6 Budgeting Myths and Misconceptions That Are Holding You Back
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Ask any billionaire in the world how they handle their finances, and you’ll get the same answer: budgeting. Though many people like to scoff at the idea, budgeting can be a great asset in your life. With the right budget and financial plan, you can cut down your expenses and grow your savings.
Surprisingly, many people still refuse or hesitate to budget their expenses. According to CreditDonkey, around 30% of households have a monthly budget. One reason why could be the sheer number of budgeting myths that are out today. You might’ve heard people claim that budgeting is only for the rich or that it ruins all the fun.
With so many false claims about the practice, it’s no wonder that people worry about their money. To help you spot the facts from fiction, here are six budgeting myths that are holding you back!
1. Budgeting is for the rich and wealthy.
What does it mean?
One of the most common misconceptions about budgeting is who can do it. There are those who think that only the rich and wealthy have the ability to make a budget. In their minds, billionaires and stockbrokers can afford to choose when and where to spend their cash. In other words, they think that they simply don’t have enough funds to make a budget.
Why is it wrong?
Budgeting is an option everyone else has. Contrary to the YOLO mentality, you shouldn’t just spend your money without care or restraint. With budgeting, you can actually take the necessary steps to unlock your financial freedom. In other words, budgeting isn’t a restraint or an off-limits plan; in fact, it can be the very thing you need to make your financial decisions more fulfilling.
For instance, think of your grocery list. Even if you’re only stopping by to buy milk and eggs, that’s a budget by itself. You’re already controlling what you will buy and how much of it you will get. Even if you’re not ready for detailed monthly plans, a simple grocery list already demonstrates that you can stick to a budget.
What should I do?
If you’re still unconvinced or you know someone who doesn’t agree, then it’s time to understand what a budget is. In simple terms, a budget is a financial plan. It outlines how much money you plan to use for whatever purpose it will serve. From bills to groceries, every financial transaction you make has a purpose. With a budget, you can track how much you spend and see how much is left over.
2. Budgets are too stressful to handle.
What does it mean?
One of the most popular budgeting myths is the claim that budgets are too stressful. For many people, sitting down and reflecting on their finances is a nightmare. They’re afraid to see that they don’t have enough cash in the bank. They might be nervous that they are restricting themselves. Some might even claim that budgets are the root cause of their financial problems!
Why is it wrong?
Ultimately, it’s a matter of excuses against the truth. Budgeting may not be easy, but that’s no reason to say that you can’t budget your expenses. With a budgeting plan, you can gain control over your finances and financial decisions. Unlike what the naysayers believe, it can help you against stress and worry. In fact, those who stick to a budget said they felt more in control of their decisions. Whereas impulse buyers and shopaholics face a lot of anxiety over their money problems, a budget-focused person will feel more relaxed.
What should I do?
To get rid of these types of budgeting myths, you need to look at things from a different angle. Many people are frightened by budgets because they feel like it’ll hold them back or take too long. In other words, they’re either focused on the consequences or the process.
If you want to make a budget meaningful, look to the purpose first. What’s the reason you want to have a budget? Ideally, it should help you save money. Save money for what? That depends on what you want to achieve. For example, you might have plans to buy a nice house down the street. You may also want to sign up for a master’s degree or start your own business.
With a budget, you can start to build your finances to that. Don’t jump right away to the how or what-if questions. Always start by focusing on the why. Knowing what your budget is for can help you see it in a different light. Yes, it might not be as fun or carefree as spending your money without restraint. However, at the end of the day, you’ll be thanking yourself later. Instead of wallowing in debt, you could soon find yourself enjoying a new house or opening your new store.
3. Budgets need to be highly detailed.
What does it mean?
Not all budgeting myths are entirely untrue or unfair. For example, this myth is all about the detail that goes into a budget. You might not be surprised to find that there are people who have very precise budgets in their heads. For them, every dollar has a purpose. In effect, that means they like to write their budgets to the letter.
For example, a housing budget could look like a giant receipt. Some people go to the fine details and cover everything, from the materials used to the types of labor needed. It’d be as complicated as building a new table from scratch. For that reason, people might say that budgeting is too stressful or only for the rich.
Why is it wrong?
A budget should be detailed in that it covers your needs in life. That said, it doesn’t need to be a fine-tooth comb that runs over every little thing. The important part of a budget is that it tracks what you spend and how much you spend it. You don’t need to list every single bill or coin on the list. Rather, you should focus on the basic idea. What are you buying? What for? And how useful will it be?
What should I do?
Ultimately, you need to look at your budget as an asset that fits your style. Not everyone likes to keep their budgets as detailed as a dictionary. Some like to follow a certain number or limit. Others might have specific things to focus on, and then some leftover cash for backup or for unexpected costs.
That said, If you do want to make a detailed list, start out with a simple plan. For example, groceries can generally be rounded up into a certain amount. You don’t need to list every single food item you plan to buy. You can simply start off by capping your spending on a specific amount. For example, you could say that you spend about $100 per week on your groceries.
Once you know your base budget for groceries, that’s when you can start to dissect it piece by piece. How much of your $100 goes to what you need and what you want? Perhaps there are essential foods, like fruits and vegetables, that you must have. There might also be unnecessary items, like perfumes or chocolates, that you can get another time. By looking further in, you can start to see the details that matter, instead of trying to control every variable.
4. Budgets kill the fun.
What does it mean?
A lot of people assume that budgets are the killjoys of life. If you have a budget, you might notice that you’re unable to afford that vacation you’ve been dreaming of. You may have plans to go partying with friends, but your budget shows that you would end up spending too much money to have any groceries. In short, budgets seem to force a limit in your life that gets rid of fun.
Why is it wrong?
In the past, whenever I hung out with friends, I was strict about my spending. I drank water, never had beer, and sometimes didn’t even eat a meal. My friends would comment that I seemed to be too stingy or harsh on myself.
Here’s the thing, though: I still had a good time with my friends. Wherever we hung out or ate, I still got to spend time with them and enjoy myself. The only difference was that I made sure to use my money for something else, specifically real estate. It helped me in the long run because I managed to profit from my choices. Sure, I may not have had a wild drinking session, but I still got to be there with my friends.
In other words, it’s not necessarily about spending money that kills your fun. When done right, you can still protect your finances while enjoying yourself. Simple things like reading a book or going to the library or walking around the park can make you happy. The best thing? They don’t cost a dime.
What should I do?
Re-evaluate what you spend on and how it can help you have fun. You should have some restraint over what you spend and why you need it. For example, some money should not be touched because it will go to your investments or savings. If you want to spend some money, make sure you budget it accordingly. This way, even if you buy or get something during a fun night out, you can still keep your funds safe for future investments and plans.
5. Budgets should be blown away if you go over the limit.
What does it mean?
Imagine that you’ve been on a strict no-snack diet for three months. You’ve avoided all possible temptations so far and survived without the urge to snack. Then, one day, at a friend’s party, you’re given a nice slice of cake. You take a bite and suddenly feel guilty, thinking that you’ve just wasted all your progress. Then, feeling like it’s all gone downhill, you go and eat another four slices.
This extreme reaction is pretty common to those with budgets. When they go a few dollars over, whether it’s for groceries or gift shopping, they feel an immense amount of defeat. Sometimes, they follow up by wasting the rest of it because it no longer matters to them. In other words, they go from spending as little as possible to spending as much as they can.
Why is it wrong?
Going over the budget doesn’t mean you have to go overboard. A few dollars over the budget isn’t always the end of the world, unlike what these budgeting myths may say. Sometimes, it might even be more worthwhile than you think. For instance, you might be willing to spend more than usual for your child’s birthday gift or for their new clothes.
What’s important is that you don’t make this a common thing. It’s okay to go over on occasion. If you made a mistake, don’t beat yourself up or take it out on your wallet. Instead, use that error as a valuable lesson on how to budget better. And if you spent more than expected for a good reason, then remember that you know your reasons why.
In addition, remember that budgets aren’t always set in stone. Being flexible with how you spend is as important as being dedicated to your limits. If you feel that you need to spend more on something useful, like a house renovation, then you should go for it. What matters is that you know it’s a smart financial move and that it can benefit you in the future.
What should I do?
Ideally, if you want a flexible budget, you need to track two important things: your spending and your income. A flexible budget focuses on these two factors because of how they influence finances. Whereas other budgets can be strict or linear, a flexible budget mainly focuses on your gains and losses.
For spending, always watch what you’re using your money on. You can make things easier by collecting any receipts or bills that come your way. Once you total up the number, you can see how much you spend per week or month. For example, you can see your monthly expenses based on your groceries, your utility bills, and your mortgage rates. You can then go further and see how much expense is necessary and how much is for luxury.
For income, always remember when the money arrives and how much in total you have. If you have credit cards or Paypal accounts, try to consolidate those numbers in an app. Some banks have applications that let you see the money in your accounts and the times you’ve spent them. If you spent more than expected on one project, don’t be disheartened. There’s still a chance that you have leftover money for your other plans, and maybe even some for investing.
6. Budgets are time-consuming.
What does it mean?
An average day could feel like an endless cycle of tasks and chores. From having three meals (at minimum) a day to going to the office, there’s a lot that can happen. For instance, you might have to bring your kids to school and then pick them up once work is done. You may have to find time to buy groceries or pay your bills. You also have to squeeze in time to get things ready, from your work clothes to the car or bike you ride.
With so much happening in an average day, you might feel as if there’s never enough time to slow down. You might even feel that you can’t stop to make a budget because it would take too long to make. After all, you’d have to consider what you spend on and how often you pay for it. That would mean looking at your bills, your income statements, and other important documents. In short, you might think that a budget is just too much of a time-hog to focus on.
Why is it wrong?
Admittedly, there is some truth to these kinds of budgeting myths. Sometimes, budgets can be quite extensive and tough to make. The budget of a father with five or six kids would probably need more time and concentration than that of a bachelor.
Luckily, technology has made it easy for humans to go and make their budgets on the fly. Apps and programs, including Google Pay, can quickly build a comprehensive budget that contains all your income and expenses. The best part is that you can spend as little as five minutes getting everything in order.
What should I do?
If you want to make a comprehensive budget the old-fashioned way, find break periods, however short, to do so. Coffee breaks and downtime can give you enough minutes to compile all the details you need. To make it easier, focus on the big picture first. You don’t need to break down your budget right away. For now, focus on the general income and expenses.
Once you got it all covered, that’s when you can start adding details. For example, you can break down your expenses into the bills for your house and for your family. Then, you can go further and see how much is spent on school, groceries, and so on.
Alternatively, as mentioned above, you could always go and find an app that meets your needs. Some budget trackers can be found in your bank’s mobile apps. Others can be downloaded online for free. Whichever one you use, take the time to review and assess it first. That way, you can find the budgeting app that fits your goals best and helps you achieve everything. For instance, some apps can alert you if you’re going to spend too much.
- Ali, M. (2022, May 27). Budgeting Myths and Misconceptions That Are Holding You Back. YouTube.
- Bell, A. (2022, April 7). 6 Reasons Why You Need a Budget. Investopedia.
- Gershon, L. (2022, July 14). Budgeting Statistics: By the Numbers. CreditDonkey.
- O’Shea, B., & Schwahn, L. (2022, December 2). Budgeting 101: How to Budget Money. NerdWallet.
- SoFi. (2020, February 26). Building Flexibility Into a Budget.
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