Even though according to https://www.forbes.com, “creating (and maintaining) a budget is a major step toward designing the lifestyle and careers we deserve”, the very mention of the word “budgeting” frightens most people who think it is a very complicated thing that restricts their enjoyment of life. Giving further momentum to the general reluctance of people to start planning out their finances is a whole host of myths surrounding budgets. When it is a matter of getting control over your finances and trying to attain long-term financial security, it is very important to separate fact from fiction. Learn about some of the most common budget myths and the real truth behind them so that you get the right motivation to manage your money well.
Budgets Have to Be Very Detailed to Work
That budgets have to be complicated and detailed is one of the biggest reasons behind people’s reluctance to start budgeting. The good thing about budgets is that you can make them as simple and complex as you like. There are people who list each and every item that they buy in the supermarket in an Excel sheet and there are people who are very easy with just classifying the expenses into broad heads that tell them where their money is going every month. The real truth is that your budget can be whatever you like and the misconception about them being very hard to work with is completely unfounded. In fact, with the multitude of online tools and smartphone apps, the process is automated to an unbelievable degree and you get the analyses without any effort at all.
There Is No Way You Can Go Over Budget
The intention of making a budget is that you should aim to stay on it, however like it or not life has a way of throwing surprises. If you make your budget too rigid, there is apossibility that you will fail so you should aim to have a budget that is flexible. Treat budgets as simple guidelines for effective money management, not rules that cannot ever be broken. For example, if you need to take a friend out to dinner and don’t have the budget to do that, you can cut down on your grocery expense for the month or take the bus a few times to make up and be able to remain on the budget overall. The reasons why people get frustrated and abandon budgets is that they tend to get fixated with the actual numbers and forget to keep looking at the bigger picture. Remember no budget is ever perfect so set your expectations accordingly. When you are making a budget and allocating numbers to every category of spending, you need to be realistic because wishful thinking will get you nowhere. A good way is to analyze your spending habits over the last three months or so and find out your average expenses in each major category. For example, if you are spending $200 on fuel for your car, there is little joy in allocating $100 and seeing your budget crumble.
Those Who Are Debt-Free Don’t Need Budgets
While budgeting is indeed a great tool for ensuring that you don’t overspend and rack up debt to pay bills that are beyond your financial capacity, the benefits of budgeting extend to everyone and not only those who are already in debt. If you have already clocked up a lot of debts, you can use the budget to streamline your spending and save more for getting out of debtfaster. Budgeting essentially is a tool for saving the money, which is uselessly frittered away, and for stabilizing the cash flow so that you are not caught on the wrong foot when large expenses have to be incurred. The purpose of a budget is to allocate a purpose for every dollar that you earn; this ensures you do not spend too much on any category or waste your money on frivolous things.
You Require a Lot of Time to Make Budgets
The amount of time you need to make a budget depends on two major factors; how detailed the budget is and how you are maintaining it. Unless you prefer the old-fashioned way of keeping budgets on paper, it is quite likely that you would be maintaining a spreadsheet. If you take a few minutes every day to update it or even every week, it will keep you updated. There are innumerable online apps on both the computer and the smartphone that make the work even easier and provide a lot of analytical features that can be useful in tracking your expenses if you are so inclined. These apps can also alert you if you are overspending and nearing the limit of any limit that you may have set up for any activity or category. The transactions are categorized automatically when you enter them or when the data is pulled in from your other financial apps so the time taken for the exercise is cut even shorter.
You do not Have Enough Money to Justify Making a Budget
Many people think those who have meager earnings need not bother about budgeting. However, it is obvious that when you have less money, it is more important to manage it better. Budgeting is also easier because due to a lifestyle that is obviously constrained by the available finances, the number of transactions to monitor is obviously fewer. With an effective budget in place, people with less income can ensure that their money is spent well and that they are not headed towards a debt trap.
Everyone should look at making budgets with a positive frame of mind because it is the only way that you have of tracking your expenses and managing your finances so that you are able to achieve your ultimate financial goals. Just by devoting a few minutes of your time, you will be able to figure out how much to spend and how much to save. Without a budget, you could be just guessing and unknowingly heading to a financial crisis that can wreck your life.