A recent survey conducted by Mint, the popular budgeting app, revealed that 65% percent of participants had no clue how much money they spent last month. But in contrary, nearly 50% of those same participants listed money as their number one source of stress. So, what’s going on?
Many people avoid examining their spending habits for fear of what they might find. It’s easier to turn a blind eye. Others believe they don’t need to budget, because of a high household income. But still, Americans overspend an average of $7,500 each year!!!
Tracking your finances and creating a budget is not that hard. The real issue is letting go of the lies you keep telling yourself about budgets that derail even the best laid financial plans.
Here are 10 budget lies stopping you back from achieving financial security:
1) Budgeting means no more eating out!
Having a budget doesn’t mean you never get to go to a restaurant again. You just have to budget for it. If you’re used to eating out most meals, you may be surprised how quickly you blow through your budget. There’s nothing wrong with eating out, just make sure you have room for those expenses in your budget before you spend any money.
2) Budgets are too restrictive
Like eating out, you don’t have to give up your morning coffee if you don’t want to, as long as it’s in your budget. But what if you don’t have room in your budget? Then isn’t your budget too restrictive?
That’s the wrong way to look at this. Budgets actually give you the freedom to spend! By sitting down and looking at where your money goes each month, you’ll start to see what things are truly important to you. Once you know what you can’t live without, you can begin cutting down on expenses that don’t bring you the same joy. This will leave you spending money for the things you really love or can’t do without.
3) Now is not a good time for me to start a budget
There’s never going to be a good time to start a budget. This excuse is often used because a birthday/holiday is coming up and they don’t want to feel restricted with gift giving. This is exactly when you need to have a budget. A budget will help you know how much you can safely spend in these situations. Since those dates never change, why not start budgeting now for the next one.
4) I earn enough, I don’t need a budget
A budget is not only for people who are in financial trouble to rarely earn enough to pay their bills every month. Otherwise, you’ll become one of the 65% of people who are clueless to where their money is going. Be diligent with tracking your spending so you know if your spending is increasing over time.
5) There’s always unexpected expenses, so why even bother budgeting?
There are unexpected expenses in life but are they really so unexpected? Do your car brakes need to be replaced or the roof of your house is leaking? These expenses look like a surprise at the time, but they’re fairly predictable. Although these time horizons are longer than you’re probably used to budgeting for, they’re as predictable as paying for your car insurance once you start paying attention. Budgets can be a great place to track these unexpected expenses and we know car or house repairs will arrive at some point. So, set a regular small amount for these things aside. As that date of the “unexpected expense” approaches, you have saved enough for when the inevitable happens.
6) Tracking all my expenses is as good as a budget
If you track all your expenses, that’s a good start! But it’s still not the same as following a budget. Half the battle is knowing where your money is going. The other half is assigning a job to every cent that comes into your bank account. This is where a budget helps.
If you are driving to a place you’ve never been you will need a map or GPS. If not, you do not know if you’re heading in the right direction. A budget is your map/GPS to financial security. It gives you direction.
7) I don’t have time to budget
Budgeting takes time but it is time well spent. to set up. If your finances are in disorder, setting aside a few hours to set up a budget should be your number one priority. Once you take control of your money, you’ll be surprised how much time you can free up to do the things you want to do.
The hardest part is getting started. Once you spend a few hours tracking all your expenses and building your budget, it’s easy and does not take too much of your time. Every month register your numbers and in 5 minutes you should know whether you’re on track or not.
8) I’m not good with numbers
Budgeting should be simple and it’s not difficult. Simply write down all your expenses and how much money is coming into your bank account each month. Add up all your expenses and subtract them from your monthly income. This will tell you if you’re spending more than you’re making. Once you know where your money is going, you can start to influence its flow by setting up spending targets for each category. Check regularly during the month whether you’re within your targets or not.
9) My spouse does not want to budget with me
The secret to getting your partner on board with budgeting is to draw the big picture. Where do you want to go? How will you get there and how much will it cost? Once your partner can see the gap, they should be more responsive to budgeting. If he/she is still not on board, carry on with the budget best you can. As small successes build up, your spouse should feel more compelled to keep the successes coming.
10) I can budget in my head
This is just another lie keeping you stuck in your old ways. Let go of this self-limiting belief immediately and set up a real budget. No matter how bad things are, but you can’t improve what’s not being properly measured.
Many people go without a budget because of these lies. Budgets are not meant to spoil the fun out of your life. They’re there to give you the freedom to enjoy life by spending within your means.
Sven Franssen