6 Myths About the Budget

For many people, the word “budget” is a dirty word. It means a limit on spending, and a loss of freedom in the way money is spent. This does not have to be the case, however. The budget can be a positive thing. Let’s debunk several myths about budgeting today.

1. Budgeting isn’t for me.

Many people begin to think they are either too broke to budget, or they have their finances under control and don’t need to have a budget. In reality, budgeting should be for everyone! Regardless of income, whether it be $10,000 a year or $10,000,000 a year, everyone should have a budget. This is simply a plan for your money and how it will be spent, nothing more, nothing less. By writing down your plan, your money will follow your instruction, rather than walking away. This is key to financial success in any income stream.

2. Budgeting is just keeping track of my spending.

This is a big one! We have counseled many people who have this belief. They have said, “I do a pretty good job, I keep track of what I am spending each month.” However, without a set plan for the income, depending will be much more than with a budget. Of course, keeping track of your money and spending every month is a good thing, it does not align your financial goals to your spending patterns. By having a written budget, you can write financial goals and stick to them.

3. A budget requires math.

Many people give up budgeting because they believe it requires complex math, fancy spreadsheets or an expensive app. In reality, in it’s simplest form, a budget is just income-expenses=0. If you can do basic addition and subtraction, or use a calculator, you can create one! Now, if you enjoy spreadsheets, calculators and fancy apps for your financial planning, by all means use it! We use a multi-page spreadsheet for our budgeting, but we like to see the data and Stuart does finance for a living. Whatever you decide, it has to work for you. 

4. I don’t have time to budget.

This is a common response to the idea of budgeting. “I work full time, I have kids, etc… I don’t have the time in my week to sit down and make a budget, let alone manage it.” Although this may be true initially, a budget does not require much time commitment. If you develop a system which works for you, it can be maintained in a little as just a few hours each month. It will take time in the beginning, to develop and implement all the systems you create, and analyzing the spending. But once it is set, the time commitment decreases.

5. I budget in my head.

Budgeting in it’s most efficient form is a zero-based budget. Income minus expenses equals zero. If you can do that in your head, then kudos! You should request to join Mensa International. In all seriousness, however, a budget should be written out. Budgeting in your head is really just keeping good track of your expense and spending. Writing it down creates accountability, and a tangible way to track.

6. Budgeting is boring. It takes away my freedom.

For the spenders out there, this is the number 1 myth about budgeting. Before we had a stable budget, I believed this myth to my core. I was stubborn, and did not want someone tell me what I couldn’t spend money on. In reality, though, a written plan gives freedom. It creates accountability and freedom with spending. Rather than restricting spending, it creates freedom by knowing what can be spent where, without creating financial hardship. A favorite story I heard long ago related a budget to a fence around a backyard. The backyard backs up to a busy highway. Without a fence, children would not be able to play very far in the yard. They would either be restricted close to the house, or play in the street and be in danger.

Once the fence is built, the children are free to run and play all the way up to the fence. A budget is similar to this. Without it, spending happens uncheck. With it, there is freedom, knowing the boundaries of your income and preventing overspending.

There you have it! These are the top 6 budgeting myths we hear most often. What myth have you been believing? Or what myth did you have to overcome in creating your financial plan? Let us know in the comments below.