Today the Moneyboss Blog is going to shed light on 3 budgeting myths. With the information provided here, you can begin to demystify the art of budgeting and personal finance.
The word “budget” is probably one of the most loathed words in the adult vocabulary. Just Baby TV has the cutest video of a little girl explaining what a budget is. She explains in a cute way that budgeting means “No Toys, No Starbucks, No Princess Dresses”. She says in her adorable explanation two of the three biggest misconceptions about budgeting. The Top 3 Myths about Budgeting are: you must live poor while your budget, you cannot purchase anything new while you budget and you have to use complicated methods in order to “properly” budget.
Let’s cover the basics here on what exactly a “budget” is and is not. A budget is a tool used to see your full financial picture including debts, assets, loans, and investments. It is a blueprint for a plan on what to spend your money on and a tracker to show you where your money goes. A budget is not a tool used to restrict or restrain you from spending money, buying what you want or limiting you in any capacity. A budget when setup correctly can only show you the truth: how much you’ve made, where you should be spending your money and what you spend your money on.
Budgeting Myth #1: Live poor today to live rich tomorrow.
Most famous personal finance and money gurus will tell you that you have to live like no one else today to live like no one else tomorrow. This is often adapted to mean we have to restrict all our spending so that any “extra” money we have is spent on paying down debt.
While this method of bill payback is effective it can lead to burnout. Budgeting should be done with your lifestyle in mind. Yes, you need to pay down bills but that does not mean you can’t go to girls’ night or out to a ball game with the fellas.
You have the right to budget for fun things. YES! YOU HAVE THE RIGHT TO BUDGET FOR FUN!
It is important to note that the budget is not what’s limiting your ability to live like you were before the budget. The limiting factor is your income. By properly allocating funds to cover debts first you may be spending less on what you “want” to spend money but by no means does that mean you have to live poor or in a lesser status.
Budgeting Myth #2: I can’t buy anything new until I pay off all my debt.
There is a popular misconception about budgeting. Often it manifests as you can’t buy anything new because “it’s not in the budget”. This statement is true but the practice behind it does not have to stop you from purchasing something new. Using your budget effectively will help you pay down your debt and still purchase items that you need or want to purchase. A budget will not stop you from purchasing new things if you build your potential new purchase into the budget.
Properly choosing your budget categories will help you see what items you can and cannot currently afford. You will be able to make well-informed decisions about what to spend your money on.
While you may not be able to buy an item today you can certainly save to purchase it tomorrow. Your budget will not stop you from making any new purchases. Instead, your budget will help you make informed financial decisions about if you should or should not purchase something.
Budgeting Myth #3: I have to use a cash based system with a ledger/envelopes/ or spreadsheet to track every penny I spend in order to get out of debt.
The myth that the only way to get out of debt is to track every penny you spend using a ledger, spreadsheet or envelopes is a dated relic of days gone by. While this method is tried and true it is not the most modern method you can use to pay down debt.
The cash based envelope method has been a go to for generations of financial freedom seekers who felt they needed to track every penny they ever made or spent in order to know exactly where their money was going and how to better use it to pay down debt. This method can be cumbersome and a bit risky as you will be carrying around cash in envelopes on your persons all the time. It is also antiquated by the fact that most billers allow you to pay your bills online via a debit or credit card online. This eliminates the need to use checks or cash to make payments.
Busting this myth is simple, consider exploring one of the modern day reinventions of the old cash envelope system that allows you to track everything from the convenience of your computer or smartphone. There are hundreds of free and paid apps that will allow you to track your finances and link up directly to your bank accounts so you never have to enter a thing. The most you’ll have to do is check to make sure the slotted categories are correct.
Budgeting is a critical factor to getting your personal finances in order and we hope you found value in this article. We here at the Moneyboss blog hope we shed some light on some of the myths that may be hindering you from creating a budget and achieving financial freedom.
Moneyboss blog would like to know your favorite personal finance myths. Feel free to share them or any other comments in the section below. We can’t wait to hear from you 🙂
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