those who favor a traditional approach
50/30/20 Budgeting: Learn how to prioritize your expenses
The Anti-Budget: Great for those who want to try a different approach
Back-to-School Budget Planner: Track school year spending
Holiday Budget: Plan for special occasions