10 Common Misapprehensions About Budgeting and Why to Avoid Them

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10 Common Misapprehensions About Budgeting and Why to Avoid Them

Misapprehensions About Budgeting

If the pandemic and the nationwide lockdown have taught us anything, it is that you can always do with more money in your savings.

To be fair, no one saw it coming. This is the kind of experience that we had only seen in movies. But those who did follow a budget and save some money were the lucky ones because they had something they could fall back on. Even though they didn’t know what was coming, they were still prepared for it. The others weren’t so lucky. 

Data shows that more than 20 million Americans lost their jobs and more than 15 million are expected to be temporary when the pandemic recedes. It is due to this reason, that despite the stigma attached to it, #budgeting is trending again!

But even though a lot of people want to keep a budget, many are still apprehensive because they think it’s too time-consuming or too-restricting. However, on average, an individual works 2,000 hours per year. In comparison, you will have to spend a maximum of one hour each month to track and budget your finances. That amounts to half a day for the whole year!

These few hours you spend on setting up your budget will probably have a bigger financial impact on your life than even the job that pays you. So let me debunk some of the myths and misapprehensions about budgeting and convince you why you need to budget.

1. Finding Time To Budget Is Difficult

Wrong! This is the most common misapprehension that you could have. Purely because every person who does keep a budget, also gets the same 24 hours as you. Granted, some people might have an easier schedule than you. But at the same time more people all over the world, especially in the developing nations, probably have an even tighter schedule than yours. If they can still find the time to budget, then you can too!

So if the reason that you don’t have a budget has something to do with “not having time”, then let me tell you that it is nothing but an excuse. You would be doing yourself a big favor by reevaluating your priorities.

Try this to find the time:

There are many ways you can find time to budget. The easiest way is to schedule a day and time to work on your budget each month. Choose a day that is towards the end of the month and a time that you’d normally be free. 

For example, you could choose to work on your budget on the last Friday of each month an hour before you go to sleep. It is better to not choose a day when chances are you’d be out partying or when you’d be tired after work.

2. It’s Hard To Stick To A Budget Every Month!

This is one of the biggest misapprehensions that you could have about budgeting – that keeping track of a budget regularly is cumbersome. 

Now, it is easy to get overwhelmed while trying to micromanage every little thing. Getting the right balance comes with practice and experience. So when you’re starting out, you can stick to just the basic categories like groceries, housing, transportation, utilities, etc., and add subcategories as you become more comfortable with your budget.

Try this to keep track:

First of all, you have to realize that just because you are sticking to a budget, it doesn’t mean you won’t be able to buy what you want. In fact, it’s quite the opposite. Sticking to a budget will help you avoid impulsive spending on unnecessary things. As a result, you will have more money to spend on things you really need and love.

To keep track of your budget, all you have to do is ask for a copy of the bill. You don’t even have to worry about calculating the budget until the end of the month. Another problem that many people face, is forgetting to calculate expenditure at the end of the month. There is a direct connection between finding time and forgetfulness. It is easy to forget things when you’re busy or engaged in work. So find a day and time every month when you are usually not busy or otherwise engaged, and reserve it for working on your budget. That way you won’t have difficulty reminding yourself.

3. You Have To Be Good At Math To Budget

Don’t make budgeting unnecessarily complicated. It is a common misapprehension that you need to be good at math to keep a budget. You don’t need a degree in finance or experience with complicated spreadsheets to do your own budget. It is simply money in versus money out.

A lot of people find budgeting hard and cannot seem to deal with it. That has a lot to do with fear of math. But if you are less comfortable with numbers, that is all the more reason why you should keep a budget – so that you don’t make poor financial decisions and end up in debt.

Try this to make budgeting easy:

There are many ways to keep a budget. If you know how to use spreadsheet software, you could easily do it on your PC or laptop. It is as simple as creating a column for income, and another for your expenses. If that is too much to handle, all you need is a notebook, pencil, and calculator. You could alternatively use a budgeting app on your smartphone. That way you won’t even have to do the calculations. Everything will be done for you. All you have to do is type in your expenditure. Now, that’s not difficult, is it?

4. I Calculate My Finances In My Head.

Unless you’re Sherlock and have decoded how to build a mind palace, this is the worst excuse you could give for not keeping a budget. It gives you a false sense that you are on top of your finances. In fact, surveys and studies show that two out of three people don’t know where their money goes each month. So chances are you might be fooling yourself.

And since calculating in your head means you do not have a written record that you can verify, the chances that you will make a mistake is higher.

Try this if you want to keep your budget on the go:

There are many free online tools and smartphone apps that you could make use of. These apps let you type in your expenses on the go. It is just like calculating your finances in your head, except that you will have a record to track and verify in case you have doubts. 

There are myriad budgeting apps available today. Mint, PocketGuard, Good Budget, Personal Capital, Simplify and Wally are some of the best among them.

5. The Best Time To Start Saving Is The New Year

This is what I call the “New Year’s Resolution Syndrome”, or in general the “Procrastination Syndrome. It is quite a common misapprehension that you have to wait for the beginning of a year or month to start with a budget. This is because more often than not, people don’t follow through with the promises they make with themselves.

Try this to start saving now instead of later:

Instead of “saving” money, “pay yourself”. Although this may seem silly on first reading, this small vocabulary change can have a big psychological impact. Further, if you automate the process, you don’t have to worry you’ll break away from the habit.

You could follow these steps to “pay yourself”:

6. I don’t have enough money to save

Now, this could possibly be true. You might not be earning a lot of money. But the fact is, you might also not be using the money you earn, smartly. Keeping a budget is not just so you save money, but also to optimize how you use the money. That is why it is crucial that those who earn less, should keep a budget. You may be surprised by what you learn.

If you only move forward a day at a time, without trying to save a few bucks, t is hard to see your situation change from what it is right now. While budgeting can be challenging if you are earning very little each month, it will improve your situation in the long term and possibly open doors to better financial security in the future.

Try this to flip your mindset:

Start telling yourself you can save money. Or better yet, tell yourself you can’t work so hard to NOT save money. 

A realistic budget will help you identify opportunities to save money or even make more money, which you would have otherwise missed. Even a small amount that can be saved this way will be more valuable to you if you are struggling financially, than higher amounts saved by those who are financially well off. You could even get a piggy bank to save smaller amounts.

7. Carpe Diem! There Is No Point In Keeping A Budget

Carpe Diem!, or “Seize the Day” or “Live in the Moment” is a good philosophy for life. But don’t get it mixed with your finances. Because the world runs on money – only money. And this comes to perspective only when you are facing an unprecedented circumstance. Nothing can prepare you for that. If one day to find yourself or your loved ones in a health or finance emergency, you will regret every moment that you have ever lived and wish you hadn’t been so selfish.

Just think of the pandemic for example. No one saw it coming. But those who did follow a budget and save some money were the lucky ones because they had something they could fall back on. Even though they didn’t know what was coming, they were still prepared for it.

Try this to keep a budget, but still “seize the day”:

Ideally, your emergency fund should amount to a minimum of three months of living expenses. Now saving three months’ worth of money isn’t a hard thing to do. There is no need to give up on fun.

All you have to do is seize 75% of the day. Leave the remaining 25% for budgeting. Instead of living entirely on impulse without restrictions, make minimal changes to your lifestyle and spending habits. Start making wiser decisions. A small change will go a long way. You will learn that budgeting in fact gives you more freedom.

8. I Am Making Too Much Money Already. I Don’t Need To Save.

One of the biggest misconceptions you can make is that if you have a good salary, you will be financially secure. This is in fact, far from the truth. For most people who earn a lot of money, their cost of living also increases as their salary increases. This means you end up spending as much you earn. And when the circle is suddenly broken, you end up in a larger debt than normal people would. That is why a lot of millionaires seem to go bankrupt with huge sums of debts.

Why do you think that the richest people in the world have a team of professionals to take care of their budget? Because with more money, comes more responsibility. If you are not aware of where your money goes, things could turn on its head quite easily.

Try this to learn where all that extra money goes:

If you are making too much money already, you can easily afford a “wealth team” – a team that consists of a financial planner, an accountant, a tax strategist, and other such professionals. These experts will take care of the budgeting and give you proper guidance.

Now, if you cannot afford a “wealth team”, then maybe you aren’t making as much money as you think you are.

9. Budgeting Is Boring

This is a common problem. Just like a lot of people find math and statistics boring, a lot of people do find budgeting boring. But credit card statements, frequent calls regarding due bills, and going to bankruptcy court are also boring. I suspect, given a choice, you’d go with the former.

But budgeting doesn’t necessarily have to be a drag. There are plenty of ways you can be creative about it.

Try this to make budgeting fun:

One of the easiest this you can do to make budgeting fun is to choose a format that’s visually appealing. If your budget is good to look at, it will feel less of a drag. 

You could make it even more exciting by setting a few challenges for yourself. You could rate your performance and reward yourself at the end of the month. This way you’ll look forward to keeping a budget every month.

10. I Already Know How To Use Money

As I’ve already mentioned, surveys show that two out of three people don’t know how to budget. True, you might be the one out of the three that do already know how to budget. But the probability of you being one of the other two is statistically higher. There is no harm in keeping a record, just in case.

Besides, you could always get better with money. That’s how you become financially successful. That’s how you make it to the Forbes list. 

Try this to get better with money:

There are plenty of finance books and blogs that you can go through to further your understanding of money. Think and Grow Rich, Total Money Makeover, The Money Book for Young, Fabulous & Broke, The Millionaire Fast Lane, and The Science of Getting Rich, are some books you could go through.

You could also take part in the various training programs and coursed available today to learn how to get the maximum out of the money you make.

Final Words

Myths and Misapprehensions about budgeting has been circulating through word of mouth or through what you read for quite some time now. These myths are perpetuated by a capitalist economy that cares not about your well-being but only about how much you spend. Philosophies are used to reinforce these misapprehensions, which has resulted in a generation that prefers not to budget.

But, once you dispel these myths and overcome the sort of stigma that is attached to budgeting, you’ll realize that budgeting is a great idea and super beneficial in the long term. You will no longer have to feel bad about your finances or avoid conversations about budgeting and saving. It will make you a more responsible individual who has greater control over your financial situation. And who knows, someday in the future, it could be what saves your life!